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Transfer Pricing: Hungarian Parliament Implemented the Country-By-Country Reporting Rules

Transfer Pricing: Hungarian Parliament Implemented the Country-By-Country Reporting Rules


The Hungarian Parliament modified the provisions on the implementation of the Country-by-Country Reporting (CbCR) system according to the 2016/1164 EU directive. These changes relate to the obligation of the transfer pricing documentation for multinational enterprises.

The goal of CbCR is to ensure that transfer-pricing documentation provides comprehensive and credible information about the multinational enterprises and the traceability of the intergroup transactions. Multinational enterprises with a more than EUR 750 million of consolidated income are concerned by the reporting obligation. As a first step, all group members will have to notify the tax authority whether they will be obliged to report in the future. Then, the parent company will be obliged to report to the tax authority. The data that have to be provided for each group member separately are, inter alia, the amount of income, the profit before tax and the number of employed persons. In the lack of CbCR regulation in the country where the parent company is seated, the group members will be obliged to report. 

The first report has to be provided from the tax year of 2016, and the deadline for the submission is 31 March 2018. The report does not offer the opportunity of the correction of the corporate income tax base, however, the tax authority can use the data provided to make risk analysis, and may also impose a tax fine based on the available information. If an MNE fails to provide the required data, the fine may amount to HUF 20 million.

Another important development of the amendment is the automatic information exchange, as a result of which the tax authority will be obliged to forward the information received to the other countries’ tax authorities.

By Eszter Kamocsay-Berta, Partner, KCG Partners Law Firm

Hungary Knowledge Partner

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