The new regulation brings significant changes to transfer pricing rules and modifies the domestic framework for transfer pricing documentation in several areas. Below, we summarise the key elements of the decree and their practical implications.
The new transfer pricing documentation decree can already be applied to tax years starting in 2025, although for now it is optional. It will become mandatory from 2026, so it is worth reviewing now which areas will see changes in documentation and data reporting requirements.
- Changes affecting documentation obligations
- The threshold for transfer pricing documentation and data reporting will increase from HUF 100 million to HUF 150 million, while for cost allocations the threshold will be HUF 500 million. These thresholds continue to apply on an annual net basis, taking into account the arm’s length principle and considering the rules on aggregation.
- The previous exemption for free of charge cash transfers is being eliminated, so the
gratuitous transfer or receipt of funds will now require a transfer pricing analysis and
documentation, which can be prepared in a simplified form. - Transfer pricing documentation, its amendments, and supporting documents can be prepared in Hungarian, English and German. Important change that previously
permitted French can no longer be used, thus narrowing the language options for - In the future, the transfer pricing documentation can be corrected up until the start of a tax audit, and this possibility is not restricted by the increasingly common transfer pricing compliance reviews in recent years.
- A related-party transaction may also exist with a natural person.
- When assessing related-party transactions, the actual economic substance is decisive, and a transaction relevant for transfer pricing purposes may be established based on contractual terms agreed in writing, orally or implied by conduct, even in the absence of invoicing.
- Changes affecting the content of the Master File
Previously, Hungarian rules required a Master File in every case where a company needed to prepare transfer pricing documentation. This was true even if the corporate group did not prepare centralised documentation, then the additional obligation always fell on the Hungarian subsidiary. This main rule remains in place; however, the new decree allows companies whose total value of related-party transactions does not exceed HUF 500 million in a tax year to be exempt from preparing a Master File.
- Changes affecting the content of the Local File
- Simplification for low-value-added services
The criteria for simplified documentation are changing: it can be applied to low-value-added services, gratuitous cash transfers, and cost allocations. Under the new decree, a wider range of services may qualify as low-value-added, including services provided as part of the taxpayer’s main business, provided that the specified conditions are met. The previous thresholds and restrictions based on NACE codes have been removed. For services provided, a minimum profit margin of 5% must be realised, while for services received, a maximum profit margin of 5% must be applied, both supported by cost calculations. If any condition is not met, or if the profit margin falls outside this range, full transfer pricing documentation is required.
Simplified documentation can only be applied if the service is not sold to an independent party, does not involve high-value intellectual property, the risk exposure is low, and the transaction is not a complex manufacturing, distribution, financial, or insurance transaction. As a result, the local file does not need to include detailed information about the market, business strategy, methodology, or profitability metrics, and no database search is required.
- Stricter requirements for Benchmark Studies
The new transfer pricing decree establishes fundamental rules for company-level database
searches, commonly applied in practice, without requiring the use of any specific database. At the same time, it permits taxpayers, in justified cases, to depart from certain database search rules within defined limits. A database search using company-level (corporate) data must meet at least the following requirements:
- The companies must be individually identifiable;
- The sample of comparable companies must exclude any non-operating or inactive entities;
- only independent companies may be included in the sample;
- the data must relate to the three years preceding the year under review;
- financial data must be available for each of the years used;
- either companies that are loss-making in at least two consecutive years must be excluded, or companies that are loss-making at the operating (business) result level in more than half of the years considered must be excluded;
- filtering should primarily be based on primary activity (NACE) codes, avoiding keyword searches;
- the companies must operate in a geographic area comparable to that of the tested party; and
- based on their websites, the companies must also be comparable.
If the tested party carries out its activities domestically, the comparable geographic area must be determined in the following order:
- Starting point: Hungary
- V4 (Czech Republic, Slovakia, Poland, Hungary)
- V4 + Bulgaria, the Baltic states, Croatia, Romania, and Slovenia
- As a last resort, it can be extended to all EU countries, but only if the sample size in the previously narrowed group is insufficient.
Incorporating these rules into the decree sends a clear message to taxpayers: centrally prepared studies will only be acceptable for Hungarian documentation purposes if they comply with the new requirements.
- Transfer pricing data reporting
The new transfer pricing decree more closely links the local file to the transfer pricing data
reporting required as part of the corporate tax return. From now on, the data on the ATP sheets will serve as a mirror of the local file. To align the two systems, the local file must include the transaction name, and the most relevant NACE code as listed on the ATP sheets, ensuring that each transaction can be clearly identified.
- Market analysis
It may provide relief that presenting the relevant market, i.e., preparing an industry analysis, is no longer required for transactions with a value below HUF 1 billion.
- Aggregation
In line with previous practice, transactions in opposite directions may still not be aggregated. The assessment of aggregation is based on accounting treatment: transactions must be separated according to whether they appear on the supplier or customer side in the books.
The new decree also clarifies that certain broad transaction categories may never be aggregated with each other. These include manufacturing, distribution, service, and financial transactions, as well as transactions related to intangible assets.
- Obligation to apply segmentation
The new decree requires that the financial data used for transfer pricing calculations be
reconcilable with the accounting system and that full segmentation be applied at the operating profit level.
Companies must proactively adjust their internal coding and accounting practices to ensure that the revenues and costs of individual related-party transactions are segmented at the operating profit level and can be reliably traced and verified.
- DEMPE-functions
For transactions involving intangible assets, it is mandatory to present the DEMPE functions (Development, Enhancement, Maintenance, Protection, Exploitation), which are crucial for the allocation of income related to intangible assets.
- Benefit test for services
One of the most significant changes is that a benefit test must be performed for services. Under this test, the taxpayer examines whether the service is fully necessary for its business activities and whether it would procure the same service from an independent party under similar conditions.
The new decree does not provide detailed guidance on the specific requirements of the benefit test, nor is it clear whether the recognition of support services obtained from the head office as expenses would be questioned if similar services could be sourced at a lower cost on the Hungarian market.
- Effective date and optional application
The provisions of the new decree will become mandatory for tax years beginning in 2026. For the 2025 tax year, taxpayers may optionally choose to prepare transfer pricing documentation and data reporting in accordance with the new rules.
Opting for the new rules may be advantageous for taxpayers who carry out a significant volume of service transactions, as they can benefit from the simplified rules for low-value-added services. It may also be beneficial for taxpayers who, based on the new HUF 150 million exemption threshold, may be exempt from preparing the full documentation and data reporting requirements.
- Conclusion
The regulation simplifies certain elements of the general content requirements of local transfer pricing documentation, while at the same time introducing new documentation and data reporting obligations in several areas. As a result, many transactions that were previously “invisible” may now fall within the scope of transfer pricing documentation.
The new decree fits into the broader trend of increasingly stringent transfer pricing compliance requirements in Hungary in recent years. The tax authority is continuously strengthening its audit capabilities, meaning that businesses can expect more rigorous transfer pricing reviews.
In practice, these changes may significantly increase taxpayers’ administrative burdens, particularly with respect to the preparation and regular review of transfer pricing documentation. A key issue in the coming period will be how quickly and effectively taxpayers are able to adapt to the new requirements.
