Invoice data reporting and electronic invoicing in Hungary

Hungary is considered a leader in the European Union in the field of VAT digitalization, as its Online Invoice System (NAV Online Számla Rendszer) has long required businesses to fulfil a fully digitized data reporting obligation.

How did Hungary become a leader in electronic invoicing?

The legal foundations for electronic invoicing in Hungary were laid down on May 1, 2004, the day of the country’s accession to the European Union, by a regulation of the Ministry of Finance. This regulation detailed the requirements for electronic invoices issued by companies. The regulation marked a breakthrough in the shift towards electronic business activities.

Since then, the field has been regulated by the VAT Act (Áfa tv.) and related regulations. Based on the provisions of the VAT Act, the authenticity of the invoice, the integrity of its data content, and its legibility must be ensured from the date of issue until the end of the retention period

However, the reason for the country's advanced state of e-invoicing is to be found elsewhere. The desire to reduce the VAT gap, improve tax morale, and shift the economy toward electronic administration drove the introduction of mandatory real-time data reporting.

When RTIR was established, the Hungarian tax authority's goal was to reduce the VAT gap*, which it successfully achieved. Currently, the VAT gap in Hungary is around 1%, but at the time of launch, it was in the double digits.

_{*The VAT gap refers to the difference between the VAT that can be collected and the VAT that is collected.} 

This was preceded in B2G (Business-to-Government) transactions by an amendment to Act CXLIII of 2015 on Public Procurement (the "Kbt."), which entered into force on April 18, 2019, bringing about significant changes. The amendment made it mandatory for contracting authorities to accept electronic invoices in public procurement procedures. 

The legislation stipulated that contracting authorities are required to accept and process electronic invoices that comply with the relevant European standard (EN 16931-1:2017) and the syntax list published in the Official Journal of the European Union.

In practice, this meant that if a company participated in a public procurement procedure, it had the option of choosing electronic invoicing unilaterally, and the contracting authority had to ensure that it was able to receive and process electronic invoices properly, even if it did not expressly agree to the use of electronic invoicing. While the amendment to the law gave taxpayers a choice, it imposed an obligation on the state.

The real-time data reporting obligation (NAV Online Invoice Data Reporting, or RTIR for short) was gradually introduced starting in 2018.

• The initial RTIR obligation applied to domestic invoices with a higher VAT content.

• As of January 4, 2021, it became mandatory to send data to the NAV for all B2B and later B2C invoices, amendments, and invalidations subject to the invoicing rules of the VAT Act.

From this date onwards, Hungarian taxpayers were required to report their invoices to the Hungarian Tax Authority’s NAV Online Invoice platform based on the NAV 3.0 xsd schema, and failure to comply with this obligation resulted in penalties from April 1, 2021.  

The Hungarian tax authority developed its own platform for reporting RTIR invoice data, but left it up to businesses to decide what technological solution they implement to comply with the obligation. They deliberately did not want a centralized solution like the one Italy already had at the time. 

The current state of e-invoicing and invoice data reporting

The severity of the real-time data reporting obligation has led to this area being technologically advanced, even though e-invoicing is not yet mandatory in the country.

• All domestic invoices must be reported in real-time to NAV within 5 minutes of the invoice issuance on the NAV Online Számla Platform. The format is based on XML standards.

• The archival period is strict, a minimum of 8 years from the annual financial statement year, but it can be even longer.

Since data reporting is mandatory anyway, most businesses send and receive invoices electronically, whether based on a PDF sent via email, a scanned paper invoice, or using other solutions such as an e-invoicing service provider’s technical solution to automate the process.

Many invoice service providers operate in the market with various services, supporting companies' operations with supplier e-invoice sending, receiving, archiving, and other supplementary services.

Professional e-invoice management is important, as the Hungarian Tax Authority, NAV, strictly punishes incorrect invoicing or archiving.

The current invoicing requirements can be found in the Hungarian Tax Authority’s publication titled "NAV Basic Rules for Issuing Invoices and Receipts”. The authority updates this publication annually. It serves as the blueprint for the invoicing requirements laid out in the legislation. The publication includes, among other things, the mandatory and optional elements of an invoice, and the time and method of its issuance.

The most important requirements regarding invoices are regulated by the VAT Act and related decrees. Any document that unambiguously modifies the data content of a given invoice by referring to that invoice and meets the conditions specified in the VAT Act is considered an invoice.

The storage obligation (archiving) also applies to documents and related contracts that are considered equivalent to the invoice (proving the same business transaction). This includes pro-form invoices, agreements, and order documents. In simple terms, it must be possible to trace the entire transaction in the event of an inspection. 

The critical role of data quality and compliance (lessons from RTIR)

Improving data quality and compliance for RTIR

It is in the interest of every tax authority, including Hungary’s NAV, to receive error-free data. Practice shows that even in countries where invoice data reporting has been commonplace for many years (like Hungary), there are still many errors in the reported invoice data.

The Hungarian tax authority continuously strives to improve its system to obtain adequate data quality because if the data reported by taxpayers is correct, the suggested VAT return will also be correct, so the economy can be planned better.

The three main sources of errors:

• Data content error: E.g., "this is how we usually issue it," "others do it this way too," "this is how the program does it." This can also be attributed to manual billing or auditing colleagues resisting full automation for fear of losing their jobs.

• Technical error: E.g., the tax authority has built a system that is too complicated, or the user cannot see the interface properly.

• Negligence: The company does not deal with errors; no corrections are made (e.g., only a warning message appears, so why should we care? We can report it anyway).

Strict penalties and the need for automation

How automation prevents strict VAT penalties

To combat these issues, the NAV uses ERROR, WARNING, and INFO messages to alert taxpayers to problems with their invoice data reporting. Due to the persistent issues affecting approximately one million data reports per month, the tax authority has tightened its rules, changing previous WARNING notices to ERROR notices to ensure taxpayers take them more seriously.

It is indeed in the interest of companies to take error messages seriously. In Hungary, the stakes are high: failure to comply or inadequate compliance with the online invoice data reporting obligation can result in a default penalty of up to HUF 1,000,000 (circa 2500 EURO) per invoice.

The quality of invoice data and legal compliance can be improved by automated checks built directly into the invoice process. These automated solutions serve as the primary defense against the three main sources of data errors (content, technical, and negligence) and the subsequent high penalties. A good invoicing service provider has liability insurance, performs numerical and content checks built into the invoicing process, and ensures 100% data quality and legal compliance. 

Banqup Group has a compliant inbound and outbound solution and a compliant real-time reporting solution on the Hungarian market.

What to expect in the future? 

Following the adoption of the ViDA package, member states will have the option of introducing mandatory e-invoicing from March 25, 2024. By 2030, this will no longer be an option but an obligation for EU member states.

When will e-invoicing become mandatory in Hungary? 

The transition to mandatory e-invoicing under the ViDA directive will occur in phases, building on Hungary's existing advanced Real-Time Invoice Data Reporting (RTIR) system.

• July 2025 sector mandates: Mandatory e-invoicing for all B2B transactions in the electricity and natural gas sectors. 

• January 2026 sector mandates: Mandatory e-invoicing for water utility services to businesses. The transition is beginning sector by sector.

• 2028 expected NAV platform launch: The Hungarian Tax Authority (NAV) plans to launch a fully compliant platform to align with the new regulations. This period is expected to be a phase of voluntary participation. The B2B mandate will come into force in 2029, after the pilot period.

• July 1, 2030, is the EU final deadline: This is the ultimate deadline set by the ViDA directive for all member states to implement mandatory Digital Reporting Requirements (DRR) and e-invoicing for intra-EU B2B transactions. All domestic B2B e-invoicing is expected to be mandatory in Hungary by this point.

Because Hungary already mandates Real-Time Invoice Data Reporting for all domestic B2B and B2C transactions, the transition to the ViDA-compliant system is not expected to bring about significant changes for businesses that are already using compliant invoicing software.

The main change for businesses will be the definitive shift from issuing invoices in flexible formats (like PDF sent via email) to the use of a structured XML format (EN 16931-compliant) as the only legally valid electronic invoice for B2B transactions.

Hungary e-invoicing updates

While Hungary already has an advanced RTIR system, the introduction of ViDA will necessitate updates to the legislation, the invoicing process, and the underlying systems.

Legislative and definitional shift

The most fundamental change will concern the legal definition of an electronic invoice (e-invoice), requiring all related Hungarian legislation (e.g., the VAT Act) to be changed to align with ViDA.

• Current definition: Under the existing VAT Act, an electronic invoice is simply any invoice that contains the obligatory data elements of a paper invoice and is issued and received in an electronic form. This includes a PDF invoice sent exclusively by e-mail (even if it's a scanned paper invoice).

• Future requirement: Aligned with ViDA's requirements, the future e-invoice will be defined as XML-structured data.

Process changes and new obligations

The process of issuing and receiving invoices will introduce new requirements to the Hungarian market:

• Mandatory status reporting: A key new element will be mandatory status reporting required from the e-invoice receiver to confirm receipt of the invoice. Automated Processing: Crucially, this receipt confirmation must undergo automated processing by the tax authority's system before being formally rendered and associated with the original e-invoice transaction record.

• Machine readability: The emphasis will shift from a human-readable document (like a PDF) to a machine-readable and processable structured data format. This structured data had to be archived according to legislation.

• Hungarian Tax Authority must develop a platform, or improve the existing one, that can process data according to the requirements. 

Interoperability and system alignment: EN16931 and Peppol

The technological landscape will also change to ensure cross-border compatibility:

• The EN16931 standard: Defining the content

  • The EN16931 electronic invoicing standard is crucial for businesses because it ensures interoperability between EU member states’ local standards.

  • Compliance is mandatory: All new B2B and intra-EU invoices must be created in an XML format compliant with the EN16931 European standard.

  • Structured data: The main invoicing data must be identical to that specified in the European standard, although each member state's data structure may be enriched with local data (CIUS).

  • Legally valid invoice: For B2B transactions, the XML file will always prevail as the legally valid tax document, even if a visual representation (like a PDF) is issued.

• Peppol requirement
  ViDA stipulates that all member states must provide the option of invoicing via Peppol, but its use for domestic transactions is often optional.

  • Hungary plans to join the Peppol network to offer secure transmission channels.

  • The National Tax and Customs Administration (NAV) has confirmed that Hungary will become a Peppol Authority to facilitate the implementation of this network and oversee service providers.

  • Domestic use: Peppol is not as widespread in Hungary as in countries like Belgium, where, if parties disagree on the invoicing method, its use is obligatory. In Hungary, using Peppol will remain optional for businesses in B2B transactions. Currently, Peppol is mainly used for international public procurement or when a foreign partner insists on it.

• A public consultation has been launched by the NAV and the Ministry of National Economy (NGM), as the authorities are actively seeking feedback on the proposed framework until January 20, 2026, to refine the technical and operational details.

Conclusion: ViDA and Hungary's e-invoicing future

ViDA will certainly introduce changes in Hungary, but due to the existing advanced state of the NAV Online Számla system and mandatory Real-Time Invoice Data Reporting (RTIR), the transition is expected to be less disruptive for most businesses.

The businesses that will be most heavily affected are the ones who still use paper invoicing, and accountants, accounting software manufacturers, and invoicing software developers, who must update their processes and systems to meet the new legislative and technical requirements. Despite the upcoming "revolutionary" changes brought by ViDA, Hungary's established digitalization of VAT makes it a leader, giving it a head start in adopting the EU's unified electronic invoicing system.