Legal Basis
The Hungarian transfer pricing (“TP”) legislation is in Act LXXXI of 1996 on Corporate Tax and Dividend Tax, Section 18 in different Decrees, as well as in the Double Tax Treaties.
The Decree 32/2017. (X. 18.) of the Ministry of National Economy provides for the methods of transfer pricing documentation and formal requirements associated with the determination of arm‘s length price. The rules are formulaic and provide principles.
Requirements
Whom: The TP rules apply to Hungarian taxpayers, and there is a self-assessment regime, i.e., the taxpayer is required to confirm its transfer pricing meets the standard or to adjust their tax return accordingly.
Condition: The Hungarian Taxpayer engages in intercompany transactions for the specific fiscal year.
When: TP documentation must be in place on the date a corporate income tax return is filed.
What: 1. Local file, 2. Master file, and 3. Country-by-Country Report.
Important recent development: Due to legal changes, TP rules apply in the event of a capital increase because of a contribution in kind provided by a shareholder, who – prior to the contribution – did not have majority ownership in the company but acquires majority ownership through the contribution. The application of transfer pricing rules is also required in case of repurchasing of own shares or transfer of such shares free of charge.
In short
Taxpayers in Hungary should be aware of the TP requirements. The conditions are described in a low entry fashion. All Taxpayers engaging in intercompany transactions involving a Hungarian subsidiary or group firm should note the TP requirements.
Please feel free to reach out to our transfer pricing and tax technology experts. They‘re happy to help you prepare for the new transfer pricing requirements.
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