The rules governing transfer pricing documentation and reporting have changed significantly for tax years beginning in or after 2026. Decree No. 45/2025 (XII. 23.) of the Minister for National Economy on transfer pricing documentation and transfer pricing reporting (the “NGM Decree”) simplifies the preparation of transfer pricing documentation in several respects and introduces a new option for preparing a simplified local file. One important area of the new rules concerns low value-adding services, the definition of which has changed substantially compared with the previous framework, highlights Kristóf Málnai, Junior Transfer Pricing Manager at Niveus.

When can a simplified local file be prepared?

Under Section 7(1) of the NGM Decree, a simplified local file may be prepared for, among other transactions, the provision and receipt of low value-adding services, certain recharges of costs incurred with independent parties, and transfers and receipts of funds free of charge.

One of the most important practical advantages of using a simplified local file is that its content requirements are narrower in several respects than those of a full local file. Under Section 7(2) of the NGM Decree, there is no requirement to describe, among other things, the relevant market, the business strategy, the method used to determine the arm’s length price and the tested party, the assumptions taken into account when applying the method, the profit level indicator, the database search or any comparability adjustments.

The guidance published by the Ministry of Finance on 9 July 2026 (the “Ministry guidance”) highlights that one purpose of introducing the simplified local file is to reduce the administrative burden. This reduction may be particularly significant because a database search is no longer required.

The definition of low value-adding services has changed significantly

The rules on low value-adding services have undergone substantial changes compared with previous years. The previous framework primarily defined the services concerned by reference to TESZOR codes, the Hungarian classification of products by activity. The new rules no longer restrict eligibility to specific TESZOR codes. Nor is it necessary to assess whether a monetary threshold is met.

Under point 1 of Section 2(1) of the NGM Decree, a service may qualify as a low value-adding service if neither the taxpayer nor any of its related parties provides a similar service to an independent party, its provision does not require unique and valuable intangibles and cannot result in the creation of such intangibles, and the service provider does not bear substantial or significant risks in connection with the service.

According to the Ministry guidance, the name of the activity or its TEÁOR code, the Hungarian classification code for economic activities, is therefore no longer decisive in itself. Instead, businesses must assess whether the service actually performed meets the conditions specified in the Decree. The guidance lists accounting, tax, legal, HR, IT operations and other administrative services among the illustrative categories.

Under the new rules, even the core activity of an intragroup shared service centre may qualify as a low value-adding service, provided that the conditions specified in the Decree are met. However, certain activities, such as those involving significant risk-taking or unique and valuable intangibles, cannot fall within this category.

The 5% mark-up as a simplified approach

One of the most important changes to the rules on low value-adding services is the treatment of a 5% net cost plus mark-up as a target value. Under Section 7(1)(a) of the NGM Decree, a taxpayer providing the service may prepare a simplified local file if it actually achieves a net cost plus mark-up of at least 5%. Under Section 7(1)(b) of the NGM Decree, the service recipient may use simplified documentation if the related-party service provider actually achieves a net cost plus mark-up of no more than 5%.

According to the Ministry guidance, the legislator drew on, among other sources, the Australian and Polish rules when establishing the 5% target value. A particularly noteworthy rule applies where both the service provider and the recipient are Hungarian related parties and both wish to apply the simplified rules for low value-adding services: in this case, the actual net cost plus mark-up must be exactly 5%.

The net cost plus mark-up must be calculated in accordance with Section 7(4) of the NGM Decree, taking into account the actual revenues, costs and expenses recorded in the accounts for the activity covered by the controlled transaction, to two decimal places.

Businesses should review their intragroup services

The new rules may provide significant administrative relief for businesses that regularly receive or provide routine intragroup support services. Using a simplified local file allows several time-consuming and costly elements associated with preparing full documentation, particularly the database search, to be omitted.

Businesses should therefore review their service transactions with related parties and assess whether they meet the new definition of low value-adding services. Where the services qualify and the conditions relating to the 5% mark-up are met, the new rules may both simplify the preparation of transfer pricing documentation and substantially reduce the associated administrative burden.