Transfer pricing

Transfer pricing became one of the hottest focus areas of the Hungarian tax authorities. In order to avoid transfer pricing related tax base modifications and corresponding penalties, taxpayers have to make sure to have proper transfer pricing reports in place – complying with both the Hungarian documentation provisions and the expectations of the tax authorities.

Currently, the only feasible option to mitigate transfer pricing risk pertaining to on-going or future inter-company transactions is to obtain a so-called advance pricing arrangement (APA). APA is an agreement between the tax authorities and the taxpayer on the transfer pricing treatment of inter-company transactions that is binding on the tax authorities.

Mutual agreement procedures (MAP) are processes through which tax administrations can discuss and eliminate double taxation that arises from transfer pricing adjustments. As transfer pricing is an area important for tax authorities throughout the EU, it is anticipated that the number of MAPs will increase in the future.