ARTICLE
22 January 2025

New Online Tax Information Reconciliation Procedure: Tight Deadlines And Significant Penalties

HS
Horizon Solutions Kft.

Contributor

Nestled in Hungary, Horizon Solutions Ltd. stands as a prominent tax advisory firm serving corporate and private clients alike. With over two decades of expertise in international tax planning and consulting, we are committed to crafting bespoke solutions that address the distinctive requirements of each individual and business. From tax planning to compliance and tax technology, our comprehensive services ensure efficient tax solutions tailored to your needs. Our accessible and dedicated team offers clear, commercially-driven advice, fostering enduring client partnerships.
Starting in 2025, Hungary's tax authority will introduce a new administrative audit process called the data reconciliation procedure.
Hungary Tax

Starting in 2025, Hungary's tax authority will introduce a new administrative audit process called the data reconciliation procedure. This system aims to identify and resolve discrepancies between the data submitted in companies' VAT returns and the information provided through the online invoice reporting system. Taxpayers need to be prepared for shorter deadlines and the potential for significant fines. Below, we outline the critical aspects of this procedure and recommend actions to mitigate risks.

The Core of the New Procedure

Under the data reconciliation procedure, the tax authority will systematically compare the data reported in VAT returns (especially on the detailed reporting sheets, where the taxpayer should report each of its invoices received with VAT deductible) with the information derived from the online invoicing reporting system. Should the tax authority identify discrepancies, it will initiate a reconciliation request, giving taxpayers only 15 days to respond and clarify the discrepancies. Failure to meet this deadline could result in a 300,000 HUF penalty (according to the law, this item applies per notice, so the amount of the risk depends on the actual procedure of the tax authority, i.e. whether the tax authority asks for clarification of one or more invoices).

One of the notable changes tied to this new system is the requirement for exact data reporting on the detailed reporting sheets starting in 2025. This includes eliminating the current rounding practices to ensure precise alignment between the information provided by invoice issuers and recipients.

Key Challenges for Taxpayers

The introduction of this procedure poses significant challenges:

  1. Tight Response Deadlines: The 15-day deadline for responding to the tax authority's reconciliation requests leaves little time for manual checks or corrections. Companies will need to rely on automated systems to identify and address discrepancies promptly.
  2. Increased Risk of Errors: The precision required in the reporting and invoice data matching increases the likelihood of errors being flagged, whether they stem from human input or system limitations.
  3. Electronic Communication: The entire reconciliation process will be conducted electronically. Notifications will be sent to the company's official electronic communication platform and discrepancies must be addressed via the Client Portal of the tax authority.

Steps to Prepare for the New Procedure

To minimize risks and ensure compliance, companies should begin preparing now:

  1. Enhance Data Accuracy:
    • Regularly reconcile the data reported in their VAT return with the online invoicing reporting system to detect and resolve discrepancies early.
    • Implement strict internal controls for invoice data entry and reporting.
  2. Automate Reconciliation Processes:
    • Introduce or upgrade software solutions to automate data validation between invoices, VAT returns, and online reporting systems.
    • Ensure ERP systems can handle the full character lengths of invoice numbers and other critical data to avoid discrepancies caused by truncation.
  3. Monitor Invoice Issuers and Recipients:
    • Verify that both invoice issuers and recipients are providing accurate data in their reports.
    • Establish processes to cross-check data accuracy with business partners.
  4. Proactively Address Risks:
    • Conduct internal audits to identify potential areas of non-compliance or systemic errors.
    • Ensure that your team is trained to manage tax authority communications and reconciliation requests effectively.

Common Causes of Discrepancies

The tax authority has also highlighted several key factors that could trigger reconciliation procedures:

  • Manual Data Entry Errors: Mistakes in invoice numbers, amounts, or dates can lead to mismatches.
  • Rounding Issues: Starting in 2025, VAT return data must match invoice data down to the last forint (HUF).
  • Incomplete Data Reporting: Missing or incorrect data submissions by invoice issuers can result in discrepancies, even if the reporting of the company receiving the invoice is accurate.

Final Thoughts

The new data reconciliation procedure underscores the importance of precision and timeliness in tax reporting. The 15-day response deadline requires companies to maintain constant vigilance over their reporting processes and invest in robust automation tools. While the system aims to improve tax compliance, the burden of proof is on taxpayers to ensure their data is accurate and complete.

By implementing proactive measures now, companies can avoid the risks of penalties and delays, ensuring a smooth transition to this stricter compliance environment in 2025. For any questions or assistance in preparing for these changes, our experts are here to help.

Act Now to Stay Ahead: If your business relies on accurate VAT reporting, start preparing today. A failure to adapt to these changes could result in unnecessary financial and operational burdens.

International Outlook: It is worth monitoring the procedure of the Hungarian tax authority, especially regarding the information and procedures made possible by technology, which, according to our experience, foreign tax authorities also analyse, in order to apply certain solutions within their own jurisdiction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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