Ministry of Finance Guidance on the New Rules Governing the Hungarian Transfer Pricing Documentation Regime

Decree No. 45/2025 (XII. 23.) of the Minister for National Economy introduces a comprehensive modernisation of the Hungarian transfer pricing documentation and reporting regime. In this context, the Ministry of Finance recently published guidance on the interpretation of the new provisions. The key conclusions of the guidance are summarised below.

1. Scope of the documentation obligation at taxpayer and transaction level

The obligation generally applies to companies, cooperatives, business associations and foreign enterprises that are subject to corporate income tax and do not qualify as small enterprises on the final day of the tax year.

The term “controlled transaction” is replaced by “related-party transaction”. The documentation requirement is not limited to invoiced transactions. It also extends to relationships that can be identified on the basis of a written contract, an oral agreement or the conduct of the parties. Consequently, the identification of transactions cannot be restricted to accounting entries. The functions performed, assets used, risks assumed and economic circumstances of the parties must also be analysed.

The general threshold applicable to the local file and the transfer pricing reporting obligation increases to HUF 150 million. The threshold must be assessed on the basis of the consideration calculated at arm’s length, excluding VAT.

A master file is required where the aggregate value of the related-party transactions subject to documentation exceeds HUF 500 million. The consideration relating to transactions that may be aggregated must be taken into account collectively.

An exemption from the documentation or reporting obligation does not, however, relieve the taxpayer from applying the arm’s length principle or assessing whether a corporate income tax base adjustment is required.

2. Types and content of transfer pricing documentation and the conditions for exemption

The new rules follow the approach of the OECD Transfer Pricing Guidelines and regulate the requirements applicable to the master file, the local file and the transfer pricing reporting obligation forming part of the corporate income tax return.

The rules are mandatory for tax years beginning in 2026. For the tax year beginning in 2025, taxpayers were permitted to elect to apply the new rules separately to individual local files.

This election did not extend to the master file or the transfer pricing reporting obligation, to which the previous provisions continued to apply in 2025. Consequently, the HUF 100 million threshold remained applicable to the reporting obligation for the 2025 tax year, even where the taxpayer had elected to apply the new HUF 150 million threshold to a particular local file.

The treatment of certain transaction categories has become more stringent. From 2026, transfers and receipts of funds free of charge are no longer automatically exempt from the documentation requirement.

A recharge of costs may be exempt from the local file requirement up to HUF 500 million where a cost incurred from an independent party is passed on without any mark-up. Where there are several beneficiaries, the arm’s length nature of the allocation key must be substantiated in writing.

The documentation exemptions applicable to exchange-traded transactions and transactions subject to regulated prices fixed as a specific amount remain in place. However, partial reporting is required where the value of such transactions exceeds HUF 500 million.

3. Functional analysis, DEMPE analysis and the benefit test

The local file focuses on the accurate delineation of the actual transaction and its economic substance.

The functional analysis must describe the functions performed, assets used and risks assumed by all parties. This includes the taxpayer, the other related parties involved and even the independent parties included in the comparability analysis. On this basis, the transfer pricing characterisation of the parties must also be determined.

In the case of unique and valuable intangibles, the DEMPE functions associated with their development, enhancement, maintenance, protection and exploitation must also be assessed.

The selection of the transfer pricing method is not discretionary. The method that is professionally the most appropriate for the transaction must be applied. Reliable internal comparables must be given preference over data obtained from external databases.

A key requirement is the benefit test applicable to services. The service recipient must demonstrate not only that the service was actually rendered, but also that it created economic or commercial value, contributed to the efficiency of its operations or improved or maintained its market position.

The recipient must also demonstrate that an independent enterprise in comparable circumstances would have been willing to pay for the service or would have allocated its own resources to performing the relevant activity.

A contract and an invoice are generally insufficient, in themselves, to evidence that the service was actually provided. Supporting evidence may include reports, analyses, professional correspondence, training materials, system usage data and time records.

The benefit test also applies to low value-adding services and financial services. Its outcome may also affect the deductibility of the relevant expense for corporate income tax purposes.

4. Simplified local file and the new rules applicable to low value-adding services

The new Decree permits the preparation of a simplified local file for:

• the recharge, without a mark-up, of costs incurred from an independent party;
• transfers and receipts of funds free of charge; and
• low value-adding services.

Among other items, the simplified documentation is not required to include a database search, a profit level indicator, a tested party or comparability adjustments.

This may provide meaningful administrative relief. However, the economic rationale for the transaction and its appropriate classification must still be substantiated.

The classification of low value-adding services is now based on a substantive analysis rather than the previous approach relying on activity classification codes.

The service must be supportive in nature, must not form part of the group’s core business, must not require the use of unique and valuable intangibles and must not involve the assumption of significant risks.

The fact that the provision of such services constitutes the service provider’s principal activity does not, in itself, preclude the application of the simplified treatment. Accordingly, activities performed by shared service centres may also fall within this category.

However, where a similar transaction undertaken with an independent party provides a reliable internal comparable, the simplified documentation option may not be applied.

For services provided between two Hungarian related enterprises, the preparation of simplified documentation by both parties is conditional upon the application of a net profit mark-up of exactly 5 per cent.

5. Treatment of financial data and amendment of the documentation

Verifiability is a key consideration in the presentation of financial data.

The revenues, costs and results relating to transactions that may not be aggregated must be presented separately. The segmentation must not leave any unjustified residual items.

It is not necessary to break down every individual line of the income statement. However, the calculation of the profit level indicator must be reproducible, and the total of the segmented data must be reconcilable with the financial statements. This requirement also applies where the tested party is a foreign entity.

It is advisable to begin collecting the relevant data and developing the allocation keys during the course of the tax year.

Transfer pricing documentation may be amended within the limitation period, but no later than the commencement of a tax authority audit. For this purpose, an audit also includes a compliance review. Once such a review has commenced, the documentation may no longer be amended.

Before the commencement of an audit, it may be appropriate to update the benchmarking analysis where market data becoming available after the original documentation was prepared provides a more accurate picture of the period under review.

This does not, however, relieve tested parties characterised as routine entities from the requirement to earn a stable routine return.

Compliance does not consist merely of preparing a single year-end document. It requires ongoing data governance, accounting reconciliation and the effective flow of information across the group.

The new regime combines administrative simplifications with more stringent evidentiary requirements. The emphasis is placed on the reliable presentation of the economic substance of transactions, the consistency of the underlying data and the ability of the tax authority to verify the information provided.

6. Specific features of transfer pricing reporting in the corporate income tax return

The transfer pricing reporting obligation forming part of the corporate income tax return does not constitute a standalone transfer pricing analysis. It is a structured and electronically processable extract of the information contained in the local file.

Its primary purposes are tax authority risk assessment, the selection of taxpayers for audit and the preparation of tax authority audits.

The reporting obligation can therefore only be completed properly if the taxpayer has first accurately delineated the related-party transaction, prepared the functional and comparability analyses, determined the arm’s length price and obtained the segmented financial data relating to the transaction.

The ATP schedule does not, in itself, replace the transfer pricing documentation. The data reported in the schedule can only be interpreted in conjunction with the underlying documentation.

As a general rule, information must be reported separately for each related-party transaction or each group of related-party transactions that has been lawfully aggregated in accordance with the Decree.

A single ATP schedule will generally correspond to one local file. In certain circumstances, however, several schedules may be required. This may be the case, for example, where separate profit level indicators are tested for different products within the same product group, or where a financial transaction includes both fixed and floating interest rates.

The name of the transaction must be selected from the transaction categories specified in the Decree. The classification must be based on the actual economic substance of the transaction rather than the description appearing on the invoice.

When determining the relevant manufacturing, distribution or service model, the parties’ functions, assets, risks and decision-making authority must therefore be considered.

For example, a manufacturer may invoice a distributor or an independent customer directly, while the economic substance of the arrangement may nevertheless indicate that it is carrying out contract manufacturing activities for another group entity. The direction of invoicing does not, in itself, determine the type of transaction.

The corporate income tax return must also include a single TEÁOR code that is most closely connected with the transaction. This is not necessarily the taxpayer’s registered principal activity. It should be the code that best describes the economic substance of the relevant related-party transaction.

Where several TEÁOR codes appear to be equally relevant, the taxpayer should first consider whether transactions that should be analysed separately have in fact been aggregated.

The transaction description, the TEÁOR code, the transfer pricing method applied and the profit level indicator must be professionally coherent. For example, a wholesale trade TEÁOR code may be inconsistent with a manufacturing transaction, while the use of the profit split method may be inconsistent with a routine activity.

The transaction value to be reported is the net consideration actually recognised during the relevant tax year, expressed in thousands of Hungarian forints.

The amount includes any transfer pricing adjustment recognised in the accounts, irrespective of the general ledger account or invoicing description under which the adjustment was recorded.

The consideration is not necessarily equal to the total amount shown on the invoice. In the case of a loan, for example, the consideration consists of interest and other fees, while the loan principal is excluded.

Under a commissionaire distribution arrangement, the commissionaire fee constitutes the transaction value. In the case of a limited-risk distributor, the transaction value is the amount invoiced by the related-party supplier for the goods.

The data reported must be consistent with the local file, the general ledger and segmented accounting records, the company’s financial statements and, where possible, the country-by-country report.

Where the information reported is incorrect or incomplete, the corporate income tax return must be corrected or self-revised, as appropriate.

Particular attention is required in relation to the transitional rules for the tax year beginning in 2025. The new Decree could only be elected for individual local files. The previous rules, including the HUF 100 million threshold, continued to apply to the reporting obligation, even where the taxpayer had elected to apply the HUF 150 million threshold to the relevant local file.

7. Aggregation of transactions

The assessment of whether transactions may be aggregated is based on three sets of criteria that must be considered together.

Aggregation must not compromise the comparability of the transactions. It is only permitted where the subject matter of the transactions is the same, the material terms of their performance are identical or differ only to an insignificant extent, or the transactions are economically so closely linked that analysing them separately would produce a distorted result.

The fact that transactions are governed by the same contractual document, use the same invoicing system or apply the same transfer pricing method is not, in itself, sufficient to justify aggregation.

Raw materials purchased from a related party may not be aggregated with the related-party sale of products manufactured from those raw materials.

Transactions undertaken in opposite directions must also be analysed separately. A transaction in which the taxpayer acts as a supplier must be separated from a transaction in which it acts as a purchaser.

Manufacturing, distribution, service and financial transactions may not be aggregated with one another. Similarly, transactions relating to the sale, acquisition, creation, licensing or franchising of intangible assets must be analysed separately.

The incorrect application of aggregation may distort not only the content of the documentation but also the exemption thresholds, the reporting obligation and the financial segmentation.

The revenues, costs and results relating to transactions that may not be aggregated must be presented separately.

A transfer pricing adjustment must, however, be treated together with the underlying transaction to which it is economically connected, even where the invoice describes it as a management fee, compensation or another type of payment.

The Ministry’s interpretation therefore emphasises the primacy of the economic substance of the transaction rather than the mechanical application of its contractual or invoicing form.

8. Permissible data sources

When determining the arm’s length price, all material facts and circumstances must be taken into account where they were available when the transaction was entered into or amended, or, at the latest, when the documentation and reporting obligations were fulfilled.

This also includes information that could have been obtained by the taxpayer by exercising reasonable diligence and without incurring disproportionate costs.

Accordingly, a database search should generally be carried out after the end of the tax year and should be based on the most recent financial information available when the documentation is prepared.

The order in which information sources should be considered also represents a hierarchy of reliability.

The first source to be examined is an internal comparable transaction undertaken between the taxpayer and an independent party.

This may be followed by a contract between one of the taxpayer’s related enterprises and an independent enterprise, and then by a transaction between two independent enterprises.

External sources may include public databases and other verifiable information relating to comparable products, services or enterprises, provided that the information can be verified by the tax authority.

Where a reliable internal comparable is available, disregarding it may require specific professional justification.

The search for comparable data must be documented in a fully reproducible manner.

The search criteria, the logical steps applied, the result lists, the inclusion and exclusion decisions and the professional reasons underlying those decisions must all be retained.

Database screenshots must show all material search criteria.

The purpose of this documentation is to ensure that, during a subsequent tax authority audit, it can be established how the final set of comparable companies or transactions was derived from the initial population and which steps were applied during the selection process.

9. Rules governing database searches

The companies included in the final sample of a company database search must be individually identifiable, active and independent.

Industry averages or statistical data in which the individual companies cannot be identified are not, in themselves, sufficient.

As a general rule, financial information for the three years preceding the tax year under review must be used, and the relevant data must be available for each of those years.

Companies that were loss-making for at least two consecutive years, or that incurred operating losses in more than half of the years reviewed, must be excluded.

The search should primarily use the principal NACE activity codes or the corresponding codes under the Hungarian TEÁOR classification system.

Keyword searches may only be used where justified and must be connected to the activity-code search using an alternative “OR” relationship.

The final sample of companies must also be reviewed manually. The review should consider, in particular, the companies’ websites, activities, functions, products, related-party status and operating status.

The initial database screening may be broader and may include companies whose operating or independence status is unknown. However, such companies may only remain in the final sample if the manual review confirms that they satisfy the relevant criteria.

Where the tested party is a Hungarian entity, the geographical search must initially be carried out for Hungary.

If the resulting sample is insufficient, the search may be expanded gradually to include the Czech Republic, Poland and Slovakia, followed by other countries in Central and Eastern Europe, the European Union and, finally, other professionally justifiable geographical regions.

The use of a different geographical region and the need to expand the search must be documented.

As under the previous regime, where the business circumstances remain unchanged, the complete quantitative and qualitative database screening must be repeated at least once every three years.

However, the financial data of the selected companies must be updated annually.

As part of the annual update, it must also be confirmed that the companies remain active and independent and that their activities continue to be comparable.

Departures from the general rules may be permitted in justified circumstances. This may include departures from the number of years reviewed, the data availability requirements or the restrictions applicable to keyword searches.

The professional reasons for any such departure must be explained in detail in the local file.

10. Other detailed rules

From 2026, transfer pricing documentation and the supporting documents may only be prepared in Hungarian, English or German.

Under the Decree, the local file and all of its appendices must be retained in a readable and verifiable format for at least eight years.

The retention obligation applies not only to the final version of the local file but also to the supporting calculations, database searches, financial segmentations, contracts and other evidence.

It is the taxpayer’s responsibility to ensure that these data remain accessible throughout the entire retention period, even where they were originally generated or held by a foreign related enterprise, such as the parent company or a foreign tested party.

As a general rule, the new provisions apply to documentation relating to tax years beginning in 2026 or subsequently. They also apply to local files relating to the tax year beginning in 2025 where the taxpayer elected to apply the new Decree.