Hungary

As of 1 January 2019, taxpayers are able to opt for a group taxation regime for CIT purposes. Group taxation is available to affiliated companies resident in Hungary for tax purposes, provided that such affiliated companies have at least 75% direct or indirect control over each other, have the same year-end, and prepare their financial statements in the same way (as per Hungary GAAP or IFRS).

By opting for group taxation, group members are able to offset their operating losses up to 50% against the positive group tax base if certain conditions are met, as well as apply simpler transfer pricing rules to the intra-group transactions between the CIT group members.

Eligible group companies have to submit an application to the Hungarian tax authority between the first and 20th day of the month before the last month of the tax year in order to benefit from the group taxation regime for CIT purposes in Hungary. The procedural rules regarding group taxation regime are included in the Act on the Rules of Taxation.

As of 24 July 2019, businesses that commence operations during the year are able to join existing corporate tax groups. Such businesses are deemed to become group members on the date on which they become subject to corporate tax in Hungary.

As of 1 January 2022, non-profit companies, social cooperatives, general interest associations of pensioners, and school cooperatives cannot be a member of a corporate tax group.

Transfer pricing

As an OECD member, Hungary’s legislation is in line with the OECD Transfer Pricing Guidelines, acknowledging that the arm’s-length principle is the international transfer pricing standard to be used.

On 11 February 2020, as part of the Base Erosion and Profit Shifting (BEPS) project, a new chapter has been added to the OECD Guidelines on the transfer pricing aspects of financial transactions, which will contribute to consistency in the interpretation of the arm’s-length principle and help avoid transfer pricing disputes and double taxation. In line with this development, the new chapter could also be applied in Hungary.

The latest edition of the OECD Transfer Pricing Guidelines (published on 20 January 2022) includes the revised guidance on the application of the transactional profit method and the guidance for tax administrations on the application of the approach to hard-to-value intangibles agreed in 2018, as well as the new transfer pricing guidance on financial transactions approved in 2020.

If parties qualify as related parties (as defined in the Hungarian CDTA) and the price applied differs from the arm’s-length price, the CIT base must/may be modified by a transfer pricing adjustment. In addition, the foreign PEs of a Hungarian company and the Hungarian head office also qualify as related entities and are subject to transfer pricing regulations.

Taxpayers are required to prepare transfer pricing documentation for every transaction between related parties (including in-kind contributions provided by related parties), subject to certain exemptions.

Transfer pricing documentation is not required to be prepared:

• For transactions between a resident taxpayer’s PE and a related company if the resident taxpayer under the provisions of an international treaty adjusts the corporate tax base ensuring that it does not include the foreign taxable income.
• For transactions covered by an advanced pricing agreement (APA) issued by the state tax authority.
• If the consideration due for goods or services supplied by a third party is recharged in full to a related party.
• In the case of cash transferred without consideration.
• If the value of the transaction does not exceed HUF 50 million during the tax year.
• In the case of individuals, small or micro enterprises, transactions conducted on the stock exchange, or at an officially set price.

Taxpayers are allowed to consolidate transactions for transfer pricing analysis purposes if the consolidation does not jeopardise comparability, and:

• the subjects of the contracts are identical, all material conditions for fulfilling the contracts are identical and fixed in advance, or the differences in the conditions are not significant, or
• the contracts are closely related.

In the case of consolidation, taxpayers are required to include arguments for the consolidation (i.e. why the taxpayer believes that criteria of consolidation are met).

When determining transfer prices applied between related companies, taxpayers are allowed to apply traditional transaction methods or transactional profit methods. If the above methods are not applicable, companies may use any other method.

The formal and content requirements as included in Base Erosion and Profit Shifting (BEPS) Action 13 were implemented in Hungary in Decree No. 32/2017 of the Ministry for National Economy (also referred to as "the current Decree"), which has replaced, as of 1 January 2018, the Decree No. 22/2009 of the Ministry of Finance, the former decree governing the details of the transfer pricing documentation requirements.

According to Decree No. 32/2017 of the Ministry for National Economy, taxpayers have to prepare a Master File and a Local File as transfer pricing documentation. The new rules have to be applied in the documentation to be prepared for financial year (FY) 2018 first.

According to Decree No. 32/2017 of the Ministry for National Economy, the Local File must include, but is not limited to, the following:

• Functional and risk analysis.
• Industry and company analysis.
• Economic analysis (including financial analysis, benchmarking analysis, and the process of selecting the most appropriate transfer pricing method).
• Copies of APAs and advance tax rulings issued by foreign tax authorities that concern the local company’s documented transactions.

According to Decree No. 32/2017 of the Ministry for National Economy, the Master File must include the following:

• The organisational structure and the presentation of the group (including the supply chain, inter-company agreements, functional and risk analysis, and business reorganisation, if any).
• Information about the intangible assets, the financial transactions, the financial performance, and the taxation of the group.
• A list of APAs and advance tax rulings issued by tax authorities.

In addition to the above, taxpayers are allowed to prepare a so-called simplified documentation for certain low-value adding services if criteria set in the Hungarian legislation are met. Decree No. 32/2017 of the Ministry for National Economy allows the preparation of the simplified documentation.

The transfer pricing documentation does not have to be submitted to the tax authority but has to be available no later than the filing date of the CIT return in any given year; otherwise, a default penalty may be assessed.

As of 1 January 2020, based on an amendment, transfer pricing rules shall be applied in the event of a capital increase as a result of contribution in kind provided by a shareholder who, prior to the contribution, did not have majority ownership in the company but acquires majority ownership through the contribution. The application of transfer pricing rules is also required in case of repurchasing of own shares, or transfer of such shares free of charge.

According to certain articles of the Act LXIX of 2021 on the Amendment of Certain Tax Laws, the competence of the Hungarian tax authority moved to the authority of the Hungarian Ministry of Finance with an effective date of 1 October 2021 in the case of APAs and transfer pricing related mutual agreement procedures (TPMAPs). From 1 October 2021, the Ministry of Finance handles the ongoing APAs and TPMAPs, and any new submission should also be made to the Ministry of Finance. Tax audits and international inquiries, however, continue to be performed by the Hungarian tax authority.

Act XXIV of 2022 on the grounding of the 2023 central budget of Hungary was promulgated in the Official Gazette of Hungary on 27 July 2022, which affects the applicable transfer pricing rules on several points.

The amounts of the default penalty related to the preparation or the record-keeping of transfer pricing documentation increased from the previous default penalty of up to HUF 2 million per documentation to HUF 5 million and, in the case of repeated infringements, from the previous default penalty of up to HUF 4 million per documentation to HUF 10 million.

As part of the modification, the fee for the APA procedure also increased to HUF 8 million in the case of a unilateral procedure and to HUF 12 million in the case of a bilateral or a multilateral procedure.

In addition, when determining the arm's-length price, should the taxpayer take into account data that is stored in a database or obtained from other sources for comparable products, services, or companies, then it is now mandatory to further narrow the elements of the resulting sample to the interquartile range (the use of the interquartile range has so far only been prescribed by the legislator in the presence of certain circumstances as defined in Decree No. 32/2017 of the Ministry for National Economy). Another change is that if the consideration applied by a taxpayer in a transaction concluded with its affiliated company falls outside the arm's-length range, in connection with the arm's-length principle, the adjustment of the profit before tax must be made to the median value of the arm's-length range unless the taxpayer proves that a value within the arm’s-length range other than the median value corresponds best to the transaction under review. In such cases, this value should be taken into account as the arm’s-length price instead of the median value. Therefore, as a general rule, it is no longer sufficient to make the correction only to the nearest value of the arm’s-length range.

The amendment also stipulates that if the consideration applied by a taxpayer in a transaction concluded with its affiliated company is already within the arm’s-length range, it is not possible to modify the profit before tax in connection with the arm’s-length principle.

The changes related to the application of the interquartile range and the modification of the profit before tax were first applied when determining the tax liability for the tax year starting in 2022.

The amendment of Decree No. 32/2017 (X. 18.) of the Ministry of National Economy on the Documentation Requirements Pertaining to Determining the Arm’s-Length Price was published on 28 December 2022, which imposed considerable changes regarding the obligations of taxpayers concerned.

Starting from the tax year of 2022, related-party transactions that do not exceed HUF 100 million at an arm’s-length price are exempt from the documentation obligation.

From the tax year starting in 2023, the Master File and the Local File are considered separate documents, from which the latter must be prepared per transaction or per consolidated transaction. Regarding the Local File, the amendment emphasizes that the Local File consists of a joint section, including taxpayer-level information, as well as a part at a transactional level covering the relevant related-party transaction. According to the amendments to the Decree, the joint, taxpayer-level part must be prepared only once per tax year, with the same information content as before. More detailed information disclosure is required (e.g. disclosure of general ledger accounts, cost centres, cost drivers, etc.) on how the related-party transactions are connected to the annual report.

The consolidation rules have also been amended, the most significant part of which is that transactions affecting expenses and transactions primarily affecting revenues cannot be consolidated.

Based on the 2022 amendment of Act LXXXI of 1996 on Corporate Tax and Dividend Tax, in addition to the previous documentation obligation related to the determination of the arm's-length price, taxpayers also have to meet a new data provision obligation as part of the annual corporate tax return.

The Decree defines the scope of transactions subject to the data provision, which can be divided into three categories:

1. Transactions exempt from the data provision:
   • Transactions not exceeding HUF 100 million at an arm’s-length price.
   • Stock-exchange transactions concluded under the Act on Capital Markets.
   • Transactions applying a fixed price determined by any competent authority.
2. Transactions subject to limited data provision:
   • Any transaction that the taxpayer has concluded with a private individual in a capacity other than that of private entrepreneur.
   • The recharge of independent third-party costs in an unchanged amount and value.
   • Liquid assets that are transferred or received without consideration.
3. Transactions subject to full data provision:
   • All transactions that do not belong to the above-mentioned limited or fully exempted transactions, including transactions for which a resolution (APA resolution) has been issued in an APA procedure.

The data provision obligation must be fulfilled for corporate tax returns filed after 31 December 2022.

The strict rules on banning tax inspections, which have been in force until recently in relation to APA procedures, also changed such that, except for tax audits focusing on the correctness of the VAT deduction, only tax audits in connection with the arm’s-length price to be determined by the APA procedure are prohibited. The ban on tax inspections applies from the submission of an APA application until the deadlines set by law have expired. This amendment gives the tax authority more leeway with respect to tax audits, since previously it could not conduct any audits in relation to transactions affected by the procedure. In relation to APA procedures, the section of the Act on the Rules of Taxation that prevents taxpayers who are not required to prepare transfer pricing documentation from submitting an APA request was repealed. In accordance with this, for example, members of a corporate tax group are also entitled to initiate APA procedures in connection with transactions concluded among themselves.

Published in the Official Gazette of Hungary on 28 November 2024, there were key updates impacting the transfer pricing regulations. These changes clarified the procedures for legal compliance verification audits, authorising the tax authority to examine the transfer pricing documentation and data reporting as part of these reviews. Since 1 January 2025, tax authorities have 60 days to conduct legal compliance verification audits, focusing on transfer pricing documentation and data reporting.

Finally, the timeline for APA procedures was extended. The initial 120-day deadline for APA procedures can now be extended twice by the Ministry of Finance, each time by an additional 90 days.

The current Decree is applicable for tax years before 2025. For tax years starting in 2026 the application of the new Decree detailed below is mandatory. For tax years starting in 2025, the taxpayers can opt for the application of both decrees i.e. the current and the new one, as well.

The new decree

Decree No. 45/2025 (XII. 23.) of the Ministry of National Economy on transfer pricing documentation and data reporting requirements (“New Decree”) was published on 23 December 2025. It replaces Decree 32/2017 as of 23 January 2026, introducing a revised and more detailed regulatory framework.

For tax years starting in 2025, taxpayers may choose to fulfil their transfer pricing documentation requirements based on the current or the New Decree. The decision can be made for each Local File i.e. for each intercompany transaction type. The New Decree becomes mandatory for tax years starting in 2026.

The New Decree introduces the following changes compared to the previous Decree described above.

Transaction value thresholds and exemptions are adjusted as follows:

• Master File preparation is required in any tax year in which the aggregate arm’s length value of transactions that require a Hungarian Local File exceeds HUF 500 million.
• No Local File is required if the arm’s‑length value of the specific transaction does not exceed HUF 150 million in the tax year (excluding VAT). Consolidation rules needs to be followed when testing against the threshold.
• No local file is required for pure pass‑through recharges of goods or services acquired from independent parties up to HUF 500 million in the tax year (excluding VAT).
• Where the arm’s‑length value (determined under the decree’s consolidation rule) does not exceed HUF 1 billion in the tax year (excluding VAT), description of the economic conditions of the relevant market may be omitted from the local file.
• No local file is required for transactions covered by a binding Hungarian APA (for the covered period), for stock‑exchange transactions, for transactions at fixed administrative prices or other individually set prices in law, and for transactions with individuals acting other than as sole entrepreneurs.

The new decree introduces the benefit test in Hungary. For intra‑group services received by a Hungarian entity, the recipient must document that the service is wholly necessary for the business and that an independent party would have paid under similar terms or the recipient would have performed it in‑house.

Additionally, the importance of financial segmentation is further emphasised. Based on the new Decree where company‑level data are not appropriate, operating profit‑and‑loss items must be allocated between related‑party and non‑related‑party segments; amounts relating to multiple activities, including shareholder activities, must be reasonably split; after allocation, no revenue, cost or expense may remain unallocated.

The financial data used in the analysis must be traceable to the accounting systems of the taxpayer, the domestic or foreign tested party, or the related party whose data are used, so that the calculation is verifiable.

Expanded economic analysis must address all five OECD comparability factors and, where relevant, analysis of intangible related transactions must follow the DEMPE framework. Accordingly, the analysis should cover the contractual terms, the parties’ functions, assets and risks, the characteristics of the goods or services, the economic circumstances and the business strategies.

Regarding routine transactions, the utilization of the TNMM and the usual tested party selection does not require further justification. For contract manufacturing and routine service providers, TNMM with a net cost plus mark‑up and selection of the manufacturer or service provider as the tested party may be applied without additional justification. For limited‑risk distributors, TNMM with operating margin and selection of the distributor as tested party may be applied without additional justification.

Consolidation is permitted where it does not compromise comparability, either for identical transactions with pre‑set terms or for closely interrelated transactions. Purchases cannot be consolidated with sales, and transactions where the same party is a supplier cannot be consolidated with those where it is a customer. Transactions may not be consolidated across the broad categories of manufacturing, distribution, services, financial transactions, and transactions involving intangibles (such as sale, creation, purchase, license, franchise).

Comparables and benchmarking requirements are specified. Acceptable sources include contracts and public or verifiable database information on comparable products, services and companies. Search steps must be recorded sufficiently to allow reconstruction, or otherwise fully documented. Company‑sample criteria include, among others, identifiable companies, exclusion of non‑operating entities, independence, and the use of multi‑year data. For tested parties operating in Hungary, the geographic scope for searches should be Hungary; if the sample size is insufficient, then – besides Hungary – the Czech Republic, Poland and Slovakia should be included; if this still results in an insufficient sample size, then Bulgaria, Estonia, Croatia, Latvia, Lithuania, Romania and Slovenia should also be included; if still results in an insufficient sample size, then the member states of the European Union should be used. Database searches must be refreshed at least every three years and financials updated at least annually, absent material business changes.

Based on the new Decree related‑party transaction may exist even without actual transactions booked between the related parties if the contractual terms (written, verbal or implied), the characteristics of the goods or services, the parties’ functions, assets and risks, the economic circumstances or business strategies support that such a transaction exists. Related‑party transactions may also exist with natural persons. The local file must state the other related party’s identification and tax residence, the basis of related party status, and, in the case of indirect majority control, the intermediary entities and the nature and extent of control.

The new Decree changes the simplified documentation requirements. Local Files with simplified content can be prepared for the following transactions:

• Provision of low value‑adding services if at least a 5.0% net cost plus mark‑up is actually realized or receipt of low value-adding services where the provider achieves a maximum of 5.0% net cost plus mark‑up.
• Free transfer or receipt of cash.
• Pure pass‑through recharges of goods or services acquired from independent parties where the recharging related party performs no significant functions and assumes no material risks, and neither the taxpayer nor its related party sells the same goods or services to independent parties unchanged.

The simplified documentation does not need to include among others the description of

• the economic conditions of the relevant market,
• the business strategy of the parties
• the selected transfer pricing method and the reasons behind the selection
• the tested party and the reasons behind the selection
• the most important assumption used during the application of the selected transfer pricing method and the reasons behind the assumptions
• the profit level indicator
• the comparable transactions or independent companies and their financial data.

These rules apply optionally from 2025 and mandatorily from 2026. The current Decree remains available as an option for 2025.

Country-by-country (CbC) reporting

In addition to the above, Hungary has implemented CbC reporting legislation. The new statutory obligation pertains to Hungarian resident companies that were, in the fiscal year preceding the reporting fiscal year, members of a multinational company group with a total annual consolidated group revenue exceeding EUR 750 million (or an amount in HUF approximately equivalent to the same, calculated according to the monthly average Hungarian Central Bank exchange rate for January 2015).

Under the general rule, a Hungarian resident ultimate parent entity must file a CbC report with the Hungarian tax authority within 12 months of the last day of its reporting fiscal year. The ultimate parent entity must also notify the tax authority about the last day of the fiscal year and that it is a reporting entity (i.e. an entity required to file a CbC report).

Hungarian resident entities that do not qualify as reporting entities are required to notify the tax authority about the name and tax residence of the reporting entity.

As a general rule, however, notifications must be made no later than the last day of the reporting fiscal year. Any change in the information reported must be reported within 30 days of such change occurring. The CbC reports and notifications must be submitted electronically.

Failing to submit reports or notifications, late submission, or providing incorrect, false, or incomplete information may be subject to a default fine of up to HUF 20 million.

Public CbC reporting

On 23 November 2022, the EU Directive on Public CbC reporting has been implemented into the local legislation and published in the Hungarian Gazette.

The Directive is applicable to both EU-headquartered multinational enterprises (MNEs) and non-EU-headquartered MNEs doing business in the European Union through a subsidiary or branch with a total consolidated revenue of more than EUR 750 million.

Based on the legislation, MNEs would be required to disclose the following information broken down by EU member states, non-cooperative jurisdictions, and all other jurisdictions on an aggregated level:

• Name of the ultimate parent entity or the standalone entity, the financial year concerned, and the currency used in the report.
• Short description of the activities.
• Number of employees.
• Net turnover.
• Profit before tax.
• Income tax due.
• Income tax actually paid.
• Accumulated earnings.

The Hungarian local legislation requires MNEs in scope to explain the reasons behind any significant differences between the income tax accrued and income tax paid.

Furthermore, the domestic law does not intend to use the opportunity to defer from the disclosure of commercially sensitive information (for a maximum period of five years) and the option to be exempt from website publication.

In line with the EU Directive, the Hungarian legislation would require multinational groups to publicly disclose the above tax-related information for financial years starting on or after 22 June 2024. Accordingly, the first financial year subject to disclosure will be 2025 for companies using fiscal year end of 31 December. The information should be accessible on the public registry of the relevant EU member state and on the company website.

Thin capitalisation / interest limitation rule

As per the prior years, interest related to liabilities exceeding three times the equity (3:1 debt-to-equity ratio) is non-deductible for CIT purposes. When calculating the ratio, debts from financial institutions shall be disregarded and the amount of liabilities could be decreased by the amount of cash receivables (to exempt back-to-back financing from this rule). On the basis of the prior rules, the non-deductible amount of interest qualifies as a permanent tax base modifying item.

According to the legislation, which is implemented on the basis of the EU's Anti-Tax Avoidance Directive (ATAD) and entered into force in 1 January 2019, the non-deductible interest should be calculated using the tax EBITDA, instead of the debt-to-equity ratio. Based on the general rule, the net borrowing costs are deductible up to the higher of 30% of the tax EBITDA or HUF 939,810,000. A major point of the amended law is that any interest paid to financial institutions will also be subject to the thin capitalisation rules.

For this purpose, tax EBITDA means an adjusted corporate tax base, i.e. the current year's tax base modified with the net borrowing costs, tax depreciation, and utilisation of carried forward unused interest capacities/exceeding borrowing costs (if any).

On the basis of EU's ATAD, Hungary implemented certain derogation rules that could result in a higher interest deduction (i) if the taxpayer's standalone equity/asset ratio is higher than the group’s ratio or (ii) the net interest expense/tax EBITDA ratio is higher than the taxpayer's standalone respective ratio.

We note that a grandfathering rule is also introduced, which states that in the case of loan agreements concluded prior to 17 June 2016 the old rules (i.e. thin capitalisation debt-to-equity approach) could be applied until there is no increase in the amount of debt or the maturity date is not prolonged.

Controlled foreign companies (CFCs)

Under the CFC rules, effective from 1 January 2019, a Hungarian taxpayer shall treat a foreign entity as a CFC where the following conditions are met:

• A Hungarian taxpayer entity alone or together with its related parties holds a direct or indirect interest therein, which entitles for:
• more than 50% of the voting rights
• more than 50% of the registered capital, or
• more than 50% of the after-tax profits.
• In the foreign entity's given financial year, the actual CIT paid by the foreign entity is less than 50% of the CIT that would have been charged on the entity under the applicable CIT rules in Hungary (i.e. less than 50% of the Hungarian CIT rate of 9% that is 4.5%, unless the foreign entity earns income that would not be subject to tax in Hungary either, e.g. dividend, capital gain).

According to the recent changes, an entity will no longer be automatically exempt from being deemed as a CFC solely on the basis that one of its related parties is listed on a recognised stock exchange.

In order to avoid the qualification as a CFC, the foreign entity must meet the following conditions:

• its income arises purely from genuine arrangements or series of such arrangements, which the Hungarian taxpayer will need to evidence
• its accounting pre-profit does not exceed HUF 243,952,500 and its non-trading income does not exceed HUF 24,395,250, or
• its accounting profits amount to no more than 10% of its operating costs for the tax period.

From 1 January 2021, it shall also be considered whether the foreign entity is tax resident or the PE is located in a 'non-cooperating state' when determining the CFC status of a foreign entity or PE in terms of the Hungarian legislation. The list of non-cooperating jurisdictions is expected to be determined in line with the list issued by the European Council.

Implementation of hybrid mismatch rules and related anti-avoidance provisions

As of 1 January 2020, the respective provisions of the ATAD II (EU Directive 2017/952) have been incorporated into the Hungarian CIT legislation regarding hybrid mismatches in order to meet the implementation requirements as set out in the Directive.

For this reason, among others, the following were introduced: (i) hybrid mismatch rules under financial instruments, (ii) hybrid payments made to a hybrid entity or to a PE, (iii) hybrid payments made by a hybrid entity, and (iv) double deductions achieved by payments made by a hybrid entity or PE.

In the above cases, the respective costs deductions must be denied, or the income shall be taken into consideration when calculating the tax base.

With effect from 1 January 2022, the respective rules of the ATAD II were implemented in relation to reverse-hybrid mismatches as well.

If a hybrid entity does not qualify as a tax resident in Hungary under the general rules but it has an establishment or a registered office there, it will become a Hungarian tax resident provided that the hybrid entity’s majority owner or shareholder has tax residency in a state that considers the Hungarian hybrid entity as a taxpayer of corporate tax or other equivalent tax.

The income of such a hybrid entity is taxed to the extent it is not taxed by the Hungarian or other country’s tax legislation.

The rules are not applicable for investment funds or other collective investment fund vehicles that have wide, diverse portfolios of securities and whose investors are subject to investor protection regulations in Hungary.

Introduction of exit taxation rules

As of 1 January 2020, the Hungarian CIT regime introduced exit taxation provisions. The implementation of such rules serves the purpose to be in compliance with the harmonisation requirements of the EU’s Anti-Tax Avoidance Directive (ATAD I).

Accordingly, a Hungarian taxpayer is subject to 9% CIT at the time of the exit/transfer of its assets and at the amount equal to the positive difference between the fair market value of such assets (to be determined in line with the general transfer pricing guidelines) and the tax book value of those assets, in certain cases (e.g. in the case of transferring the effective place of management to a foreign jurisdiction, transferring assets to its foreign PE).

Note that asset relocations in the frame of a voluntary liquidation procedure is/was also covered by the Hungarian legislation.