The field of VAT has been characterised by extensive and continuous digitalisation over the last decade: the National Tax and Customs Administration (“NAV”) has taken significant steps towards the digitalisation of the tax system with internationally exemplary developments – notably the introduction of the obligation to provide online invoice data or the online cash register – and the EU is planning to digitalise the harmonised value added tax in its new proposal (which we reported on in our previous article). The electronic VAT system launched by NAV this year is part of these global and domestic developments and while it is a small step towards making processes more efficient for individual taxpayers, it is a milestone on the road to a digital tax system.
Our readers who are interested in taxation will have already come across the concept of the NAV’s electronic VAT system (“eVAT”) several times, and those who have been following the topic for a long time may also remember that according to the earlier provisions of the VAT Act, which were adopted but did not enter into force, the tax authority was to introduce the submission of VAT returns by 2021. As is known, the decision-makers decided to postpone the draft at that time, and the tax authority developed the concept of the new e-VAT system with the involvement of experts and taxpayers. The main cornerstones of the system, which will be fully operational from January 2024 and fully functional from 1 February 2024, are set out below, without going into technical details.
How the eVAT system works
The essence of the e-VAT system is that the tax authority prepares and makes available to taxpayers the VAT return based on the data available to it (mainly the online invoice data), which taxpayers can submit as their own return after completing or amending the draft.
Taxpayers can choose between two models of eVAT: the machine-to-machine (M2M) model and the web-based model. In the M2M model, the taxpayer transmits the necessary data to the eVAT system in the data structure defined by the tax administration and then approves the draft return generated by the administration by machine. In very simple terms, this can be interpreted as a taxpayer analytical report based on the standard tax codes introduced by the tax administration, i.e. the codes used to indicate the type of transaction, replacing the role of the return. It is expected that the return via an M2M connection will be used by businesses with higher tax rates, while the web-based return format – similar to the well-known eSZJA system – could represent a significant resource saving for smaller taxpayers.
The expected benefits
Although the invoice data available to the NAV were previously available on request, the validation of all invoice data – i.e. checking that the invoice data recorded in the NAV Online Invoice system matches the invoice data in the taxpayer analytics – required an extraordinary investment of time or a separate IT development. The eVAT system provides a structured verification process for taxpayers and, prior to submission, NAV also draws attention to discrepancies identified during its risk analysis, so that taxpayers can correct errors that might not have been detected using the previous form (ÁNYK) before filing the return, avoiding self-monitoring processes.
Of course, taxpayers can also save considerable time by having their returns prepared by the tax authorities as a service and, in the case of eVAT, by not having to bother with the summary statements (“M-sheets”) listing incoming invoices in detail, saving time and additional energy.
The future of VAT compliance
Of course, any conclusions on the success of the new system can only be drawn on the basis of our experience in the coming months. Based on the benefits of eVAT and previous similar experiences (including the rapid take-up of eSZJA), we believe that eVAT will be a widely used solution by taxpayers and its promotion is supported by the NAV: taxpayers who file their tax returns through the eVAT system can benefit from certain advantages, such as not having their returns examined by the tax authorities for 15 days from the due date, and the possibility to correct their returns during this period without any self-audit surcharge.
The use of eVAT is not compulsory, but if successful, we can expect to see a gradual decline in the role of the old paper VAT return.
The content of this post does not constitute legal or tax advice and does not create an engagement. In each case, detailed knowledge of the individual case is necessary to assess it and to find a tailor-made solution. If you have any questions, please do not hesitate to contact us at http://www.bekespartners.com/.
