The timeframe for conducting compliance inspections doubled by 2025, giving scope for more comprehensive inspections
In addition to the closing tasks and the preparation of statutory returns, thorough preparation for transfer pricing tasks is also essential, as a key target of an audit is the examination of the pricing of intra-group transactions. While taxpayers have to comply with increasingly complex and stringent transfer pricing obligations, the audit timeframe has also doubled and the maximum penalty for non-compliance has increased by 150 percent, warns consultant and auditor Moore Hungary.
„As the requirements have become more stringent, the number of transfer pricing-focused audits has also increased - pointed out Andrea Kocziha, tax partner at Moore Hungary. More than double in the first three quarters of 2024 transfer pricing-focused compliance investigation launched, than for the year 2023 as a whole. The number of investigations with findings presents an even more daunting picture for taxpayers: five times as many transfer pricing-focused compliance investigations concluded with findings in the first three quarters of 2024 than in the full year 2023.”
The continuation of this trend is likely to be confirmed by From 1 January 2025, the relevant compliance tests the conduct of the maximum time frame has been increased from 30 to 60 days, which gives the tax authority the opportunity to carry out much deeper and more comprehensive transfer pricing controls than ever before.
The increase in the number and depth of compliance investigations shows a clear and close correlation with the mandatory transfer pricing reporting obligation. As part of the corporate tax return, taxpayers are required to provide detailed information on their significant intra-group transactions, which allows the tax authorities to identify taxpayers and transactions at risk. The data therefore serves as a kind of map for the tax authority to determine which taxpayers to investigate.
The risk for taxpayers not only the requirements, but also high because of the significant penalties: the maximum default penalty in relation to the obligation to keep and keep transfer pricing records the amount of the fine is HUF 5 million (per year and per transaction), and in the case of repeated defaults HUF 10 million. This is a 150% increase compared to the previous maximum fines of HUF 2 and 4 million.
„Compliance with the ever-evolving transfer pricing control system is an increasing challenge for companies. It is not surprising that more and more companies are turning to external consultants who have the specialised knowledge and extensive experience to ensure effective compliance” added the Moore Hungary expert.
A transfer price a settlement price at which a company transacts with related parties - i.e. parties within the group. It is of fundamental importance because if it is not set realistically, i.e. it differs significantly from the arm's length price that would be applied between unrelated parties, it can be open to abuse, as it can have a significant impact on the profitability and tax liability of the companies concerned.
Moore Hungary
Moore Global, which started in a London office more than 110 years ago, is now one of the world's leading consulting and audit networks. Present in over 110 countries worldwide, the network has more than 550 independent offices and over 37,000 employees. The group's turnover for the last financial year exceeded $4.5 billion.
With a team of nearly 200 experts, Moore Hungary offers a full range of consulting services in the fields of business, finance, M&A, legal, tax, accounting, hotel and tourism, ESG, NIS2 industry consulting and auditing.
In our fast-changing world, Moore provides strategic guidance and practical advice to help clients navigate and understand the complex regulatory and changing market environment and industry conditions, and thereby find the best solutions.
More information about Moore Hungary and its services is available on the consultant's website: www.mooreglobal.hu.
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