Taxable persons have a general obligation to prepare transfer pricing documentation in relation to effective contracts concluded with their related parties if performance took place under such contracts, agreements in the current year. The taxpayers qualifying as micro or small enterprises on the last day of the tax year do not have to prepare transfer pricing documentation.
Related parties are not obliged to prepare transfer pricing documentation if the total value of performance under their contract does not exceed HUF 50 million threshold in the tax year at the arm's length price calculated without value added tax. The value of performances under the contracts which can be consolidated for transfer pricing purposes has to be considered on an aggregate basis for the purpose of this value limit. In addition, no transfer price documentation obligation applies if consideration of supplies of goods or services is recharged to a related party or related parties in unchanged amount or value provided that the supplier of the product or service is not a related party of the taxable person and the party paying the cost.
The arm's length price is determined using one of the following methods:
- comparable uncontrolled price method,
- resale price method,
- cost plus method,
- transactional net margin method,
- profit split method,
- or other method if the arm's length price cannot be determined with the above methods.
Upon request, the tax authority determines the arm's length price that may be applied in a future related party transaction in a resolution (Advance Pricing Agreement, APA). APA is subject to a fee of 2 million forints for each side of the initiated procedure. Preliminary consulting costs 500 thousand forints per consulting session.
A new decree concerning transfer pricing entered into force in the end of 2017, which requires documentation with data content somewhat different from that of previous year and more extended and which is applicable to all related parties from the 2018 tax year according to the general rule. According to this regulation, transfer pricing documentation now has three levels with the following elements:
- main document (master file)
- local document (local file)
- country-by-country report (CbC-report).
The country-by-country report (in respect of which only multinational groups with a consolidated net sales revenue of at least 750 million Euros have a data reporting and announcement obligation) is not a direct part of the documentation obligation, which is fulfilled by preparing the master file and the local file.