Preparing a segmented income statement is one of the biggest practical challenges under Hungary’s 2026 transfer pricing rules. The new Hungarian decree requires companies to present the profitability of related-party transactions at operating profit (EBIT) level, supported by properly substantiated revenue and cost allocations. For many businesses, this goes beyond preparing transfer pricing documentation and may require a review of their accounting and financial controlling systems. During transfer pricing audits, the Hungarian Tax and Customs Administration (NAV) requires more than segmented figures: companies must also demonstrate the economic rationale behind them and their traceability to the general ledger. János Karczub, transfer pricing expert at RSM Hungary, explains where the main risks arise and why businesses should prepare before closing the 2026 financial year.
What does NAV examine during transfer pricing audits, and why is an Excel spreadsheet not enough?
As we enter the final quarter of the year, companies are already preparing to close their 2026 financial year. At the same time, they need to prepare their first transfer pricing documentation for which the new Hungarian transfer pricing rules are mandatory, unlike the transitional approach available in 2025.
Hungarian NGM Decree No. 45/2025 (XII. 23.) introduced significant changes in several areas. Stricter rules on aggregating transactions and conducting database benchmarking analyses, DEMPE analysis and more detailed evidence of the economic benefits of services—the benefit test—all create additional tasks. Based on our experience, however, preparing a segmented income statement is likely to present the greatest practical challenge.
This is because extracting the appropriate financial data often cannot be left until the transfer pricing documentation is being prepared. Existing accounting and management information systems, together with cost allocation and financial controlling processes, may not support the required breakdowns.
Contact RSM Hungary’s transfer pricing experts
Transfer pricing segmentation: an established expectation becomes a regulatory requirement in Hungary from 2026
Transfer pricing segmentation enables companies to assess the profitability of related-party transactions separately from other activities, using the revenue, costs and expenses attributable to those transactions. Hungary’s new decree, applicable from 2026, sets out detailed requirements for segmentation down to operating profit level and requires the calculations to be supported by accounting data.
Segmentation is not a new concept in transfer pricing in 2026. The OECD Transfer Pricing Guidelines have long emphasised that the financial indicators used to assess whether related-party transactions are at arm’s length must relate to the transaction or activity actually being examined.
This is particularly important when applying the transactional net margin method (TNMM). For a company engaged in manufacturing, distribution and services, overall profitability calculated from its annual financial statements is unlikely to provide a suitable basis for demonstrating that its different related-party transactions are at arm’s length.
In recent years, NAV has already requested segmented financial data, particularly from businesses carrying out several types of activity. In compliance reviews and tax audits launched in Hungary in 2026, we have seen segmented income statements and their supporting evidence receive particular attention, even where the documentation under review was prepared under the previous Hungarian transfer pricing decree.
Hungary’s new transfer pricing decree therefore does not introduce an entirely new obligation. It gives statutory force to a longstanding expectation under the OECD Transfer Pricing Guidelines,” said János Karczub, transfer pricing expert at RSM Hungary.
What does Hungary’s new transfer pricing decree require, and what does NAV examine?
One of the most important elements of Hungary’s new transfer pricing rules is segmentation at operating profit (EBIT) level. Revenue, costs and expenses relating to the relevant activities must be properly separated, while indirect costs must be allocated using an economically justifiable methodology.
No operating item may remain unallocated to an activity during transfer pricing segmentation, and the calculations must be traceable to the company’s accounting records.
Obtaining financial data relating to a foreign company may present an additional challenge. Where the tested party is based outside Hungary, the Hungarian company must obtain and substantiate financial information over which it often has no direct control.
NAV’s audit practice points in the same direction. In reviews and audits launched in 2026, the segmented income statement already features in the information request questionnaires issued by tax inspectors. Alongside the final figures, NAV will request the allocation keys used, their economic rationale and a reconciliation of the segmented data to the general ledger.
The question is therefore no longer simply whether a business can produce segmented data, but whether it can defend that data before NAV’s inspectors if necessary.
When overall profitability conceals transfer pricing risk
Consider a company that manufactures goods for a related party while also carrying out its own distribution activities.
The company’s overall operating profit margin is 5%, which may appear satisfactory at first glance. Segmentation, however, reveals that the manufacturing activity generates a margin of just 1.8%, with the highly profitable distribution business lifting the company-wide average.
If the profitability of the manufacturing activity falls outside the arm’s length range established using the appropriate method and profit level indicator, a transfer pricing adjustment may be necessary even where the company’s overall profitability is above average.
The reverse can also occur: a loss-making transaction with independent parties may reduce the company’s overall profit, while the related-party transaction itself is at arm’s length in terms of both its conditions and its pricing. Operating losses combined with related-party transactions are likely to increase the probability of a transfer pricing audit in Hungary significantly. In such circumstances, segmentation itself may help the company avoid a tax penalty relating to transfer pricing.
Properly planned and performed segmentation can therefore be an important means of defending a company’s position during a tax audit,” emphasised János Karczub, Senior Manager in RSM Hungary’s Tax Services practice.
Why do financial controlling systems present the greatest challenge for transfer pricing segmentation?
Companies’ accounting and financial controlling systems are generally not designed to support the preparation of transfer pricing documentation. Cost centres and internal reports are structured to support management decisions, but this structure often differs from the breakdown required for related-party transactions.
In our experience, separating revenue is usually more straightforward. The real difficulty may lie in allocating indirect or shared costs appropriately, such as warehousing, IT, premises, management costs or depreciation.
Which allocation keys are appropriate for these costs? How can the company demonstrate that the allocation reflects the economic substance? And is the necessary data available in the first place?
Hungarian subsidiaries using group-wide ERP systems, or needing to obtain financial data from foreign related parties, may face particular difficulties.
For some companies, reviewing existing reports and allocation keys may be sufficient. Others, however, may need to redesign their entire financial controlling system, which can require substantial resources and even more time.
Inadequate transfer pricing segmentation may also result in more than a penalty for non-compliance with transfer pricing documentation requirements. Depending on the circumstances, an incorrect profitability analysis may lead to a tax base adjustment and a tax penalty under Hungarian tax rules.
What should companies do before year-end to prepare their 2026 transfer pricing documentation?
Although the general deadline for preparing 2026 transfer pricing documentation in Hungary is the end of May 2027 for calendar-year taxpayers, companies should assess before the year-end close whether their current accounting and financial controlling systems can produce the necessary breakdowns.
The first step is to identify the related-party transactions requiring segmentation and review the cost allocation keys. Companies should then prepare a trial segmentation using data for the first nine months of the year. This can reveal, before the year-end close, whether the required revenue and cost data is available or whether financial controlling processes need to be adjusted.
Do not leave segmentation until you prepare the transfer pricing documentation
Hungary’s new transfer pricing decree introduces several significant changes, but segmentation stands out because it may substantially affect not only transfer pricing documentation, particularly the local file, but also the company’s financial operations.
At this stage, the greatest risk is not that a company has yet to prepare a segmented income statement. A much greater problem arises if the company discovers only after the year-end close, or during a NAV transfer pricing audit, that its existing systems cannot reliably produce one.
How can RSM Hungary help?
RSM Hungary’s transfer pricing experts help companies review their existing accounting and financial controlling processes, develop segmentation and cost allocation methodologies, substantiate segmented income statements with general ledger data, and address questions arising during NAV audits.
If you are uncertain whether your company’s existing systems can meet Hungary’s 2026 segmentation requirements, assess the necessary steps before the year-end close.
