In this briefing we would like to draw your attention to the most important new transfer pricing rules introduced by the summer tax law amendments, which are already apply for the tax year starting in 2022.
New reporting obligations
Among the changes, it is worth highlighting that companies subject to transfer pricing registration obligations, in addition to preparing transfer pricing documentation, are required to will already be required to provide information in their corporate tax returns in connection with the determination of the arm's length price, resulting in the following for calendar year taxpayers by 31 May of the year following the tax year, the information specified in the transfer pricing regulation will have to be provided.
The detailed rules have not yet been published, but it is already clear that it will be of particular importance that the transfer pricing register for 2022 will be completed practically before 31 May 2023 in order to serve as a basis for the above reporting.
Obligation to apply an interquartile range
In the case of determination of the arm's length price, price range from a database (e.g. Amadeus) or other data verifiable by the tax administration (e.g. internal comparables) the use of an interquartile range will be mandatory. Given that in the past there have been cases where the full market price range, i.e. the whole range between the minimum and the maximum value, was acceptable for determining the arm's length price, the introduction of this new rule may in the future make transfer pricing significantly more difficult to assess and may lead to tax base adjustments.
Adjustment of applied price - Application of median
If the consideration applied by the parties falls within the arm's length price range, no transfer pricing adjustment is required and the consideration is deemed to be arm's length. If, however, the transfer price applied differs from the arm's length price range, then as a rule, the tax base adjustment should be made to the median value. An exception to this is if the taxpayer can demonstrate that a value within the arm's length range that is different from the median best reflects the transaction under consideration, in which case that value should be taken into account as the arm's length price instead of the median.
Higher fines
The maximum amount of the default fine for non-compliance with transfer pricing registration obligations HUF 5 million-and the maximum fine for repeated infringements is 10 million HUF-will increase to HUF 2 million from HUF 2 million and HUF 4 million respectively.
It can therefore be seen that significant changes and tightening in the area of transfer pricing have been introduced, which foresee that transfer pricing will continue to be a priority area for tax authority controls in the coming years (as confirmed by the 2022 audit plan issued by the NAV). As a result, fast, accurate, reliable and professionally excellent work in the preparation of transfer pricing records will become increasingly important.
A Moore Hungary Tax Advisory Kft. tax experts are ready to help you in preparation for new obligations; contact us with confidence!
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