Transfer Pricing in Hungary

The legal framework

Hungary runs its transfer pricing regime out of a single operative provision. Section 18(1) of Act LXXXI of 1996 on corporate tax and dividend tax (Tao. tv.) requires a taxpayer whose related-party consideration, net of VAT, departs from what independent parties would have agreed in comparable circumstances to adjust its pre-tax profit by the difference. The upward adjustment is mandatory; the downward adjustment is conditional, and the conditions are the part groups underestimate. A reduction needs a counterparty that is Hungarian resident, or foreign and subject to a corporate-type tax without being a controlled foreign company; a document signed by both parties recording the amount; and a declaration from the counterparty that the same figure enters its own tax base. Hungary has no secondary adjustment rule — no deemed dividend, no deemed loan — so that declaration is the only mechanism tying the two sides of a correction together.

Relatedness comes from section 4 point 23, built on majority influence under the Civil Code, tested up, down and between sister entities, with close relatives' holdings aggregated and a foreign operator treated as related to its Hungarian branch. The limb that catches groups is identity of management: where the same people direct business and financial policy in two entities, they are related whatever the shareholdings say. Lower participation tests of 25% and 50% apply for specified provisions.

The OECD Guidelines are not Hungarian law but are wired into it: recital [1] of the 2025 documentation decree records that the rules were framed taking them into account, and the Kúria decides range questions by reference to them. The standard is not confined to corporate tax either. Sections 39(11) and (12) of Act C of 1990 on local taxes require a taxpayer bound by the Tao. tv. arm's length rules to state related-party net sales and revenue-reducing costs at arm's length, a downward adjustment again depending on a counterparty declaration, and the innovation contribution base is built on the same figures. A transfer pricing correction therefore propagates well beyond corporate tax.

Methods, comparables and benchmarking

Section 18(2) permits CUP, resale price, cost plus, TNMM and profit split, with an open category available only where none of the five can establish the price. Selection follows the most appropriate method standard with no hierarchy, and section 6(3)(j) of Decree 45/2025 (XII.23.) NGM requires the reasons to be written down.

What distinguishes Hungary is how tightly the sample itself is regulated. Section 18(9) makes the interquartile range compulsory whenever the analysis rests on public or authority-verifiable database data. That rule sits in the statute, not the decree, which trips up readers who look for it in the wrong instrument. Sections 18(11) and (12) complete the arithmetic: no adjustment where the applied price sits inside the range; where it sits outside, the arm's length price defaults to the median unless the taxpayer proves that another point better fits the transaction examined. Displacing the median is the taxpayer's burden and a real one. The Kúria's earlier position in Kfv.I.35.504/2018/6, that any point in a defect-free range satisfies the principle, has since been narrowed by statute.

Section 11 codifies sample construction: three years of data, independent and non-dormant companies, exclusion of anything loss-making in two consecutive years or in more than half the period, screening on primary activity codes rather than keywords, and comparability confirmed against the companies' own websites. Departures must be reasoned in the local file. Section 11(2) then sets a geographic ladder — Hungary, then Czechia, Poland and Slovakia, then a wider Central and Eastern European tier, then the EU, and only then elsewhere. A pan-European benchmark is no longer a legitimate starting point. Screenings refresh at least every three years, financial data annually.

Documentation: what NAV expects

Decree 45/2025 (XII.23.) NGM entered into force on 23 January 2026 and replaced Decree 32/2017 outright. Any description of Hungarian documentation still keyed to the old decree is now wrong on thresholds, exemptions and content.

The local file threshold rose to HUF 150 million per controlled transaction, net of VAT and measured at arm's length prices, with aggregable transactions valued together whether or not they were actually aggregated. The master file is separately gated for the first time: it is required only where the aggregate consideration of local-file transactions exceeds HUF 500 million. Both must exist by the corporate tax return deadline — the last day of the fifth month after year end — with the master file deferrable to the parent's own deadline and at the outside twelve months from year end. Language is now a restriction rather than a liberty: the file may be prepared in Hungarian, English or German, where the repealed decree allowed any language at all.

Two substantive tightenings deserve attention. Gratuitous transfers of funds lost their exemption and now require a simplified local file under section 7(1)(c). And section 6(3)(i) introduces an express benefit test: for any service received, the file must demonstrate that the service was wholly necessary to the recipient's business and that the recipient would have paid an independent provider on similar terms or performed the function itself. That is now a documented deliverable, not an argument held back for audit.

A simplified local file otherwise remains available for low value adding services where the provider actually earns a net mark-up of at least 5%. Data reporting runs per transaction on the ATP-01 and ATP-KV sheets of the annual corporate tax return, and NAV reads it against the file.

Audits, penalties and the enforcement climate

NAV's published 2026 audit plan makes transfer pricing an express priority for large and key taxpayers, and the annex is unusually specific: simultaneous risk assessment of every Hungarian subsidiary of a group using country-by-country and cross-border arrangement data, intangibles, related-party financing, loss-making or thin-margin routine manufacturers and distributors, and compliance with the conditions in APA decisions. Automotive, construction, chemicals, IT, pharmaceuticals and food are named for sector sweeps.

The penalty architecture rewards care. Section 230(1) of Act CL of 2017 allows up to HUF 5 million per record for a documentation failure, rising to HUF 10 million on repeat, and because the master file and each transactional local file are separate records the ceiling multiplies within a single year. A country-by-country failure carries up to HUF 20 million. A primary adjustment attracts the ordinary 50% tax penalty under section 215(3), or 200% under section 215(4) where income was concealed or records falsified, which cannot be mitigated, plus daily late payment interest at the central bank base rate plus five percentage points, divided by 365. The doubled-base-rate formula quoted in a good deal of commentary was superseded in June 2021.

There is no formal documentation-based penalty protection. What exists is structural. NAV's own guideline treats a correct file delivered after the deadline as mitigating and gaps serious enough to prevent the arm's length price being established as aggravating, and section 4(8) of the decree lets a taxpayer correct errors up to the moment an audit opens but not after. The right to assess lapses five years from the end of the year in which the return fell due, extended once by twelve months where a new procedure is ordered and suspended while an administrative action or Kúria review is pending.

Dispute resolution and advance certainty

Advance pricing agreements under sections 174 to 183 of Act CL of 2017 are the workhorse of Hungarian certainty, and they are no longer cheap: since 20 July 2025 the fee is HUF 10 million unilateral and HUF 14 million bilateral or multilateral, payable in full with no instalments, 85% refunded on rejection or withdrawal unless the withdrawal comes late in the procedure, with preliminary consultations at HUF 1 million each. The application goes to the minister responsible for tax policy rather than to NAV. The procedure runs 120 days, extendable twice by ninety. A decision binds for three to five years and can be extended once by three. Rollback exists only in bilateral and multilateral cases, and only for periods not audited, not time-barred and not under an audit closing the period. Two features still make an APA worth more than the fee suggests: no audit may be opened on the transaction while the application is pending, save a pre-payment audit, and a covered transaction is exempt from the local file for the years named — the closest thing Hungary offers to penalty protection. The decision falls away the day a critical assumption fails, and APA compliance is itself on NAV's 2026 audit list.

Three mutual agreement routes run in parallel: the Directive 2017/1852 route for EU counterparties and tax years from 2018, the Arbitration Convention route for associated-enterprise adjustments, and the treaty route. A request goes in within three years of notification of the first measure, admissibility is decided within six months, and the agreement phase runs two years extendable by one. The competent authority is not NAV but the Ministry's International Taxation and Transfer Pricing Division. Domestically, an assessment runs from NAV appeal to the administrative courts, with review on law to the Kúria.

Pillar Two and what changes in 2026

Two things dominate the 2026 planning cycle. The first is the transition itself. Section 15 makes the new decree first applicable to tax years beginning in 2026. For years beginning in 2025 the election under section 15(2) operates local file by local file, so a taxpayer may document some transactions under the new decree — taking the HUF 150 million threshold with them — and leave others under Decree 32/2017, provided each file chosen for the new regime is prepared wholly under it. The master file and the data reporting stay on the old decree either way. Expect the wrong number to be quoted: NAV's own FAQ still carries HUF 100 million, which is right for 2025 filings and wrong for 2026.

The second is Pillar Two. Act LXXXIV of 2023 enacts the 15% minimum with all three charging mechanisms, and NAV's 2026 plan makes 2025 covered taxes — corporate income tax, the innovation contribution and the energy suppliers' income tax — a mandatory audit topic. Transfer pricing outcomes now feed directly into effective tax rate computations the authority intends to test.

Amount B is the visible gap. The OECD profile records Hungary as still considering the simplified and streamlined approach while committing to respect outcomes produced by covered jurisdictions, and the 2025 decree — which restates benchmarking comprehensively — contains no Amount B election, return matrix or covered-jurisdiction mechanism. Hungarian distributors remain on full benchmarking with the geographic ladder and the mandatory interquartile range.

How practitioners should respond

Rebuild the benchmarks before rebuilding the files. The geographic ladder and screening criteria in section 11 will invalidate a share of inherited pan-European studies, and a study that fails section 11 will not survive the median rule either: too wide a sample produces a median NAV is happy to impose.

Second, map the transaction perimeter against HUF 150 million and HUF 500 million using arm's length values with aggregation applied, not invoiced amounts. Groups that stayed under the old HUF 100 million line by splitting flows will find aggregation counted against them, and the withdrawal of the free cash transfer exemption catches intra-group funding that was previously invisible.

Third, build the benefit test into service contracts and into the file at the same time. NAV now has a documentary hook for a challenge that used to be purely argumentative.

Fourth, reconcile ATP-01 and ATP-KV to the local file line by line before filing. Inconsistency between return and file is a named risk trigger, and non-filing is on the audit list in its own right.

Finally, price the APA properly. HUF 10 million is a serious number, but set against a per-record penalty exposure, a stay on audit and local file exemption it is often still the cheaper route for a group with a material, recurring flow, and it converts an argument about the median into a binding decision.