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Hungary – Transfer Pricing (2025)

Hungary’s domestic tax code explicitly incorporates the arm’s length principle. The primary legal source is the Act LXXXI of 1996 on Corporate Tax and Dividend Tax, notably Section 18 which governs the fair market price and tax consequences when intercompany prices differ from arm’s length. Section 31, paragraph 2, subparagraph b of the Act contains an explicit reference to the OECD Transfer Pricing Guidelines (TPG) and Hungarian transfer pricing rules are based on the OECD TPG, although the TPG themselves are not legally binding in Hungary.

Arm’s length principle and the role of the OECD Guidelines

Hungarian transfer pricing regulation follows and relies on the technical guidance of the OECD TPG. The law explicitly refers to the TPG in Section 31, paragraph 2, subparagraph b of the Act LXXXI of 1996 on Corporate Tax and Dividend Tax. Consequently, while the TPG are not directly binding, they constitute the interpretative framework adopted by the Hungarian tax authorities and embedded in national decrees.

The domestic definition of affiliated companies is contained in Section 4 point 23 of the Act LXXXI of 1996 on Corporate Tax and Dividend Tax (non-official English translation provided in the profile). Broadly, affiliation arises where the taxpayer and another person are connected by majority control (direct or indirect) under the Civil Code (paragraph a), where the other person has majority control over the taxpayer (paragraph b), or where a third party has majority control over both (paragraph c), with close relatives recognized as potential third parties. The definition also covers nonresident entrepreneurs and their domestic places of business and business establishments, foreign branches, situations of dominant influence over business and financial policy (paragraph f), and contains specific thresholds for certain applications: in some instances affiliation exists where voting rights or capital participation reach 25% or more (subparagraph ga) and in other cases where participation reaches 50% or more (subparagraph gb), with concerted action and consolidated groups taken into account.

Methods and application criteria

Section 18 paragraph 2 of the Act LXXXI of 1996 on Corporate Tax and Dividend Tax lists the transfer pricing methods that taxpayers may use. Hungary expressly recognizes the comparable uncontrolled price (CUP) method, the resale price method, the cost plus method, the transactional net margin method (TNMM) and the profit split method. The law also allows the use of other methods if none of the listed methods can reliably determine the fair market price; national regulations follow the OECD TPG in permitting alternative approaches where appropriate.

For method selection, Hungary applies the “most appropriate method” standard as interpreted in the OECD TPG. This selection principle is set out in Section 31, paragraph 2, subparagraph b of the Act LXXXI of 1996 on Corporate Tax and Dividend Tax. No rigid statutory hierarchy is imposed; taxpayers must justify their choice consistent with the TPG.

Comparability and ranges

Hungary follows the comparability analysis guidance of Chapter III of the OECD TPG (Section 31, paragraph 2, subparagraph b). There is an expressed preference for domestic comparables: the geographic selection prioritizes Hungary first, then the Visegrád countries, and the scope may be extended further if necessary. The law allows the use of an arm’s length range and statistical measures where justified, in particular considering functional analysis, sample composition or outliers; this is provided in Section 18 paragraph 9 of the Act LXXXI of 1996 and in Section 8 of the Decree of the Ministry for National Economy No 32/2017 (X.18). Section 18 paragraph 9 specifically contemplates the use of additional filters and the interquartile range (IQR) covering half of sample elements when appropriate. Comparability adjustments are possible but not mandatory: Paragraph 7 of the Decree No 32/2017 states that adjustments may be used to improve comparability but are not required; any adjustments must be properly documented.

Documentation and reporting

Hungary requires taxpayers to prepare transfer pricing documentation. Section 18 paragraph 5 of the Act LXXXI of 1996 on Corporate Tax and Dividend Tax together with the Decree of the Ministry for National Economy No 32/2017 (X.18) require the preparation of a Master File consistent with Annex I to Chapter V of the TPG, a Local File consistent with Annex II, and a Country-by-Country Report (CbCR) consistent with Annex III. Further legal bases include Section V/D of Act XXXVII of 2013 on the rules of international administrative cooperation related to taxes and other duties and Act XCI of 2017 on the multilateral exchange of CbCR information between competent authorities.

Timing and formalities require that the Master File and Local File be prepared by the corporate income tax return filing deadline. Documentation may be prepared in any language chosen by the taxpayer; however, upon request the taxpayer must provide a Hungarian technical translation of documents in foreign languages, except that English, German and French documents are accepted for clarification of facts by the tax authority. All domestic constituent entities of MNEs within the scope of CbCR must file a notification before the end of the reporting fiscal year indicating their filing status. Both the notification and the CbCR must be filed electronically using the Hungarian domestic schema. The CbCR must be submitted within 12 months after the last day of the financial year reported.

Penalties for transfer pricing documentation non-compliance are set out in Section 230 of the Act CL of 2017 on the Rules of Taxation and Section 43/S of Act XXXVII of 2013. Penalties for incomplete or inaccurate, non-filed or late-filed Master File and Local File can reach up to HUF 2,000,000, and up to HUF 4,000,000 in repeated cases. For CbCR, the penalty for an incomplete, inaccurate or late filing can reach up to HUF 20,000,000. These fines may be imposed in part or in full.

Exemptions / materiality

There are exemptions from documentation obligations. The Act LXXXI of 1996 (Section 18 paragraphs 3 and 5) and Decree No 32/2017 provide several exemptions from preparing Master and Local Files, for example for small enterprises and for taxpayers having an APA. For CbCR, multinational enterprises are not required to prepare a CbC Report if their consolidated revenue in the preceding financial year is below the EUR 750 million threshold, per Section 4 paragraph 7 of Act XXXVII of 2013.

APAs and MAP; procedures and timing

Hungary provides Advance Pricing Agreements (APAs) and Mutual Agreement Procedures (MAPs). The legal framework for APAs is set out in Sections 174–183 of the Act CL of 2017 on the Rules of Taxation, Sections 111–116 of Decree No. 465/2017 and in Act XXXVI of 2006 concerning Double Tax Treaties. MAP is provided for in Section 42 of Act XXXVII of 2013 on the rules of international administrative cooperation related to taxes and other duties and Hungary maintains a MAP profile. The profile does not specify detailed statutory timelines for all procedures in the country profile text; administrative timelines follow general procedural rules and the terms of bilateral or multilateral agreements where applicable.

Sanctions and other considerations

Beyond documentation penalties, Section 18 paragraph 1 of the Act LXXXI of 1996 requires the taxpayer to adjust pre-tax profit when transactions between affiliated companies use consideration different from the fair market price. If the applied consideration increases pre-tax profit relative to the fair market price, the taxpayer may deduct the difference from pre-tax profit provided certain conditions are met, including that the counterparty is a resident taxpayer or a foreign person subject to a corporate-tax-equivalent, there is a document signed by both parties specifying the amount of the difference, and the other party has declared its application of that difference for tax purposes. Conversely, if the applied consideration results in lower pre-tax profit than would result from the fair market price, that difference must be added to the pre-tax profit, except for contracts concluded with private persons who are not entrepreneurs. The law thus contemplates primary adjustments reflected in taxable profits.

Hungary does not apply secondary adjustments as a general rule: the country profile indicates that secondary adjustments are not made. Regarding profit attribution to permanent establishments (PEs), Hungary follows the Authorised OECD Approach (AOA) in the majority of double tax treaties concluded after 2010; the Corporate Income Tax Act provides that international agreements (double tax treaties) override national law provisions. For non-treaty facts and circumstances, Hungary applies a domestic rule found in Section 14 paragraph 1 subparagraph c of the Act LXXXI of 1996, which provides for a specific adjustment: the pre-tax profit of the nonresident company attributable to its domestic business establishment may be increased by 5% of revenues and income that were earned through but not recorded for the business establishment.

Other administrative aspects

Decree No 32/2017 contains guidance on intra-group services, including guidance for intermediated services provided between three or more group companies which should be charged on an arm’s length basis (Section 1 paragraph 2 subsection c). A simplified approach for low value-adding intra-group services is available under Section 5 of the Decree, based on the OECD TPG and the EU Transfer Pricing Forum guidance. For financial transactions and cost contribution arrangements, Hungary follows the OECD TPG where domestic specific guidance does not exist: the profile indicates no domestic transfer pricing guidance specific to financial transactions and no specific legislation on cost contribution agreements, with the TPG serving as guidance. Outside of transfer pricing, other tax rules are relevant, for example interest deductibility limits harmonised with EU Directives 2016/1164 and 2017/952 (BEPS Action 4) which affect the tax treatment of financial transactions.

Conclusion

Hungary’s transfer pricing framework is grounded in the Act LXXXI of 1996 and supplemented by the Decree of the Ministry for National Economy No 32/2017, with explicit reliance on the OECD TPG for interpretative and technical guidance. The country mandates Master File, Local File and CbCR subject to specified exemptions, provides for APAs and MAPs, prioritizes local comparables (Hungary, then Visegrád countries) and allows statistical approaches and ranges where appropriate. Penalties are specified for documentation and CbCR non-compliance, and domestic rules govern year-end adjustments and profit attribution to PEs, while secondary adjustments are not applied as a general rule.

References

Country profiles and additional OECD material: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html

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