Transfer Pricing Requirements in Hungary

Transfer pricing requirements are getting tougher in Hungary. On June 21, a new bill, complementing the 2023 budget, went to parliament.

While Hungary’s master file, local file, and country-by-country report requirements still apply, there’s also a new obligation for taxpayers: Now, you’ll also have to provide information about your transfer pricing transactions on your annual corporate income tax return, starting for tax year 2022.

What information? The Ministry of Finance hasn’t quite determined that yet.

Heightened Penalties for Non-Compliance

If a new reporting requirement wasn’t enough to convince you that Hungary’s serious about transfer pricing, consider the heightened penalties in this bill.

Now, if you fail to meet the documentation requirements, or your documentation is incomplete, there’s a penalty of HUF 5 million per controlled transaction—up from HUF 2 million. And if you’re a repeat offender, the penalties increase to HUF 10 million from HUF 4 million. Pretty significant jumps.

Changes to the Comparability Range

The bill also highlights changes to the comparability range. If you’re using public comparable companies in your analyses, the arm’s length range would then be synonymous with the interquartile range.

If pricing falls outside the arm’s length range, then the Hungarian tax authorities would make an adjustment and reset the price to the median, not to the closest point of the interquartile range. Get familiar with the new regulations—they go into effect on the 31^st day after the law is published.