Purpose of the regulation

The purpose of the new Decree No. 45/2025 (XII.23.) is to regulate the transfer pricing documentation obligation in a way that, considering the OECD Transfer Pricing Guidelines and ensuring proper tax administration, provides the tax authority with transparent data on transactions between related parties for audit purposes, and helps taxpayers determine their tax obligations. Another important goal is to ensure the availability of essential, standardized, quantifiable data on related transactions that can be easily processed by IT systems to facilitate risk analysis by the tax authority, targeted selection, and preparation for audits.

Subjects of documentation and data reporting obligation

The obligation to prepare documentation and provide data related to determining the arm’s length price continues to apply to corporate income tax taxpayers whose company size, based on group-level data, qualifies at least as a medium-sized enterprise under the act on small and medium-sized enterprises.

Parts of the documentation and thresholds

Under the new decree, the transfer pricing documentation for determining the arm’s length price continues to consist of the Master File, the common part of the Local File applicable to the taxpayer, and the transactional part(s) of the Local File.

The new decree introduces a threshold for the Master File: it must be prepared for any tax year in which the aggregate net value of transactions subject to Local File preparation obligations, calculated at arm’s length, exceeds HUF 500 million. The content requirements of the Master File remain unchanged.

The threshold for preparing the Local Fileincreases from a net HUF 100 million, calculated at arm’s length prices, to HUF 150 million. Taxpayers remain exempt from the documentation obligation for transactions that:

• which were entered into prior to the existence of the related-party relationship and whose material terms have not been amended, and in respect of which no change has occurred that independent parties do take or would take into account when determining the price
• in respect of which the arm’s length price has been determined by the Hungarian tax authority in a formal decision (for the years specified in the decision, provided that the decision remains binding),
• are stock exchange transactions under the capital market act;
• are executed at a fixed official price or a price individually determined by law;
• are concluded with private individuals not acting as sole proprietors.

Under the new decree, gratuitous transfersof fundsare no longer exempt from documentation requirements; however, a simplified documentation may be prepared for such transactions.

Cost recharges (transfer an asset or service to a related party at the price charged by an independent party, without making any changes) are exempt from documentation obligation only if their net value at arm’s length does not exceed HUF 500 million. For cost recharges exceeding this threshold, a simplified Local File may be prepared. The documentation must include the method of cost allocation and allocation keys in a manner verifiable by the tax authority. Exemption from documentation obligation for cost allocations among multiple parties applies only if the taxpayer substantiates that the allocation method complies with the arm’s length principle.

When determining thresholds, the value of transactions that can be aggregated must be considered on aggregated basis. The new decree does not change the aggregation rules. Transactions may be aggregated if doing so does not compromise comparability based on contractual terms, characteristics of goods or services, functions performed, assets used and risks assumed, economic circumstances, and business strategies, and if the subject matter of the related transactions is identical and all material terms are predetermined and identical, or differences are not significant; or if they are closely interrelated. Purchases cannot be aggregated with the sale of products manufactured from the purchased materials, and transactions where the party acts as a supplier cannot be aggregated with those where it acts as a buyer. The new decree adds that manufacturing, distribution, service, financial transactions, and transactions involving intangible assets (sale, establishment, acquisition, licensing, and franchising) cannot be aggregated with one another.

Changes in the Local File

A new content requirement in the Local File is that, within the transactional part, the name used for data reporting of the related-party transaction must be indicated, as well as - where applicable – the most relevant activity code of the transaction, which also appears in the data reporting. This ensures that during audits, it is easy to identify which transactional part corresponds to which data reporting sheet in the corporate income tax return.

The new decree also supplements previous requirements by mandating that, in the transactional part of the Local File, in addition to specifying the basis of the related-party relationship for the parties involved, details must include any intermediary entities and the manner and extent of majority influence where such influence exists indirectly.

The transactional part must continue to introduce the functions performed by each party involved in the transaction. Decree No. 45/2025 (XII.23.) provides a detailed list of these, requiring that economically relevant characteristics of the related-party transaction include, among others: strategic management, research and development, procurement, engineering support for production start-up, manufacturing, quality control, packaging, logistics, inventory management, market research, marketing strategy, brand development, marketing and advertising, pricing policy determination, contracting, distribution, customer acquisition, customer monitoring, receivables management, customer service, data collection and provision for decision-making, administration - and, where the subject of the transaction or the activity involves significant, unique, and valuable intangible assets, the creation, development, maintenance, protection, and exploitation of such assets as functions, the intangible and tangible assets used, as well as human resources and assumed risks, including market risk, R&D risk, design risk, investment risk, procurement risk, capacity utilization risk, operational risk, quality risk, reputational risk, logistics risk, inventory risk, credit and customer risk, liquidity risk, and foreign exchange risk - along with how these functions relate to the group’s broader value creation, the circumstances of the related-party transaction, and industry practice. Based on the functions performed, assets used, and risks assumed, the characterization of the parties must be carried out where relevant, assigning them to the functional profile category that best fits, such as contract manufacturer, toll manufacturer, licensed manufacturer, sales agent, commissionaire, limited-risk distributor, or co-entrepreneur entity.

A major change is that the economic characteristics of the relevant market in the transactional part of the Local File must only be presented if the transaction’s net value calculated at arm’s length exceeds HUF 1 billion.

It is also important that, for financial and non-financial services, the new decree requires the performance of the so-called “benefit test” in line with the OECD Transfer Pricing Guidelines. This means demonstrating, on the part of the service recipient, that the service is necessary for its business activities and that it would be willing to obtain the service from an independent party under comparable conditions or perform the service itself.

The Local File must continue to include a summary of the financial information used to determine the arm’s length price, as well as an explanation of how the data used can be linked to the taxpayer’s accounting system or, under the new decree, to the accounting system of the domestic or foreign related party, depending on which party’s data is used for the analysis. According to the new decree, if profitability indicators are calculated for the activity or segment affected by the related-party transaction - where it is not appropriate to consider full company-level data - the revenues, costs, and expenses included in operating profit must be allocated between the activity affected by the related-party transaction and other activities, requiring a segmented income statement.

The new decree precisely defines the profitability indicators. Among the commonly used indicators, net margin refers to the ratio of operating profit for the segment affected by the related-party transaction to net sales revenue. Net mark-up refers to the ratio of operating profit for the segment affected by the related-party transaction to the difference between net operating revenue (sales revenue increased by other income and the value of capitalized own performance) and operating profit.

Use of databases containing company-level data

Ministerial Decree 45/2025 (XII.23.) has incorporated into the regulations the expectations set by the tax authority regarding research and filtering performed in databases containing company-level data, in line with the professional practice developed under the OECD Transfer Pricing Guidelines. Accordingly, the sample of comparable companies identified through database filtering should primarily consist of entities that:

• are genuinely present in the market and engaged in active business operations;
• are independent, i.e., not part of a corporate group, so their financial data are not influenced by transactions with related parties;
• have financial data available for each of the three years preceding the tested fiscal year;
• are not continuously loss-making (i.e., not loss-making in two consecutive years out of the three examined, or, if more years are considered, not loss-making in more than half of the examined years).

Database searches should primarily be performed using the primary activity codes corresponding to the transaction, combined with the appropriate geographic scope. If the analysis is based on the Hungarian taxpayer’s financial data (the Hungarian taxpayer is the tested party), companies operating in Hungary should be selected first. If there are not enough Hungarian companies, the scope may be expanded to the Visegrád Four countries; if still insufficient, then to companies operating in Bulgaria, Estonia, Croatia, Latvia, Lithuania, Romania, and Slovenia; and if necessary, further to other EU member states and, ultimately, other regions.

Database filtering must still be carried out at least once every three years, while the financial data of comparable companies must be updated at least annually.

Low value-added services

In addition to free transfers of funds and cost allocations, a simplified local file may also be prepared for low value-added services.

The new decree introduced a significant change in the definition of low value-added services. While the previous regulation linked the definition to thresholds and activity codes, the new decree allows for a broader interpretation. A service may qualify as low value-added if it:

• is not provided by the taxpayer or any of its related parties to an independent party;
• does not require unique or valuable intangible assets for its provision and does not create such assets;
• does not involve significant or material risks attributable to the service provider;
• is not a manufacturing, assembly, contract manufacturing, distribution, consignment distribution, or agency distribution activity, nor a financial transaction, insurance or reinsurance activity, nor the extraction, exploration, or processing of natural resources.

A simplified local file may be prepared for low value-added services:

• by the service provider, if it achieved an actual net profit margin of at least 5% on the provision of the service;
• by the service recipient, if its related party achieved an actual net profit margin of no more than 5% on the provision of the service.

Data reporting in the corporate income tax return

Under Ministerial Decree 45/2025 (XII.23.), taxpayers are exempt from the data reporting obligation in respect of transactions that:

• were concluded prior to the existence of the related-party relationship and whose material terms have not been modified, nor has any change occurred that independent parties would consider when determining the price;
• are exempt from the obligation to prepare a Local File based on the threshold - as noted above, the threshold has increased from HUF 100 million to HUF 150 million;
• are stock exchange transactions under the capital market act, provided that the transaction’s net value calculated at arm’s length does not exceed HUF 500 million;
• were executed at a fixed official price or a specific price individually determined by law, provided that the transaction’s net value calculated at arm’s length does not exceed HUF 500 million.

Data reporting is not comprehensive but limited to the restricted data content specified by law for transactions that:

• are stock exchange transactions under the capital market act, where the transaction’s net value calculated at arm’s length exceeds HUF 500 million;
• were executed at a fixed official price or a specific price individually determined by law, where the transaction’s net value calculated at arm’s length exceeds HUF 500 million;
• are transactions with individuals who are not acting as sole proprietors;
• involve free transfers of funds;
• involve cost allocations.

For transactions where the arm’s length price has been determined by the Hungarian tax authority in a formal decision, no documentation obligation applies for the years specified in the decision, provided the decision remains binding. However, under the new decree, the data reporting obligation must be fully met.

Language and scope of documentation

Under Ministerial Decree 45/2025 (XII.23.), the documentations and supporting documentations may be prepared in Hungarian, English, or German.

The provisions of the new decree must first be applied to transfer pricing documentation and data reporting related to corporate income tax obligations for tax years beginning in the 2026 calendar year.

For tax years beginning in 2025, the new rules may be applied to individual Local Files at the taxpayer’s discretion, but not to data reporting in the corporate income tax return. Accordingly, for the 2025 business year, the data reporting obligation continues to apply to transactions whose net value calculated at arm’s length exceeds HUF 100 million.