Transfer Pricing Country Summary Hungary

Transcription

1 Page 1 f 6 Transfer Pricing Cuntry Summary Hungary February 2018 tpa-glbal.cm

2 Page 2 f 6 Legislatin Existence f Transfer Pricing Laws/Guidelines The applicatin f the arm s length principle between related parties is prescribed by Sectin 18 f the Act LXXXI f 1996 n Crprate Incme Taxatin (CIT Act). In late 2017, the Hungarian Ministry fr Natinal Ecnmy issued Decree 32/ n the basis f Article 18 (5) f CIT Act -, based n which related cmpanies shall dcument the arm s length price, the methd used fr establishing the arm s length price, and all evidence r circumstances supprting them, fr the intra-grup transactins. When applying the arm s length principle, the CIT Act refers t the OECD Transfer Pricing Guidelines as the basis f the legislatin. Act XXXVII f 2013 incrprates the Cuntry-by-Cuntry Reprting ( CbCR ) requirements in the Hungarian legislatin. CbCR requirements have been implemented in line with the BEPS Actin Plan and Cuncil Directive (EU) 2016/881. The first year t be cvered starts frm January 1, 2016 fr Hungarian parent cmpanies and surrgate parents, whereas ther grup entities are affected frm January 1, 2017 nwards. Definitin f Related Party Related parties are defined as enterprises that wuld meet any f these: Cnnected by direct r indirect majrity (mre than 50%) sharehlding (vting rights); Have a cmmn direct r indirect majrity sharehlder; One is able t appint r dismiss the majrity f the key management r the supervisry bard f the ther enterprise; Freign entrepreneur with dmestic branch; Dmestic entrepreneur with freign branch; r Have the same managing directrs r have the same management. Transfer Pricing Audits Transfer pricing has been in the fcus f the Tax Authrity since Transfer pricing may be audited during a general examinatin r audits nly with transfer pricing fcus can be ran. Thse taxpayers may expect tax audits with a higher prbability that generate lsses n a cntinuus basis, r that pay a high vlume management r ryalty fee. Entities paying r receiving a lan interest are als in the fcus. Transfer Pricing Related Penalties Lack f dcumentatin: If a tax payer fails t cmply with the transfer pricing dcumentatin requirements, it wuld be subject t a default penalty. In line with the legislatin, the lack f either f the master file and the lcal file wuld entail a default fine. A penalty up t 2 millin HUF (~6,500 EUR) may be levied per missing dcumentatin. Fr subsequent vilatin f dcumentatin bligatin, the Tax Authrity may impse a default penalty f up t 4 millin HUF (~13,000 EUR) per dcumentatin. Fr repeated missins in cnnectin with the same dcumentatin, the fine may be up t fur times the amunt first impsed (8 millin HUF, that is ~26,000 EUR). tpa-glbal.cm

3 Page 3 f 6 In the case f a missing, delayed, incrrect r incmplete fulfilment f CbC reprts r CbC ntificatin, the Hungarian Tax Authrity may impse a fine up t HUF 20 millin (~EUR 65,000) upn the taxpayer, r the reprting entity. Tax underpayment: A 50% tax penalty can be charged n the assessed tax underpayment, if any. Additinally, a late payment penalty equal t twice the base rate f the Hungarian Natinal Bank (currently 0.9%) may als be charged. Advance Pricing Agreement (APA) APAs are available as frm January 1, Applicatins can be made fr future transactins n a unilateral, bilateral r multilateral basis fr a perid f minimum 3 and maximum 5 years (with a pssible extensin fr further three years). An applicatin fee f 2 millin HUF (~6,500 EUR) will be charged per each agreement. The fee f preliminary cnsultatin is 500 thusand HUF (~1,625 EUR) per cnsultatin. The maximum timeframe fr making a decisin n the applicatin is 120 days, which may be prlnged by 60 days twice. Dcumentatin and Disclsure Requirements Tax Return Disclsures Taxpayers must ntify within 15 days if they enter int an agreement with a related party r if that related party becmes independent. The ntificatin shuld include the name, the seat and the tax ID f the ther party. Taxpayers subject t CbCR bligatins n their wn shuld file the CbC Reprt by the end f the 12 th mnth fllwing the business year. Taxpayers that are part f an MNE subject t CbCR must als ntify the tax authrity whether they are bliged t file CbC Reprt n their wn r if nt, they shuld name the reprting entity in the ntificatin frm. The deadline fr filing the relevant ntificatin frm is the last day f each business year. Level f Dcumentatin A transfer pricing dcumentatin shuld be prepared if the taxpayer perfrms a cntrlled transactin with any f its related parties. Taxpayers are exempted frm dcumentatin bligatin in any f the fllwing cases: The taxpayer qualifies as a small-sized entrepreneur; Transactins perfrmed with private persns in a status ther than private entrepreneurs (such as transactins with the wners); The arm s length price f the given transactin had been assessed and agreed with the tax authrity in the frame f an APA; Cst recharges; Mney transfers made free f charge; Transactins perfrmed n the stck exchange; The price f the transactin is fixed by legislatin r authrity assessment; The arm s length value f the intra-grup transactin des nt exceed 50 millin HUF tpa-glbal.cm

4 Page 4 f 6 (apprximately 165,000 EUR) per fiscal year. The Hungarian legislatin fllws the BEPS recmmendatins. In line with Decree 32/2017, the dcumentatin cnsists f the master file and the lcal file, therefre the subsidiaries themselves are ultimately liable fr the preparatin even fr the master file. The masterfile-lcal file apprach is mandatry frm 2018 nwards, hwever, taxpayers may satisfy their dcumentatin bligatins upn the frmerly effective legislatin and prepare a standalne study in respect f 2017 fr the last time. The cntent and frmal requirements f the lcal file are as fllws: Administrative infrmatin Date f preparing the dcumentatin; Registered seats and tax ID numbers f the parties; Cpy f such effective unilateral, bilateral and multilateral APAs and ther taxatin agreements shuld be attached, that were issued by an authrity ther than the Hungarian Tax Authrity; General administrative infrmatin n any clsed authrity and curt cases related t the assessment f the arm s length price f the transactins cvered by the dcumentatin. General infrmatin n the lcal entities and its peratins Detailed infrmatin regarding the lcal entity s management and reprting flw, the business strategy and the list f the cmpetitrs; Infrmatin n business restructurings and transfer f intangible assets; Infrmatin specific fr the lcal entities intra-grup transactins General presentatin and the general administratinal infrmatin f the cncerned intragrup transactins; The cpy f the intercmpany agreements, r a detailed presentatin f the cntract if the parties entered int a verbal agreement; Detailed functinal analysis in respect f all parties engaged in the intercmpany transactin, mentining any changes having taken place cmpared t the previus years; Identificatin f the mst apprpriate transfer pricing methd with respect f the nature and type f the intra-grup transactin and the availability f the cmparable data; Methdlgy fr the cmparability analysis; Surce f data t be used in the curse f the cmparability analysis; Presentatin f the selected internal and external cmparable transactins, including the financial data f the independent cmparable entities used in the cmparability analysis fr identifying the arm s length remuneratin. Selectin f the tested party (when using a ne-sided transfer pricing methd), Prviding an explanatin fr using a multi-year cmparability analysis. A cnclusin determining whether the applied transfer prices were at arm s length. Language fr Dcumentatin Hungarian, English, German and French dcuments must be accepted by the Tax Authrity. Hwever, it is tpa-glbal.cm

5 Page 5 f 6 recmmended having a Hungarian summary as the Tax Officers may nt speak all f these languages. Deadline t Prepare Dcumentatin The lcal file shuld be prepared by the date f filing the annual crprate incme tax return (the deadline f which is the last day f the 5 th mnth fllwing the business year, i.e. May 31 in the case f taxpayers with a calendar year). The dcumentatin des nt need t be filed with the tax authrities. If allwed by the legislatin f the grup s ultimate parent cmpany, the deadline f preparing the master file may be prlnged, but nly up t the last day f the 12 th mnth fllwing the business year. Deadline t Present the Dcumentatin Upn request, taxpayers have 3 days t submit their TP dcumentatin t the tax authrity. Small and Medium Sized Enterprises (SMEs) SMEs are als bliged t apply the arm s length principle. Hwever, entities qualifying as small-sized enterprises are exempted frm dcumentatin bligatins. Statute f Limitatin The statute f limitatin in Hungary is 5 years, which may practically be even 7 years. Safe Harbr Rules Lw Value-Adding Services A simplified dcumentatin may be prepared in case f lw value-adding services (the legislatin lists these services) perfrmed within a multinatinal grup. All the belw cnditins shuld be met t be entitled fr the preparatin f simplified dcumentatin: The service is nt the cre activity f the service prvider; and The arm s length value f the transactin des nt exceed HUF 150 millin (~ 500,000 EUR) in a tax year; and The revenue frm the transactin des nt exceed 5% f the sales revenue f the service prvider; and The cst f the transactin des nt exceed 10% f the peratinal csts and expenses f the service receiver; and The arm s length price is established based n the cst plus methd; and The applied mark-up is in the range f 3-7% (cnstituting arm s length mark-up). The simplified dcumentatin must include: Name, registered seat and tax registratin number f the related party; tpa-glbal.cm

6 Page 6 f 6 The subject f the cntract; Date f signature and term f the cntract; The arm s length price (i.e. n cmparability analysis is necessary); and The date f preparatin (and date f amendment, if any) f the dcument. Transfer Pricing Methds The Hungarian legislatin fllws the recmmendatins laid dwn in the OECD Transfer Pricing Guidelines. The fllwing methds are accepted in the CIT Act: Cmparable Uncntrlled Price Methd Resale Price Methd Cst Plus Methd Transactinal Net Margin Methd Prfit Split Methd If nne f these methds is applicable, the tax payer may use anther apprach. Arm's Length Range When identifying the arm s length remuneratin, the taxpayers shuld cnsider the interquartile range, if the fllwing cnditins are met: The cmparable data are surced frm publicly available databases; and The analysis takes data int accunt at least 10 cmparable entities with at least 3 years f financial data/the number f bservatins is mre than 30, r the extent f the full arm s length range (minimum-maximum) exceeds 15 percentage pints. Cmparables Lcal cmparables are primarily preferred. Hwever, if the reliability f these cmparables is nt sufficient enugh, cmparable data frm different gegraphical regin with similar ecnmic cnditins shuld be acceptable as well. A database search shuld be prepared at least every three years, while the financial data f cmparable cmpanies selected during the database search shuld be updated n an annual basis. Mutual agreement prcedure ( MAP ) MAP is adpted in the lcal legislatin; it is, hwever, nt used n a regular basis. N MAP can be initiated in Hungary if the subject perid f time is elapsed. This dcument was updated in cperatin with Sándr Szmicsek, Tax Partner, Mazars Hungary. tpa-glbal.cm