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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

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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

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

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The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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