Monday, 1 August 2016

Time traveling into the world of transfer pricing documentation

The Hungarian transfer pricing documentation obligations may be the strictest system in Europe. Since its implementation it is repeatedly modified which makes the compliance even more complicated.

Despite the fact that currently the transactions under HUF 50 million are no longer have to be documented, the authority may retrospectively levy a HUF 2 million penalty - per year per transaction - after the missing TP files.

Let’s have a look through a practical example at this complex and frequently modified regulation system.

For example, a contract concluded in 2008, where the yearly transaction value amounts to HUF 20 million and is still in effect needs to be supported with the following TP documentation (assuming that the business year is the same as the financial year):

  • Complex TP documentation for 2008 (when the validity of the contract is undetermined simplified documentation cannot be prepared even if the value is under HUF 50 million);
  • Simplified documentation for 2009 (the cumulative transaction value is under HUF 50 million which makes entitlement for the simplification);
  • Complex TP documentation for 2011-2012 (the cumulative transaction value is over HUF 50 million);
  • With the effect of 2013 there is no TP documentation obligation (the yearly transaction value is under HUF 50 million); however, it is advisable to prepare a written record about the reason of not preparing it.
Additionally in 2008 the TP documentation was only acceptable in Hungarian language, as it is only since 2019 from when a foreign language may be acceptable for the transfer pricing documentation. The possibility of preparing a common TP documentation - EU Master File concept – came into force first in 2010. This option; however, needs to be reported in the CIT declaration.

The changes in the transfer pricing regulation are shown in the below chart:

You may find more information about the Hungarian transfer pricing obligations and the transfer pricing documentation requirements on our Hungarian blog.

LeitnerLeitner provides the following services in the field of transfer pricing:

  • Transfer pricing advisory services
  • Data base search (AMADEUS)
  • Audit and preparation of transfer pricing documentation
  • Representation in fiscal procedures (APA – Advanced Pricing Agreement, Tax Authority Audit)

For further information, please visit our website or contact us via e-mail at