In this information we wish to present to you the most important requirements relating to the transfer pricing administration of related parties.
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.
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:
Our goal is to support our clients to make sure that they avoid transfer pricing related sanctions.
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:
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.
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In the course of transactions, our M&A, tax, and legal experts provide assistance to our partners in conducting financial, legal and tax due diligence procedures as related to a variety of company acquisitions, as well as...Read more