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Launching Hungary’s eVAT System

Analysis

Bence Barta, director of Andersen Adótanácsadó Zrt.

The tax law package brought before Parliament in the fall includes the amendments to the VAT Act, which will re-create the legal framework for introducing the eVAT system. This concept was already included in the legislation a few years ago, but the tax authority opted out at the time. The system introduced after January will be much more sophisticated and will affect all taxpayers in the coming years, says Bence Barta,director of Andersen Adótanácsadó Zrt.

The eVAT system is planned to be launched on Jan. 1, 2024. We are currently at the end of the pilot development process of the National Tax and Customs Authority (NAV), so the launch is not expected to encounter any technical barriers. Nor will there be any legal hurdles, as the tax package submitted to Parliament at the end of October contains the supplementary rules of the VAT Act and the Act on the Order of Taxation, which will lay the foundations for the launch.

From 2024, Barta says VAT returns can be submitted to the tax authority in three ways. The first option will remain the solution that has been used for years: submission through the “Ányk” (General Form Completion Tool). However, the technology underpinning the Ányk is not expected to stay for long. In parallel with the ramp-up of the eVAT system, it is due to be phased out later (the exact date is not as yet known).

The second option will be a VAT return on the eVAT online platform made available by NAV, to be edited and submitted by the taxpayer. However, this solution will not mean a ready-made VAT return offered by NAV; the submission of the VAT return will still require several decisions and declarations on behalf of the taxpayer. The novelty of this option is that, based on the online invoice data supply, the online cashier service and the import customs decisions, NAV will display the transactions that the taxpayer can edit to submit the VAT return on the interface, Barta says.

Machine-to-machine Connection

The third option will be submitting VAT returns through a machine-to-machine (M2M) connection. This is expected to be the most popular option among taxpayers in the medium-sized enterprise category and above. When using the M2M eVAT, the taxpayer must upload its VAT sub-ledgers in the data structure required by NAV and approve them as VAT returns. During the implementation process, it will be crucial to match the company tax codes to the standard tax codes and to establish an API-based data connection for smooth communication.

Barta believes that implementing the eVAT system could bring significant benefits for the tax authority. The standard VAT sub-ledgers-based data pool can ease the problem of years of diminishing audit capacities and ever shorter audit deadlines at NAV. It could also help make the risk analysis and the audit process more automated and targeted.

The business benefits are not as clear-cut; nevertheless, the M2M eVAT does include several simplifications. For example, using the system removes the need to prepare and submit domestic summary reports. It also reduces the amount of data that needs to be provided to tax auditors during audits. However, the main benefit of the launch of the M2M eVAT is that, with the help of the validations run by themselves or the tax authority, taxpayers can become aware of systemic errors that would later result in significant tax assessments at a time close to the submission of the VAT return. Consequently, they will be able to manage the errors detected by the systems directly when the problem arises.

Of course, the most significant “incentive” for moving to the eVAT will be when the Ányk form is discontinued, and the VAT return can only be submitted through the eVAT interface or the M2M eVAT system. This reason alone makes it worthwhile to start implementation as soon as possible, Barta suggests.

This article was first published in the Budapest Business Journal print issue of November 17, 2023.

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