Self-billing issues in light of the 2021 rules on online invoice data reporting
Tax & Legal Alert | PwC Hungary | 1 February 2021
Effective from 4 January 2021, the scope of online invoice data reporting has been extended to include transactions where a customer issues invoices on behalf of its foreign supplier, or, conversely, a supplier mandates a foreign counterparty or customer to issue invoices on its behalf (generally known as ‘self-billing’). Companies may wish to reconsider whether to participate in such transactions or billing arrangements.
In essence, under the new rules in force since 4 January 2021, online invoice data reporting is now mandatory for nearly all types of invoices issued in accordance with Hungarian invoicing rules. In cross-border transactions, the fact that self-billing is used may, in itself, affect which Member State's invoicing rules have to be applied, and thus indirectly determine whether the invoice concerned has to be reported.
If, for example, the Hungarian tax liabilities arising on a transaction are fulfilled by the Hungarian customer instead of its EU-based foreign counterparty, the invoice will be subject to the rules of the foreign counterparty's Member State, i.e. it will be outside the scope of Hungary’s rules on online invoice data reporting. By way of example, such a transaction takes place when a Hungarian taxable person orders a supply of goods that involves installation and assembly, or even a marketing service, from a German supplier. However, according to the new rules, if the invoice for such a transaction is issued by the Hungarian company, under a self-billing arrangement, the transaction will be subject to the invoice data reporting obligation. In that case, the question arises whether the legislators’ intent was indeed to extend the scope of invoice reporting to include invoices where the taxable person obliged to issue of the invoice / supplier is a foreign taxable person who does not otherwise have any other tax liability in Hungary. In this context, it should be noted that even in the case of a self-billing arrangement, the obligation to report invoicing data lies with the taxable person that is obliged to issue the invoice (i.e. the supplier of goods or services). Technically, in such a case, the relevant legal requirements are only fulfilled if the invoicing software used by the customer performs invoice reporting automatically, without manual intervention. At the same time, to report such invoice data the customer must use the supplier’s technical user credentials, which the supplier applies for and provides to the customer. However, only Hungarian taxable persons can apply for such a credentials; this means that serious concerns arise regarding the technical feasibility of invoice reporting in such cases. Hungarian customers authorised to apply self-billing should also reconsider whether this rule can be applied in practice, because a self-billing customer and its supplier are jointly and severally liable for the fulfillment of statutory provisions relating to the issuance of the invoices, including proper invoice reporting.
Conversely, under the new rules, if a Hungarian company supplies goods or services in another EU Member State in the frame of an out of scope transaction from Hungarian VAT point of view, the relevant invoice will be subject to online invoice data reporting. However, according to the wording of the relevant legislation, if the parties to the above transaction were to agree on self-billing, the invoice issued on the same transaction would not be subject to the reporting obligation. For example, if a Hungarian company sells natural gas to another EU-based taxable gas dealer through a gas network within the Community territory and the parties agree on self-billing, the invoice may be excluded from the scope of invoice reporting. Here, too, the question arises whether this rule is in line with the principle of comprehensive invoice reporting as well as with one of the underlying objectives of such reporting, i.e. to facilitate preparation of draft VAT returns by the Hungarian tax authority.
In addition to the above, there could be several self-billing scenarios where a foreign customer issues invoices on behalf and in the name of a Hungarian company, under Hungarian invoicing rules. For example, such arrangements are often used in VAT exempt intra-Community supplies. In the above cases as well, the foreign customer’s invoicing software – in which the invoice is generated – must perform invoice data reporting, using the Hungarian company’s technical user credentials. At the same time, the entity obliged to issue the invoices, i.e. the Hungarian company, will be responsible for proper invoice reporting, while the customer will have joint and several liability for the same. Accordingly, the Hungarian company must monitor the quality of the invoice reporting performed by its foreign counterparty, because it will likely incur the burden of sanctions arising for any improper reporting.
In light of the above, companies that participate in self-billing arrangements may wish to review how they can comply with the new invoice reporting requirements in connection with self-billed invoices.
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