Transfer Pricing – New Regulations – Stricter Compliance Rules
Transfer pricing has been a priority issue in Hungary since 2003. While the tax authority used to focus on the formal requirements, it is now more competent and experienced in checking the content. Loss-making and low-profitability operations are given the highest priority in risk analysis and selection for audit.
Further legislative tightening has been introduced from 2022. Related party transactions with a value of more than HUF 100 million (€250 000) per year must be documented, but those below the threshold must also be valued at market value.The maximum admin fine for failure to prepare or incomplete transfer pricing documentation has been increased by two and a half times, to HUF 5 million (around €12,500) per transaction per year from 2023, and the master file and local file will also be considered as separate reports for fines purposes.
The benchmarking rules have also been tightened. First from 2022, only the interquartile range will be considered as the market when using a database and the median value will be used for subsequent tax base adjustments.
A very important new obligation is that, for the first time with the 2022 tax return, extensive information must be provided on the content of transfer pricing documentation. The deadline for the preparation of the reports was previously the submission of the corporate income tax return, but in fact the report was only required during an audit. However, with the new rule, documentation must now actually be ready in order to be able to provide the information and fill the related form.
From this year onwards, the tax authority will focus even more than before on transfer pricing audits and, due to the highest level of fines in the region, plans to examine not only the correctness of the pricing but also the fulfilment of the administrative obligation with a significant capacity to meet the high revenue expectations assigned to transfer pricing investigations.
