The Hungarian National Tax and Customs Administration (NTCA) oversees the transition period for the real-time invoice data reporting system, from version 2.0 to version 3.0. .

This new version will be mandatory for all taxpayers in the country from April 1, 2021. However, the system update that will be released through the new version will greatly simplify reporting for companies if they choose to agree to some voluntary changes.

One of the key improvements in the system is the reporting scheme, which allows taxpayers to meet the reporting obligation by submitting an electronic invoice containing the full content of the invoice data. This optional e-Invoicing feature is only available for B2B transactions.

Navigating around requiring “customer consent”

While this change is a welcomed move, especially for many large Hungarian corporations, the question has arisen as to how it is in line with EU law.

In accordance with the EU VAT Directive and the regulations transposed into the Hungarian VAT Act, the exchange of e-invoices requires the consent of the person accepting the invoice. In other words, the supplier cannot force the buyer to accept electronic invoices instead of paper invoices.

Contrary to the Italian e-invoicing reform several years ago, Hungary’s move towards e-invoicing is not mandatory and buyers may not agree to e-invoicing. In the opinion of the NTCA, for those who choose, consent may be given in the form of a prior written agreement between the parties or implicitly (eg by paying an invoice).

Incoming e-invoice function

The customer who agrees to e-invoicing will be able to download the invoices received in the system based on the tax identification number and issued by their suppliers in the online system of the tax office. Customers must provide an invoice number in their request to download an invoice. The NTCA response will contain the invoice issued and the hash code assigned during the invoicing process.

If the customer’s tax identification number is incorrect in the e-invoice, the customer will not be able to download the electronic invoice from the system.

How to ensure integrity and authenticity in a new process?

During the invoicing process, an electronic invoice is created on the seller’s side. The merchant’s system generates a hash code for the file using one of the algorithms indicated in the official standard of the tax office.

The electronic invoice issued on the seller’s side and the electronic invoice received from the seller on the customer side must be stored together with the hash code generated during the invoicing process. This can be used to meet integrity and authenticity requirements as alternatives to the methods listed in the regulations: qualified electronic signatures and electronic data interchange (EDI) with consent.

The future of e-invoicing

Thanks to this new initiative, the Hungarian government has made a significant step forward in the digitization of invoices. It reflects the need for greater control and insight into the activities of taxpayers in their jurisdictions and the government’s commitment to reduce the importance of paper invoices. The natural next step could be the adoption of a mandatory Italian-inspired CTC model; however, such a move would require the support of the EU institutions.