Transfer pricing documentation and the associated reporting obligations have become a central issue for companies, especially in light of the new regulations effective from 2025. Reporting is not only necessary for preparing transfer pricing records but also plays a key role in tax returns. Below is an overview of who is affected by the reporting obligation and how it impacts corporate tax returns.
Who is affected by the reporting obligation?
The obligation to provide transfer pricing information applies to companies that:
- Achieve an annual revenue of more than 50 million HUF or carry out transactions exceeding this amount through sales or other activities with related companies.
- Engage in international transactions, meaning they conduct business with companies registered in other countries in accordance with Hungarian law, and in this context, the tax authority may perform transfer pricing audits.
The obligation to maintain transfer pricing records and provide the related information has been extended not only to multinational companies but to all companies that exceed a certain financial threshold and may impact corporate tax revenues through their business relationships.
Why is it important to maintain transfer pricing records?
Transfer pricing records contain information that demonstrates that transactions between related companies were carried out at market prices. The records help companies comply with local and international tax laws and support the legality of their tax returns and tax audits.
Data reporting is crucial not only for the preparation of records but also during the corporate tax return period. According to the regulations, from 2025, it will no longer be sufficient to simply maintain transfer pricing records: the related data must also be submitted as part of the corporate tax return.
Data Reporting in the Corporate Tax Return
Transfer pricing records and the related data are now part of the corporate tax return. This means that companies must not only prepare the records but also submit the related data to the tax authorities. Failure to do so or providing incorrect information can result in significant fines.
What information needs to be reported?
The tax return must include:
- A detailed description of transactions with related companies, including their type, volume, and financial amount.
- The transfer pricing method used and the justification for it.
- An analysis of relevant markets and similar transactions that justify the application of market prices.
What are the consequences of non-compliance?
Failure to maintain transfer pricing records and provide the related data can result in significant penalties and serious issues during tax audits. It is important for companies to give due attention to proper documentation and compliance with deadlines.
What companies should do
- Prepare the Records: Affected companies should start preparing transfer pricing records now to ensure they can meet the obligations in time.
- Review Data Reporting: Since the data included in the records must be submitted as part of the tax return, we recommend that companies ensure they provide accurate and up-to-date information.
- Consult an Expert: Preparing transfer pricing records and providing the related data is a complex task, so it is advisable to involve an expert to avoid legal and financial problems.
In conclusion, transfer pricing documentation and reporting of related data will become mandatory for all affected companies from 2025, and the related data must be included in the corporate tax return. Proper preparation and timely submission of the data will help avoid legal issues and ensure the smooth operation of companies.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
