Transfer pricing documentation

The examination of transfer pricing documentation is a priority issue for the tax authorities every year, and the relevant legislation is imposing an increasing number of administrative obligations on businesses. The tax authority conducts not only formal but also increasingly thorough substantive examinations of the records.

The new documentation requirement comprises three different documents: Country-by-Country Report (CbCR), master file, and local file.

From the 2023 tax year onwards, the main document and the local document shall be classified as separate records, with the latter to be prepared for each transaction or for each group of transactions. The essence of this amendment is that, unlike the previous one-time penalty, the penalty for failure to comply with transfer pricing reporting obligations may now be imposed multiple times per tax year.

Under unchanged circumstances, it is sufficient to perform the manual filtering part of the database filtering every three years, but the financial data of the companies selected in this way must be updated every year, typically taking into account the most recent three years of data available at the time of registration.

Failure to maintain transfer pricing records may result in significant penalties, as the Tax Authority may impose a default penalty of up to HUF 5 million per record per year (or up to HUF 10 million in the event of repeated violations). In addition, in the event of a substantive finding, a tax penalty and late payment surcharge equal to 50% of the tax shortfall may be imposed. In the event of failure to comply with the CbCR data reporting, notification and change reporting obligations, or in the event of late, incorrect, false or incomplete compliance, the Tax Authority may impose a default penalty of up to HUF 20 million on the person obliged to report and provide data.

Our services related to transfer pricing documentation:

• We review existing transfer pricing documentation and make recommendations for possible improvements to the documentation for the future.
• We conduct database research and update financial data using the database also used by the Tax Authority.
• we review the contracts involved in the transactions,
• we prepare the application for determining the normal market price (NMP),
• we prepare calculations for any items that may arise that modify the corporate tax base,
• we assess the scope of transfer pricing documentation to be prepared,
• We prepare comprehensive transfer pricing documentation.

Why choose us for matters relating to transfer pricing documentation?

• Our experts have many years of experience in tax law and accounting, including significant practical experience in transfer pricing.
• Thanks to their experience as tax authorities and tax advisors, our experts have extensive experience in the application of tax law and continuously monitor domestic and EU legal practice.
• When representing clients before the tax authorities, we combine this theoretical and practical knowledge with the information provided by our clients to ensure that the proceedings conclude with the best possible outcome for our clients.

If you have any further questions on this topic, our experts are available at the contact details below.