The OECD (Organization for Economic Cooperation and Development has published it’s 13th BEPS (Base Erosion and Profit Shifting) action plan. Some of it’s most important recommendations concern transfer pricing.

The extensive material introduces more changes on the field of transfer prices, but the most significant change affects the transfer pricing obligation itself.

According to the proposal (which the OECD recommends to use from 2016 on in case of company groups with consolidated group revenue equal to or exceeding EUR 750 million, or it’s equivalent in local currency in the business year previous to the current year) suggests the introduction of a three-level documentation obligation. The parts of the document would be the masterfile, the local file, and the so called country-by country (CbC) report. The masterfile contains information for the whole company group, the local file for the local member company while the CbC report means a reporting obligation for the parent company. The CbC contains a documentation including information regarding all the countries and the operations in these countries in which the parent company performs business activities.

We point out that the Hungarian (and the European) regulation has already known (and made possible) making documentations containing masterfiles, so the CbC report constitutes the real innovation of the action plan, which might be shared by the tax authorities of the respective countries within the framework of an internal data exchange between them, in order to elevate the level of transparency.

Due to the mentioned threshold limit of 750 million Euros, Hungarian companies might not be affected by these possible changes, because according to the plans, the preparation of the CbC report would be the parent company’s responsibility. However the introduction of a CbC reporting obligation can increase the administrative burden of the company group as a whole, and the set guidelines can serve as a rule of thumb for future regulation for transfer pricing.