This may hurt businesses: NAV is controlling transfer pricing more strictly than ever before

By: Trademagazin Date: 2025. 03. 25. 10:19

The examination of transfer prices of affiliated companies has been a priority area for years, but starting this year, the Hungarian Tax Authority is mobilizing more resources than ever to audit this area. As of March, new expert organizational units have been established to audit the area, and these departments will also conduct audits related to the global minimum tax, which appears as a new element in the Hungarian Tax Authority’s audit plan this year – noted Tamás Kiss, head of the Consulting business unit of SALDO Zrt.

Similar to last year, the examination of the pricing of affiliated companies is also a priority in the Hungarian Tax Authority’s audit plan this year. The tax authority has formulated as an emphasised goal the audit of taxpayers who conduct risky transactions based on transfer pricing data and those who make losses or low profits from a transfer pricing perspective. According to the new directions, food industry enterprises may be the primary target of the audits.

It is not enough to price correctly, you also need the right documentation

Interconnected companies can establish structures that deviate from normal market conditions, which can significantly reduce their tax base. These typically affect corporate income tax, local business tax and innovation contribution tax revenues, but they can also affect special taxes and even the value added tax base. The primary goal of transfer pricing controls is to prevent cross-border profit shifting, but purely domestically owned companies are not exempt from inspections, given that the use of inappropriate prices can lead to abuse even in a purely domestic context.

“The appropriate use of transfer prices can contain numerous optimization opportunities, but these must be examined in their context. Deviation from market prices, on the other hand, can have serious consequences. However, the use of appropriate normal market prices is often not enough; they must be supported by transfer pricing documentation in accordance with the legislation.”

– highlighted Tamás Kiss, Head of the Consulting Business Unit of SALDO Zrt.

Failure to prepare transfer pricing documentation can be sanctioned with 5 million forints, and in case of repeated violation, with 10 million forints. Moreover, the fine is no longer imposed per taxpayer, but per related (or consolidated) transaction – that is, the 5 million amount can be multiplied. There are also known cases where, due to the application of inappropriate consolidation rules, the tax authority lacked documentation for additional transactions in addition to the document prepared by the taxpayer.