New transfer pricing regulation: reduced administrative burdens for smaller businesses, even stricter transfer pricing regulations for larger ones

The new transfer pricing regulation was published at the end of 2025. Its application is mandatory from 2026, but it may also be applied optionally for 2025. The completely new regulation, which replaces the previous one, not only includes certain administrative simplifications and clarifying provisions, but also equips the Hungarian tax authority with even more effective tools and may pose new challenges for domestic businesses in several key areas.

With the exception of one or two relief measures, the tightening of transfer pricing in Hungary continues

Hungary’s transfer pricing regulations have already been detailed and strict, and with the new transfer pricing rules—given the high importance of transfer pricing and its significant tax risk both domestically and internationally—the tightening of transfer pricing in Hungary continues. A clear objective is to achieve the highest possible consistency between transfer pricing documentation and data reporting by providing standardized, IT-manageable data, thereby supporting the most effective tax authority risk management, selection, and audit processes.

The new TP Decree contains provisions aimed at ensuring consistency with the transfer pricing guidelines of the Organisation for Economic Co-operation and Development (OECD) in important areas such as the detailed presentation of economically relevant characteristics, the benefits test in case of services, and the regulation of low value-adding intra-group services.

What are the most significant changes to transfer pricing rules?

1. Preparation of segmented income statements for individual related-party transactions, reflecting actual profitability.

Consistency between the report, transfer pricing documentation, and transfer pricing data reporting from 2022 onwards has been expected from the outset. In its recent practice, the tax authority has already required the preparation of segmented income statements for certain related-party transactions, and this will become a general and fundamental requirement in the future, even for low value-added services.

For segmentation purposes, related and unrelated items must be allocated to the operating result level on the income and expense sides. The division must be reasonable between the individual activities, and no items may remain undivided. In order to ensure correct segmentation and appropriately segmented profitability data, it may be necessary to review and appropriately design financial processes. In the absence of these, we cannot be sure that the profitability tested by related companies and compared with the normal market is correct, so there may be a risk of a mandatory tax base adjustment by the tax authorities to the median value, which may be significantly higher in some cases.

If the related party is the tested party, the financial data is not directly available to the taxpayer preparing the records. However, even in this case, i.e. in the case of a domestic or foreign tested related party, it must be possible to demonstrate how the financial data can be linked to the accounting system. Obtaining the necessary segmented data may require additional time, especially in the case of foreign affiliated companies, so it is important to be prepared for this in advance.

Under the new transfer pricing regulation, it is mandatory to examine the actual profitability indicator. It is therefore not sufficient to refer to a certain percentage mark-up specified in the group’s transfer pricing policy in general terms; rather, the profitability data must be actually verifiable and demonstrable in the companies’ books, consistent with the transaction values.

2. Benchmark: the age of the data, the key steps in database filtering, and the geographical considerations.

In summary, the most important thing to know about the new regulation is that the tax authority will no longer automatically accept central benchmark studies prepared at the group level.

The amended regulation stipulates that the data available at the time of fulfilling the tax obligation must be taken into account when preparing the comparative research. Furthermore, the new transfer pricing regulation sets out the most important database filtering steps (unique identifiability, activity, independence, data for each of the previous three years, appropriate geographical criteria, application of primary activity codes, exclusion of continuously loss-making enterprises, data from the websites of independent partner enterprises). Deviations from these steps are only possible in the cases specified in the regulation and only if justified.

Among the database screening steps, it is worth highlighting the importance of the geographic criterion that the Hungarian tax authority has already applied in line with its previous guidance. Accordingly, if the tested party carries out its activities in Hungary, Hungary qualifies as the comparable geographic area. The expansion of the geographic criterion may take place only in cases of an insufficient sample size, and with due regard to a predefined territorial hierarchy. It is advisable to rethink the benchmarking strategy and review the database screenings in the spirit of the new rules.

3. A more detailed functional analysis of related-party transactions.

The functional analyses that form the core of transfer pricing documentation must be reviewed, updated, and supplemented, taking into account that the content requirements of the transfer pricing regulation have been significantly expanded in this regard. Particular emphasis should be placed on a detailed presentation of the economically relevant characteristics of the related transaction (contractual terms; functional profile; product, goods, service characteristics; economic conditions; business strategy). In the case of intangible assets, care must be taken to present the DEMPE functions (creation, development, maintenance, protection, and exploitation of intangible assets).

4. Usefulness test for service transactions

The documentation requirements for services are becoming stricter. Adequate supporting documentation is particularly important in the case of central management services. In the case of service transactions, the service user is required to prove that the service is actually necessary for its business activities and that it would use the same services from an independent party or perform them itself. Without proof of usefulness, the cost of the service cannot be included in the tax base.

5. Changes in transfer pricing exemptions and thresholds

The changes to the value limits may provide relief for many smaller businesses. Under the new transfer pricing regulations, it is not necessary to prepare a Master File for the tax year in which the total value of the taxpayer’s related-party transactions, calculated at normal market prices, does not exceed HUF 500 million. The exemption threshold for the Local File and transfer pricing data reporting has also been raised from HUF 100 million to HUF 150 million.

At the same time, the cases for exemption from the Local File have been narrowed. The new transfer pricing regulation no longer provides an exemption for the gratuitous transfer or receipt of funds. In the case of cost allocations from independent parties, only transactions not exceeding HUF 500 million may be exempt from the obligation to prepare a Local File.

6. Free transactions

The new transfer pricing regulation stipulates that related-party transactions may arise even in the absence of invoicing between related parties. By codifying the possibility of reclassification, which already existed in the tax authority’s practice, it has been made clear that even in the case of seemingly independent transactions, there may be an obligation not only to prepare transfer pricing documentation but also to adjust the tax base.

7. Industry analysis in transfer pricing documentation

It is a simplification of administrative obligations that industry analysis may be omitted from transfer pricing documentation for transactions with a value not exceeding HUF 1 billion.

8. The new concept of low value-added services and other cases requiring simplified documentation

Following international transfer pricing guidelines, the new transfer pricing regulation redefines the concept of low value-added services with a more general legal definition than before, and the previous restrictions on transaction value and activity codes no longer apply. In the future, low value-added services – allowing for simplified transfer pricing documentation—if it is an activity that related parties do not provide to independent parties, does not require or create unique, valuable intangible assets, does not involve significant risk, is not part of manufacturing, assembly, distribution, financial, or insurance activities, and is not related to the extraction or processing of natural resources. Unlike the previous 3%–7% markup range, it is now expected that the actual profit margin be at least 5% when providing the service and at most 5% when using the service.

A simplified Local File may be prepared beside low value-added services, free transfers and receipts of funds, and cost allocations. In the latter two cases, there is no requirement to include the actual value of the profitability indicator. The simplified records do not need to show the relevant market, business strategy, method, tested party, assumptions underlying the choice of method, profitability indicators, benchmark, or comparability adjustments.

9. Possibility of aggregation

Transactions related to manufacturing, distribution, services, financial, and intangible assets cannot be consolidated.

10. Additional documentation requirements

The transfer pricing documentation must also include the tax residence of the related party. If the majority influence is indirect, the documentation must also include the intermediaries and the nature and extent of the majority influence in them. In order to ensure the highest possible degree of consistency between transfer pricing documentation and transfer pricing data reporting, the transaction description already known from the data reporting, the most characteristic TEÁOR code according to the 54-item list, and the precise characterization according to the criteria specified in the transfer pricing regulation must be used.

How can businesses prepare to comply with the new requirements of the Transfer Pricing Regulation?

• In order to avoid unnecessary transfer pricing risks, it is necessary to familiarize oneself with local transfer pricing regulations in detail and then update transfer pricing processes and strategies at affiliated companies in line with any changes.
• The segmentation and financial processes must be reviewed.
• Then the content of the transfer pricing documentation needs to be reviewed, and the documentation should be strengthened with a functional analysis and an analysis of the services.
• It is necessary to identify transactions that were previously exempt but will be subject to transfer pricing documentation/data reporting obligations in the future, including the transfer and receipt of funds free of charge and cost allocations exceeding 500 million HUF.
• The relevant data must be prepared: the segmented results of related companies, benchmark studies specific to Hungary, a more detailed functional analysis, a utility test for services, and provide more time to collect data that is more difficult to obtain (e.g., data on intermediaries in the case of indirect majority influence, financial data of foreign tested parties.)

The Transfer Pricing Business Unit of LeitnerLeitner is available to assist with all matters related to transfer pricing, including the preparation of documentation and benchmarks, compliance with tax authority reporting obligations, tax audits, as well as Advance Pricing Agreement (APA) and Mutual Agreement Procedure (MAP) proceedings.