From 1 January 2028, e-invoices will be mandatory for cross-border supplies of goods or services. with corresponding ‘near-real time’ reporting. The current maximum issuance requirement of 45 days post-taxable event is proposed to be shortened to just two days.
VAT in the Digital Age
On 8 December 2022, the European Commission proposed a series of measures to modernise and make the EU’s Value-Added Tax (VAT) system work better for businesses and more resilient to fraud by embracing and promoting digitalisation under the project name ‘VAT in the Digital Age’. The first pillar of the package is the new real-time Digital Reporting Requirements.
According to the estimation by the Commission, the move to e-invoicing should help reduce VAT fraud by up to €11 billion a year and bring down administrative and compliance costs for EU traders by over €4.1 billion per year over the next ten years.
Digital Reporting Requirements
In order to achieve the above ambitious goals, the following measures are aimed to be implemented, if the proposal is accepted:
• All B2B Intra-community supplies (ICS) will be subject to e-invoicing and digital reporting for all companies, including non-residents, as of 1 January 2028. Accordingly, all businesses will be obliged to issue and receive e-invoices for ICS’s based on a European standard for e-invoicing (EN 16931) for intra-community supplies.
• This also implies that from 2028, as a general rule, paper and basic PDF invoices will not be acceptable as VAT invoices. Instead, there will be a header-level transaction reporting schema based on the European standard for e-invoicing (EN 16931) and structured formats - such as XML; UBL; PDF/A3 - will be required.
• Whilst e-invoicing is not being mandated for domestic supplies on an EU level, from 2024 Member States will be free to impose such requirements without prior approval from the Commission;
• Reporting deadline will be within two working days of a chargeable event, basically near-real-time.
• The introduction of the new intra-community reporting regime will render EC Sales Lists (ESL), summary invoices obsolete and those will be withdrawn, accordingly.
The feedback period for the proposal has just been closed in the first weeks of April 2023. Whilst supportive of the DRR objectives – efficiency and anti-fraud – and of the package, many parties made remarks about the ambitious timetables, particularly with regard to the mandatory acceptance of e-invoices from next year and generally the two-day reporting requirement.
From a Hungarian point of view, most parts of the initiative should not pose a special challenge: the Hungarian tax office has set the goal of digital taxation previously and real-time online invoice data disclosure requirement had been implemented in Hungary gradually even from 2018. Notwithstanding, businesses will certainly need to adjust their day-to-day operation to comply with the general e-invoicing, the corresponding data schema and the tight deadlines, if accepted. Now the proposal is still subject to the EU protocol (VAT Expert Group, Member States, EU Parliament, etc.) before the implementation.
By Bálint Zsoldos, Head of Tax, KCG Partners Law Firm