Transfer Pricing in Hungary, 2009 Survey report
Since 1995, Ernst & Young has surveyed multinational enterprises on international tax matters, with special emphasis on transfer pricing.
In 2008, we decided to survey large Hungarian companies and provide an overview of the transfer pricing situation in Hungary. In 2009, Ernst & Young carried out the same survey.
The Ernst & Young Transfer Pricing Report demonstrates clearly that larger firms operating in Hungary face significant transfer pricing risk if they do not comply with local rules.
The entities that participated in the survey experienced a rise in the number of transfer pricing inspections. Inspectors have gained practical experience and now they have the opportunity to consult a dedicated team of transfer pricing specialists during tax inspections. In line with this trend, tax authorities have been trying to levy heavy penalties; in particular, for non-compliance with the documentation rules. More than 55% of the firms reported that their transfer pricing was inspected by the tax authorities during the last two years, clearly demonstrating that the tax authorities are paying ever greater attention to transfer pricing issues.
The dominance of the Comparable Uncontrolled Price (“CUP”) method declined. Profit based methods are not only applied by taxpayers but also accepted by the tax authority. Fewer companies than expected initiated (or are considering initiating) an Advanced Pricing Agreement (“APA”) procedure with respect to their related party transactions. We believe that, in line with the international trends, the number of APAs will increase as more and more companies want to make sure that their pricing arrangements for large transactions are not challenged when audited by the tax authorities.
This report constitutes a compilation of our respondents’ opinions. Our intention was to present both the opinions and the practical experience of significant taxpayers operating in Hungary, which will enable you to more accurately assess the state of your company’s knowledge, experience and practices, compared to other companies. This report also briefly summarizes the tax law changes regarding transfer pricing enabling taxpayers to prepare for coming tax audits in 2010.
