New options to make online reporting easier for foreign taxpayers using self-billing

A new legislative amendment seeks to quell the reporting woes of foreign customers using self-billing: as of 26 June 2021, they have alternative options and not real-time solutions to meet their online reporting obligations.

As described in a previous Tax & Legal Alert, the rules in force since 4 January 2021 have broadened the scope of the Hungarian invoice data reporting obligation resulting to include foreign companies that prepare invoices under a self-billing arrangement.

This situation is particularly problematic for Hungarian suppliers who have agreed to have their invoices issued by a foreign customer. This is because foreign customers who are not established in Hungary for tax purposes have had disproportionate difficulty in fulfilling their reporting obligation for invoices prepared on behalf of their suppliers. What makes the problem even worse is that the Hungarian supplier (in the self-billing arrangement, the principal) and the foreign customer (the agent) are jointly and severally liable to meet the reporting obligation.

Recognising this unfavourable situation, the Ministry of Finance issued a notice in April 2021 (as we described here) to assist foreign companies, under which the Ministry of Finance would grant the companies concerned a grace period until 30 June 2021 for the data reporting.

The recent legislative amendment – in effect since 26 June 2021, but due to the grace period applicable only from 1 July 2021 – puts an end to the uncertainty. In a bid to adopt a more taxpayer-friendly approach, the amendment provides significant relief to foreign taxpayers who are not established in Hungary and do not have a VAT registration, by relaxing both the IT requirements and the deadline for reporting.

• According to the amendment, invoice data can be reported using an IT system other than the agent’s invoicing software, provided that it is done electronically via a machine-to-machine connection.
• In addition, taxpayers using self-billing will have six calendar days to perform the reporting obligation.

Consider the following two options for using an IT system other than the agent’s invoicing software:

First, the foreign agent may decide to appoint a third party, e.g. a tax advisor, to perform the online invoice data reporting on its behalf, based on data extracted from its IT system using a machine-to-machine interface.

Second, by amending the self-billing agreement between them, the parties may agree that the Hungarian supplier who already has an IT system fit for this purpose will fulfil the data reporting obligation for invoices and documents qualifying as invoices issued by the customer under the self-billing agreement.

Please note that from 1 July the grace period no longer applies, so self-billed invoices must also be reported to the tax authority even if the agent is a foreign entity; however, there are already a number of options for taxpayers to do so.

PwC’s tax experts and Smart Tax team are ready to help you with reporting self-billed invoices, and we can quickly provide you with an off-the-shelf solution for either option you choose.

If you have any questions regarding the above – or regarding any other form of RDI subsidies – please don’t hesitate to contact one of our expert colleagues below, or your usual PwC contact.