The question in which language the transfer pricing documentation should be prepared comes up a lot of times with certain clients. There is no compulsory legal regulation regarding the language of the transfer pricing documentation, which means that it can be prepared in any language. However, companies have to note that in certain cases the tax authority may demand a translation from the taxpayer, which may imply a substantial cost.
From 1 January 2012, the tax authority is obliged to accept transfer pricing documentations prepared in English, German or French. If the transfer pricing documentation is not prepared in Hungarian or any of the above mentioned languages, the taxpayer is obliged to provide the tax authority, upon request, with a translation of the transfer pricing documentation or any part of it within the specified deadline. The cost of the translation is, of course, borne by the taxpayer.
We specifically have to point out that the fact that the tax authority may not demand a translation of the transfer pricing documentations prepared in English, German or French does not mean that the transfer pricing documentations prepared by foreign related parties in these languages could be accepted without any adjustments whatsoever. These still have to be revised in each case and supplemented in accordance with Hungarian regulations for the taxpayer may be sanctioned with a default penalty if the transfer pricing documentation in question does not comply with Hungarian legal regulations.