Page 32 - Central and Eastern European Transfer Pricing Review

32 | CEE Transfer Pricing Review

Do tax authorities have requirements that arose in the business interest of that the arms length price of the service
or preferences regarding databases the taxpayer, its tax base might be needs to be assessed by means of the
for comparables? increased with the amount of the true- cost-plus method.
Databases used by the taxpayer are ups and taxed accordingly. Please note that, pursuant to the MF
obliged to be publicly available or In certain cases, such adjustments Decree, there are a limited number of
verifable by the tax authority. The might also entail VAT or local business conditions that if not met, can result
preferred database is Amadeus, tax issues (e.g. if the adjustments are in the simplifed documentation being
published by BvD, but not required. directly related to transactions subject to rejected. First, if the margin applied
VAT, the costs of goods sold or services falls outside the previously mentioned
What level of interaction do tax intermediated are adjusted etc.). range of 3 and 7 percent or the pricing
authorities have with customs method of cost-plus 3 and 7 percent
authorities? Year-end adjustments are generally does not refect the arms length price,
Medium, but cooperation is increasing recordable in the fnancial statements, the taxpayer is not entitled to apply the
due to the merger of the National Tax and pursuant to Hungarian GAAP, i.e. no simplifed documentation. Furthermore,
Customs Administrations in 2011. special treatments are required. the net value of the services, taking into
consideration all transactions which can
Are management fees deductible? Other unique attributes? be consolidated in one document, cannot
In principle yes, but only if it can be Effective from 1 January 2012, in the exceed HUF150 million (EUR526,000),
supported that the management case of certain low value-added services 5 percent of the seller s net sales
fees incurred are in the interest of the (as defned by the 22/2009 MF Decree revenue and 10 percent of the operation
company. e.g. IT services, translation, interpreting, costs of the purchaser in the tax year.
accounting and legal activities, language
Are management fees subject to education, administrative services, However, note that the understanding
withholding? storage, canteen service, etc.). Special of the new regulation is currently
No. rules were introduced in order to ease uncertain due to possible differences in
the associated burden to prepare the interpretation of the wording of the
Are year-end transfer pricing transfer pricing documentation. new sections.
adjustments permitted?
According to the new rules on simplifed
Year-end adjustments are basically documentation applicable for these Other recent
permitted, but they should be services, if the service provider applies developments
suffciently justifed by the taxpayer a margin between 3 and 7 percent, the
as to why their application is deemed price applied is qualifed as an arms None.
economically necessary (e.g. in order to length price without any further analysis
achieve a targeted level of proftability or benchmark study, Accordingly, the Tax treaty/double tax
in line with the functional profle of transfer pricing documentation can be resolution
the taxpayer etc.) i.e. their business prepared with limited content. However,
nature should be defensible. Where the condition for applying the new rule is What is the extent of the double
the tax authority does not recognize tax treaty network?
such adjustments true-ups as costs Extensive.

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