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Helga Kiss, tax director, RSM Hungary
Helga Kiss

First definite CbC deadline at the end of the year!

There are several points where it is possible to trip up when fulfilling the country-by-country reporting obligation per country. The first deadline is the end of the year for both of the 2016 and 2017 reporting obligations!

What period is subject to Country-by-Country reporting by 31 December 2017? 

In case of a financial year corresponding to a calendar year, the country-by-country reporting obligation is required to be complied with (with the CBC report to be submitted to the tax authority) as part of transfer pricing records by 31 December 2017 for both of the financial years of 2016 and 2017. In case of the first year of data disclosure, that is, 2016, taxpayers had a one-year grace period for complying with the obligation; at the same time, the general rule is that reporting is required to be completed by the last day of the financial year of the group. This also applies to the year 2017. 

It is promised that the form currently available on the webpage of NTCA (17T201T) – which now makes it possible to report the data for only one year – will also be adjusted to the currently effective legislation to make it suitable for reporting on both years simultaneously. If this fails to come about, reports will be required to be submitted separately for the two years by the end of this year. 

Hungarian taxable persons required only to report but not to disclose data on behalf of the company group are also required to indicate the end of the company group’s financial year of data disclosure, in addition to specifying their own details as well as the name and country of the group member making data disclosure. 

Clarification in the text of the Hungarian legal regulation on Country-by-Country reporting 

The purpose of CBCR regulation is to prevent tax diversion and to facilitate the transparency of company groups through the information submitted by company groups. Theoretically, only the ultimate parent undertaking is required to submit a country-by-country report, to be made available to national tax authorities pursuant to currently effective information exchange agreements. To date, however, these information exchange agreements have not yet entered fully into effect. Therefore, pursuant to the currently effective rules, group members other than the ultimate parent undertaking are also required to submit a report to their own tax authority, unless the automatic information exchange agreement between the tax authorities enters into effect by the last day of the financial year, or the parent company designates a group company for submitting such report which is seated in a country where CBC report exchange is in operation between such country and Hungary. 

The Hungarian act on the rules of international public administrative cooperation on tax and other public charges will be amended depending on the date of entry into effect of the automatic information exchange agreements between tax authorities. If such agreement enters into force by the deadline of data disclosure (CBC report submission) – that is, in 12 months from the end of the financial year of data disclosure –, then a group member other than the ultimate parent undertaking will not be required to submit a country-by-country report. 

According to legal regulations currently in effect, group members’ secondary data disclosure obligation shall first occur in relation to the 2017 financial year of data disclosure. Therefore, in respect of the 2017 financial year of data disclosure, exemption from independent data disclosure may be granted to group members between whose country and the country of the ultimate parent undertaking the automatic information exchange agreement enters into effect (according to the amendment, instead of 2017) by 31 December 2018, that is, by the expiry of the deadline for submitting independent reports. 

The OECD is expected to update the country-by-country lists of information exchange agreements currently in effect by the end of November. 65 countries (including Hungary) have already acceded to the multilateral information exchange agreement, more than 40 countries out of which have indicated with which signatories they intend to agree on information exchange, which are to take effect soon. Together with those and with the automatic information exchange mechanism already in operation within the EU under the “DAC4 Directive”, the situation of Hungary will become settled with respect to a number of countries. 

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