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Tax News - Important changes in the Hungarian transfer pricing regulation


An amendment to the NGM decree 32/2017. (X.18.) on the documentation duties in connection with the determination of the arm’s length price has come into force on 31 December 2022. The amendment introduces significant changes to the Hungarian transfer pricing regulations, in particular

- the value limit of the transfer pricing documentation obligation is changed

- an additional reporting obligation is required

- maximum penalties are increased.

The limit of the transaction value for transfer pricing documentation is increased from HUF 50 Million to 100 Million, meaning that transfer pricing documentation is only required in case the net consideration of a related party transaction exceeds HUF 100 Million. Accordingly, fewer companies will need to prepare a transfer pricing documentation, and this beneficial change is already applicable with respect to the 2022 tax year. It should be noted, however, that if a related party transaction is below the HUF 100 Million net consideration, but it was not based on the arm’s length price, then the tax base still has to be adjusted.

The rules of preparing a consolidated documentation for several transactions have also changed. With respect to the 2023 tax year, the documentation for purchases may not be combined with the sales of products manufactured from the purchased materials, and transactions related to expenditures may not be combined with transactions primarily related to revenues.

Additional reporting obligation: in the corporate income tax returns which are submitted after 31 December 2022 – thus for the 2022 tax year, too – additional data must be reported about the related party transactions which are subject to the transfer pricing documentation obligation (i.e. the net transaction amount is above HUF 100 Million), such as

  • classification of the transaction (with NACE code),
  • net amount of the transactions per partner,
  • chosen method of determining the arm’s length price,
  • arm’s length price range,
  • the amount of tax base adjustment,
  • the profitability of the transaction.

In practice, this means that the Tax Authority will be in a position to check the existence of a transfer pricing documentation based on the data provided in the corporate income tax return (albeit the transfer pricing documentation itself still not need to be submitted).

Correction to the arm’s length price: In the case of related party transactions not made based on the arm’s length price, the price cannot be adjusted to any price within the arm’s length price range (which was usually one of the upper or lower interquartile values), but the tax base must be adjusted to the middle value of the price range. For example, if the applied margin is 2%, and the arm’s length price range is between 3% and 5%, then it is not sufficient to adjust the margin to 3%, but it has to be adjusted to 4% (median).

The fee for advanced price agreements with the Ministry of Finance (‘APA procedure’) has also been raised, with regard to unilateral procedures it amounts to HUF 5 Million, and in the case of bilateral or multilateral procedures it amounts to HUF 8 Million.

Increased penalty limits: Starting from the 2022 business year, the maximum penalty that could be charged in a tax inspection due to missing or faulty transfer pricing documentation is increased from HUF 2 Million to 5 Million, and in the case of a repeated violation from HUF 4 Million to 10 Million. Furthermore, these penalties may be charged per missing or faulty documentation. Due to the fact that in the amendment there was a change in the definition of the documentation, and so the master file, the local file and its parts containing each transaction are defined as separate documents, the penalties may be charged multiple times with respect to the same tax year.


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