Facebook image
Transfer pricing documentation obligation

Transfer pricing documentation obligation

In this information we wish to present to you the most important requirements relating to the transfer pricing administration of related parties.

Do you have any question?
Don't hesitate to contact us!
Helga Kiss, tax director, RSM Hungary

Helga Kiss

Director, Tax services

János Karczub

Manager, Tax Services


When is transfer price documentation necessary? 

If your company is a member of a domestic or international company group, you will most likely have related party (i.e. intra-group) transactions about which you will have to prepare transfer price documentations. 

It is a well-known fact that related party transactions not reaching a value of 50 million forints annually are exempt from the obligation to prepare transfer pricing documentation. However, not many are aware that the 50 million forint value limit is to be calculated based on the arm’s length price, which means that no documentation has to be prepared for the transactions for which the book value is used as basis and the book value is lower than the market value. 

The transfer pricing team of RSM is able to help you, among others, in the identification of the transactions that need to be documented. 

Our transfer price related services:

  • We assess the related party transactions of the company and determine which of these need to be documented; 
  • We check the contractual background of transactions and, if possible, compare it to the practice actually applied; 
  • We identify the assets applied, the functions performed and the risks borne in related party transactions; 
  • We determine which pricing method is the most suitable for substantiating the arm’s length price; 
  • We prepare the transfer pricing documentations; 
  • We review the documentations prepared earlier and make suggestions for their amendment within the limits of law; 
  • We support clients in any other transfer pricing documentation related tasks and answer questions. 

When should you consult an advisor? 

In many cases, Hungarian group members have several years of practice and established internal processes in relation to documentation preparation. However, an unfavourable market change, unusual situations or extraordinary business events may also occur in these cases (e.g. restructuring within the group) the transfer pricing documentation of which may pose a challenge for the persons responsible for this matter. 

It is good to know that the Hungarian Tax and Customs Authority applies enhanced scrutiny audits in the case of companies, which present: 

  • long-term losses; 
  • operating profit/loss below the industry level; 
  • disproportionately high financial loss relative to the operating profit/loss; 
  • management fees of substantial amount; 
  • large-amount year-end adjustments relating to transfer prices. 

Our goal is to support our clients to make sure that they avoid transfer pricing related sanctions. 

Elements of the three-tier transfer pricing register

Following the transfer pricing action plans in the BEPS Action Plan to reduce tax base erosion and profit shifting published by the OECD, the institution of country-by-country reporting was incorporated into domestic law from 15 May 2017. In addition, a new NGM decree on transfer pricing record-keeping obligations entered into force in Hungary on 18 November 2017.

As a result, transfer pricing documentation will become a three-tier system, requiring the following records:

  1. Master file
  2. Master document (Master file)
  3. Country-by-country report (CbC report)

The Country-by-Country Report must be prepared by international groups of companies with a consolidated net turnover of EUR 750 million (HUF 230 billion) or more in the previous year. The local documents must be prepared by the Hungarian members of the groups in compliance with local and international rules, as is the case for the country-by-country report.

    If you have any question, please don't hesitate to contact our experts!

    Contact our expert directly or send us an offer request!

    Our professionals regularly publish specialist material