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Is the Tax Authority learning everything about us?
According to a statement issued by the Ministry of Finance, from July next year companies will be required to provide data about invoices to the Hungarian Tax Authority („HTA”) regardless of the VAT amount, and from the following year even data about invoices issued to private individuals will have to be provided as well. Consequently, the HTA will be able to monitor domestic invoicing almost immediately.
Invoicing software programs have already been linked to the HTA from July 1st 2018, therefore the HTA has immediate access to information on any invoice with VAT amount of at least one hundred thousand forints. From July next year invoicing software will be required to provide data to the HTA when issuing an invoice to any businesses, regardless of the VAT amount. From 2021, data provision by the invoicing software will be mandatory about invoices issued to private individuals as well.
Manual invoices are already required to be reported online to the HTA within a few days and in case of issuing cash register receipts the device itself sends data to the HTA. This means that virtually all domestic invoices will be visible to the HTA in the future. Only invoices received from abroad and certain non-invoiced VAT-able transactions will not be immediately visible to HTA.
Meanwhile, the Tax Authority has a near-instant overview of business invoices, giving them much greater opportunity to carry out more effective risk analysis than ever before. They will know, for example, if a company does not declare the payable VAT for each of its invoices, or deducts more VAT than expected at the end of a given month.
Beyond arithmetical errors, risk analysis will also identify suspicious or unusual transactions as well (for example, if a ‘risky taxpayer’ issues invoices for us or potentially fictitious invoices circulate in suspicious networks of companies).
At the ‘Crowe Tax Breakfast’ it was discussed, among other topics, that HTA has been working for years on the IT background for obtaining a complete, real-time view of taxpayers' tax affairs. The previously introduced online cash register system and the Online Invoice Reporting System, as well as the EKÁER (road transport surveyance) system are all part of this concept. At the same time, the HTA focuses more and more on establishing a partnership with taxpayers instead of assessing penalties, thus encouraging taxpayers to comply with the legislation on a voluntary basis.
‘As a result of this change the number of audits resulting in penalties has drastically decreased in recent years among law-abiding taxpayers. Instead, the HTA is calling on taxpayers to correct their mistakes on their own. Following the same concept, the most recent plans of HTA will further expand the possibilities for taxpayers to correct their own mistakes’, said Attila Czinege, Special Director of Audits at the HTA.
As a result of another important measure planned by the Ministry of Finance, similarly to personal income tax returns, the tax authority will prepare draft VAT returns for businesses from 2021 onward. Companies will simply have to approve the draft returns or amended them with items which are unseen to the tax office, if necessary.
The event also highlighted the future role of tax advisors: there was a consensus amongst participants that the activities of tax advisors will increasingly be turned to a model where they collaborate with their clients on a day-to-day basis. Not only will they have to help their clients with carrying out corrections and adjustments for past periods, but they will also need to provide continuous support for taxpayers in their daily operations.
It is going to be more and more important for tax information to be correctly entered in accounting systems. Previously many businesses began to correct mistaken accounting items only before the start of tax audits, but now it is essential to ensure correctly capture transaction from the beginning. This is the only way to minimize the risk of the HTA detecting systematic mistakes by the taxpayer which would inevitably lead to tax audits involving heavy administrative costs and material tax exposures.