By embracing digital transformation, tax authorities can significantly improve their operations and effectively close the VAT GAP. An innovative eVAT system, like the one the Hungarian tax authority has recently implemented, is a powerful tool for tax administrations, offering increased efficiency, enhanced accuracy and compliance, valuable insights, and flexibility.
Introduction
The Hungarian tax authority has implemented an innovative eVAT system to streamline VAT return processes and minimize the VAT GAP. This system, which went live in 2024, allows taxpayers to submit draft VAT returns prepared by the tax authority, which can be adjusted and approved by the taxpayers themselves.
This eVAT system provides numerous benefits, such as real-time VAT tracking, error detection, and validation to reduce discrepancies. It also offers a preventive role by helping taxpayers to avoid tax authority consultations and compliance investigations. The system is designed to be flexible, allowing taxpayers to choose the method that best suits their needs.
Digital Tax Transformation: eVAT in live
The Hungarian tax authority was one of the first in the world to offer draft VAT returns (eVAT), among other things, with the aim of supporting and facilitating taxpayers in fulfilling their obligations and also to minimize the VAT GAP. The project went live on 1 January 2024. From that date, the Hungarian Tax Authority prepares draft VAT returns, which can be adjusted and submitted by the taxpayers. In this article, we present the relevant legal background and the new VAT system. We hereby also detail the benefits and opportunities of the new system for businesses and governments.
The eVAT system in Hungary
Similarly to the digital registration systems of some South American countries and Greece’s myDATA system, the Hungarian tax authority now has a record of the live and nearly complete VAT transaction data of companies from the online cash register and online invoicing system introduced from July 2018. As another milestone in the unstoppable digitalization of tax administrations, the Hungarian Tax Authority has built its new tax return system, eVAT, on this transaction data set.
This new tax (eVAT) platform is now available to resident and non-resident enterprises. The system is based on the OECD SAF-T standard, which describes the XML data reporting developed for the transfer of digitised tax-related accounting data but also goes beyond it. It also includes a check-analysis toolkit for taxpayers that can help taxpayers identify trends and errors for further analysis and correction.
Advantages for Tax Administrations
The eVAT system offers numerous advantages for tax administrations, making it a valuable tool for digital transformation and closing the VAT GAP.
- Increased efficiency: one of the primary benefits is the increased efficiency in processing VAT returns. By leveraging digital data, tax authorities can generate draft VAT returns, which taxpayers can then review and submit. This automation reduces the administrative burden on both taxpayers and tax authorities, leading to faster and more accurate tax filings.
- Enhanced accuracy and compliance: another significant advantage is enhanced accuracy and compliance. The eVAT system includes a validation process that helps identify errors and discrepancies in VAT returns before they are submitted.
- Analytics Capabilities: the eVAT system also provides valuable insights through its analytics capabilities. Tax authorities can use the data collected to perform risk analysis and identify trends, which can inform policy decisions and improve tax administration processes. This data-driven approach enhances the overall effectiveness of tax administration and helps in closing the VAT GAP by ensuring that all taxable transactions are accurately reported and taxed.
- Flexibility: the system offers flexibility for taxpayers, allowing them to choose between different methods of filing their returns, such as using the web interface or a machine-to-machine connection. This flexibility accommodates the varying needs of different taxpayers, from small businesses to large enterprises.
Final Thoughts
In summary, the eVAT system is a powerful tool for tax administrations, offering increased efficiency, enhanced accuracy and compliance, valuable insights, and flexibility for taxpayers. By embracing this digital transformation, tax authorities can significantly improve their operations and effectively close the VAT GAP. For more information, you can find our more detailed article here.
