Transfer Pricing Documentation

Transfer pricing is the price applied between related parties when they sell goods, provide services, or transfer intangible assets to one another. If related parties charge prices that differ from those they would apply to independent parties, they can shift taxable profits from one group company to another- potentially reducing the overall tax burden.

For Hungarian taxpayers, income and the corresponding income tax can be shifted between related parties – whether between a Hungarian taxpayer and its foreign affiliate, or between domestic affiliates. Because such shifting may reduce one country’s tax revenues and increase another’s, tax authorities prioritize the audit of related-party transactions and subject them to strict regulation.

What Is the Arm’s Length Principle in Transfer Pricing?

The arm’s length principle is the international standard for transfer pricing, to be applied by businesses and tax authorities in OECD member countries. It requires related parties to price and behave as if they were independent of one another.

If related-party transactions do not comply with the arm’s length principle, the difference must be quantified, and the taxpayer must adjust the tax base. In Hungary, increasing the tax base is mandatory in such cases; decreasing it is subject to statutory conditions.

What Is Transfer Pricing Documentation?

Transfer pricing documentation aims to determine the arm’s length price (or range) for related-party transactions and to demonstrate that the consideration applied by the related parties is consistent with market terms.

For Which Transactions Is Transfer Pricing Documentation Mandatory?

Under Decree 32/2017 (X.18.) of the Ministry for National Economy (NGM), documentation was not required for transactions where the annual value of supplies did not exceed HUF 50 million (net, excluding VAT).

Update: Decree 27/2022 (XII.28.) of the Ministry of Finance (PM) amended the above rule with effect from the 2022 tax year, raising the exemption threshold from HUF 50 million to HUF 100 million. Accordingly, transfer pricing documentation is required only for transactions whose annual net value exceeds HUF 100 million.

Under the same rules, intermediated services (közvetített szolgáltatások) do not require documentation where they are re-invoiced within the group without any markup (i.e., pure pass-through billing).

1. Preparation of documentation compliant with Hungarian regulations

Our specialists deliver tangible value, ensuring that advisory work plays a strategic and productive role in today’s corporate governance environment. We identify areas for improvement and recommend tools that help you achieve your organizational goals and contribute positively to your company’s successful operation.

2. Arm’s Length Profitability Analysis

Leveraging our proprietary databases and audit-informed search strategies, Central Audit determines the arm’s length price range for a given country or region – including multi-year analyses where appropriate. In preparing the documentation, we use internationally recognised databases such as TP Catalyst and RoyaltySource to deliver robust, audit-defensible benchmarks.