The transfer pricing documentation must be prepared simultaneously with the corporate tax (TAO) return for the current year, but no later than by the date of submission of the TAO return. This deadline is 31 May 2021 for taxpayers using a business year identical to the calendar year.
Attention, 31 May is the final deadline! If the company submits a TAO return earlier, the transfer pricing documentation must also be prepared earlier. In the latter case, NAV (National Tax and Customs Administration) may request the transfer pricing documentation during an inspection even before the last day of May.
The 3 main components of the transfer pricing documentation are the same worldwide
From 2018, all affiliated companies have to prepare their multi-level transfer pricing documentation on the basis of the new transfer pricing decree (Decree of the Minister of National Economy 32/2017 (18 October) NGM),which consists of a master file and a local file. The third component of the transfer pricing documentation is the CbC (by country) report, which currently only affects domestic companies in groups with consolidated sales revenues of EUR 750 million. The sales revenue data of the group of companies must be examined for the financial year preceding the financial year of the data supply.
1. The local file must be prepared separately for each local member company.
In terms of content, the local file is similar to the stand-alone transfer pricing documentation prepared under the previous transfer pricing decree. However, this document should already contain a number of additional elements that were previously not part of the mandatory transfer pricing documentation. The preparation of the local file is always the responsibility of the local member company of the group.
2. The master file, on the other hand, should provide a comprehensive picture of the entire group.
Due to its complexity and comprehensiveness, this file is typically prepared by the holding or consolidating company. At the same time, depending on the transfer pricing regulations (or lack thereof) in the country of the parent company or the examination of the price/value ratio, it may still need to be prepared by the Hungarian member company. Similarly to the preparation of the local file, the taxpayer can efficiently prepare the master file with the help of their Hungarian transfer pricing service provider. In this case, it is extremely important that the information required for creating the master file should be available.
It is important that if the master file has to be prepared by the Hungarian company, because the parent company does not provide one, the deadline for the preparation is the same as the deadline for the local file.
If the master file is prepared centrally by the group and is made available to the other member companies (and the local file is completed by the deadline),the master file should, in principle, be completed by the deadline effective in the country of the ultimate parent company. The report must be available no later than 12 months after the last day of the company’s tax year, which is 31 December 2021 for taxpayers using a business year identical to the calendar year.
Typically, in our experience, comprehensive tax inspections also cover transfer pricing documentation, so members of groups should prepare them in an up-to-date manner, in line with the submission of reports.