Page 29 - Central and Eastern European Transfer Pricing Review

Hungary | 29

Hungary

KPMG's Views on Transfer Pricing in Hungary

The tax authority is paying special attention to transfer pricing issues. Previously,
the mere availability of transfer pricing documentation was suffcient, but recent
experience is showing that tax audits are moving towards more in-depth analysis
of transactions (questioning qualitative screening, testing comparables, challenging
benchmarking studies and functional analysis) and a comprehensive review of
documentation (including contracts, calculations that support the arms length pricing
of transactions and deductibility of costs).

Basic information Section 172 (16) default penalty of the obligations in connection with
fnancial year 2009. From 1 January 2011,
Tax authority name Section 132/B-C APA Section 18 of the CIT incorporated proft
Nemzeti Adó- és Vámhivatal (NAV) Section 178.17 defnition of the split and TNMM as equivalent approaches
National Tax and Customs Administration related parties. with traditional transactional methods.
of Hungary. However, note that this modifcation is
Act CXXVII of 2007 on VAT: only applied on business years starting
Citation for transfer pricing rules Section 67 determination of VAT base in 2011 and onwards.
Act LXXXI of 1996 on Corporate provided the consideration is not
Income Tax and Dividend Tax (CIT): considered as arms length As of 1 January 2012 certain sections
of 22/2009 MF Decree changed. These
Section 4 (23) ae determines the Section 255 determination of arms modifcations aimed to decrease the
concept of related parties length principle regarding VAT administrative burden on taxpayers.
However, note that the understanding
Section 18 (1)-(4) regulates the MF Decree 18/2003 detailed of the new regulation is still uncertain
determination of the arms length regulation of transfer pricing due to possible differences in the
price and the applicable methods documentation (replaced by MF interpretation of the wording of the
Decree 22/2009 effective from
Section 18 (5) determines transfer 1 January 2010) new sections. Further clarifcation is
pricing documentation requirements expected to be published in 2013.
for taxpayers. Decree 22/2009 of the MF Decree 22/2009 detailed
Ministry of Finance (MF) effective regulation of transfer pricing For 2009 and prior fnancial years,
from 1 January 2010 determines documentation transfer pricing obligations were
the formal requirements for transfer MF Decree 38/2008 detailed regulated by the 18/2003 MF Decree.
pricing documentation
regulation on APA procedures. What is the relationship threshold
Section 18 (6)-(8) special cases (e.g. for transfer pricing rules to apply
dividend payment in-kind, capital Effective date of transfer pricing between parties?
decrease/increase in-kind etc.) are rules Direct or indirect ownership with greater
listed which have to be supported by The new Decree (MF Decree 22/2009) than 50 percent voting power, or the
transfer pricing documentation. on detailed regulation of transfer pricing existence of majority control. Majority
documentation was effective from 1 control means when any party has the
Act XCII of 2003 on Rules of Taxation:
January 2010 and is generally applicable right to appoint or dismiss the majority
Section 23 (4) (b) notifcation of for the 2010 fnancial year. However, if a of executive offcers and supervisory
related parties (both the start and the company wished, the new regulations board members.
cessation of relationship) could be also applied for the fulfllment

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