The draft Hungarian transfer pricing decree has arrived, which from 2026 will replace the NGM 32/2017 transfer pricing regulation. The legislator’s declared aim under Hungarian law is to reduce administrative burdens and support tax authority audits. These two different objectives are expected to be reflected in practice in a way that, while the documentation pressure is eased for smaller transfer pricing transactions, expectations related to transfer pricing documentation requirements will tighten for all other transactions based on the new Hungarian regulatory approach.
Transfer pricing changes: administrative relief under Hungarian rules
The draft of the new Hungarian transfer pricing decree contains a few favourable changes that may reduce the administrative time required, primarily for low-volume and routine transactions.
1. Higher threshold and simplification for low value-adding services
- Higher exemption threshold: The documentation and data reporting threshold for transfer pricing will increase from HUF 100 million to HUF 150 million. This may be significant relief for companies with smaller volumes of related-party transactions under Hungarian transfer pricing rules.
- Clearer rules for low value-adding services: The definition of these services is closer to what is prescribed in the OECD Transfer Pricing Guidelines, removing earlier, more restrictive Hungarian-specific thresholds. If the service meets the functional criteria and the net mark-up is 5% (at least 5% when providing the service, at most 5% when receiving it), several mandatory content elements may be omitted from the documentation, and a benchmark study will not be mandatory in line with the Hungarian draft decree.
2. Exemption from preparing a Master File
- Hungarian rules have always required that a Master File be available in all cases where transfer pricing documentation was required. This was true even if the group did not prepare one centrally, in which case the additional task always fell on the Hungarian company. This remains the general rule under Hungarian legislation, but for companies where the total value of all related-party transactions does not exceed HUF 500 million within a tax year, preparing a Master File will not be mandatory.
3. More flexible amendment rules and one tightening regarding the language of documentation
- Possibility to amend: Under the draft Hungarian transfer pricing decree, transfer pricing documentation may be amended up until the start of a tax audit. The growing number of transfer pricing compliance reviews launched in recent years will no longer restrict this possibility.
- Language choice: Transfer pricing documentation, amendments, and supporting documentation may be prepared in Hungarian or English. An important change in the Hungarian legal framework is that the previously accepted other languages (German and French) will no longer be allowed, meaning the language options are narrowed.
Transfer pricing tightenings under Hungarian law: alignment between the Local File (LF) and data reporting (ATP sheets)
The tightenings in the draft decree focus on standardising data and ensuring auditability. The data reported in the Transfer Pricing Data Reporting (ATP sheets) will now serve as a mirror image of the Local File as required by Hungarian regulation.
1. Mandatory data harmonisation
To ensure alignment between the two systems (LF and ATP), the Local File must include:
- The transaction name used on the ATP sheets and the most characteristic TEÁOR code (Hungarian NACE code). This ensures each transaction can be precisely identified under the Hungarian reporting logic.
- Characterization: The Local File must clearly include the characterization of the parties (contract manufacturer, full-risk manufacturer, etc.). This is a key conclusion drawn from the functional analysis and materially influences both the choice of method and the selection of the tested party as stipulated by the Hungarian draft decree.
2. Significant narrowing of the scope of exemptions
On the one hand, the new HUF 150 million threshold takes effect; on the other hand, several important previous exemptions are abolished according to the rules:
- Free of charge cash transfers: The documentation exemption for free transfers and receipts of funds will be completely removed. From now on, such free supports will require transfer pricing analysis and documentation, albeit in a simplified form based on Hungarian legislation.
- Cost recharges: The previous exemption from documentation for pass-through recharges at an unchanged amount will be removed above HUF 500 million.
- Cost recharges: The previous exemption from documentation for pass-through recharges at an unchanged amount will be removed above HUF 500 million.
3. Stricter rules on aggregation
More flexible aggregation of transactions was especially typical in centrally prepared foreign transfer pricing documentation, but the new Hungarian transfer pricing regulation will categorically prohibit this approach. The new decree supplements the aggregation rules by stating that transactions falling into the following 5 categories may not be aggregated with one another: manufacturing, distribution, services, financial, and intangible asset transactions.
Ez további szigorítást jelent az összevonás esetében, hiszen pár éve került be a korábbi rendeletbe a vevői és szállítói oldalon szereplő ügyletek (pl. anyagbeszerzés és a hozzá kapcsolódó gyártás és termékértkesítés) összevontan elemezhetőek lehessenek.
The biggest challenge of the new Hungarian TP decree – new accounting-related requirements
The deepest and, for most companies, system-level change required by the draft decree relates to the new requirements for presenting financial data under the Hungarian regulatory environment.
Mandatory segmentation and traceability of data
The Decree specifies that the financial data required for calculations must ensure linkability to the accounting information system. In this context, the new regulation also emphasizes the need for segmentation.
- Segmentation must be complete with respect to operating profit, meaning that after allocation no operating item may remain unallocated to an activity.
This requirement bridges the gap between transfer pricing analysis (economic perspective) and bookkeeping (accounting perspective). Companies must proactively transform their internal posting and accounting practices to ensure that revenues and costs of individual related-party transactions are segmented at operating profit level and can be reliably traced and verified in accordance with Hungarian rules.
Stricter content requirements
The depth of the functional analysis also increases according to the Hungarian draft decree:
- DEMPE functions: For transactions involving intangibles, it will be mandatory to present DEMPE functions (development, enhancement, maintenance, protection, exploitation), which are crucial for allocating income related to intangible assets.
- Benefit test for services: The recipient of a service must now mandatorily substantiate that the service is fully necessary for its business activities (benefit test).
Tightening of benchmark studies: loss exclusion and geographic hierarchy
In the area of database searches (benchmark studies), the Hungarian transfer pricing decree elevates to legislative level certain tightenings that significantly influence the outcome of comparability analyses:
- Automatic loss exclusion: It will be mandatory to exclude companies that are loss-making at operating (business) profit level for two consecutive years or for more than half of the years considered.
- Time interval: The search must cover the three years preceding the tax year.
- Geographic hierarchy: If the tested party is domestic, the search must follow a strict hierarchy (Hungary, V4 countries, V4 expanded with seven additional EU Member States, EU27). Expansion is only possible if the sample size is insufficient.
Practical preparation aligned with the new regulation
The rules of the decree may be applied optionally already for 2025, and will be mandatory for 2026. This short transition period requires companies to immediately review their internal systems and processes in line with Hungarian legal requirements.
The rules of the decree may be applied optionally already for 2025, and will be mandatory for 2026. This short transition period requires companies to immediately review their internal systems and processes in line with Hungarian legal requirements.
What can companies do now?
- Review centrally prepared transfer pricing documentation as soon as possible, especially the compliance of benchmarks and aggregations with the new rules set out in the Hungarian draft decree.
- Prepare detailed DEMPE analyses for all intangible transactions so that the necessary substantive support will already be available when preparing the documentation.
- Evaluate internal services to determine whether the new simplified LVA (low value-adding) regime can be applied under the Hungarian rules.
- Align the ATP sheets and the Local File by standardising transaction names, TEÁOR codes, and characterisation.
- Transform accounting and controlling systems so that segmentation can be performed accurately and traced reliably down to operating profit level as required by Hungarian regulation.
- Identify transactions that were previously exempt but will require documentation going forward (e.g., free cash transfers, large-value cost recharges).
