Transfer pricing documentation modifications

The transfer pricing register has been required to be prepared at the same time as the corporate tax return so far in order to take account of any necessary tax base adjustments, but the main data related to the transfer pricing have not been required to be reported in the tax return. According to the transfer pricing rules, taxpayers subject to transfer pricing registration obligations are expected to provide information in their annual corporate tax return in the context of arm’s length price determination.

The expected data provision obligation applies to corporate tax returns to be filed after 31. December 2022. The specific rules on the provision of the data are not yet known, the content of the data provision will be set out in a ministerial decree. According to our preliminary information, the decree is expected to require the provision of the following information: 

According to the expected modifications, if the consideration applied by the taxpayer in a transaction with any of its affiliated companies falls outside the arm’s length range, an adjustment to the midpoint/median of the arm’s length range will, as a general rule, be required. An exception to this is where the taxpayer demonstrates that a value within the arm's length range other than the median is the most appropriate for the examined transaction.

If the company adjusts the pricing to the market conditions in a timely manner – if necessary – it is sufficient if the settlement price falls within the interquartile range after the adjustment and no adjustment to the taxable amount using the median value is necessary.

The fee for an APA procedure will increase from HUF 2 million to HUF 5 million, and from HUF 2 to HUF 8 million for bilateral or multilateral procedures.

The new provisions are expected to be applied for the first time for the assessment of the tax obligation of the tax years starting in 2022.

According to Section 4 Subsection 4 lit. d) of the Transfer Pricing NGM-Decree No. 32/2017, in the case of verbal contracts, a detailed description of the content of the contract must be prepared, which shall form an integral part of the transfer pricing documentation.

It is worth preparing the written summary of verbal contracts in time so that the essential parts of the contracts can be processed in the documentation.