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Transfer pricing

The tax administration (NAV) nowadays puts more and more emphasis on the inspection of transfer prices, applied by related companies. The Hungarian Corporate Income Tax law stipulates that in the case where related parties are not applying arm's length prices in the transactions between them, they are required to modify their tax base accordingly. Furthermore, they’re required to have documentation on the transfer prices used in their joint transactions, which must meet certain requirements regarding its form and content.

Since 2005, our company has been regularly participating in preparing transfer pricing documentations and in inspecting their conformity with the regulations. This way our experts have been gained extensive experiences in this field.


The most typical stages of a NAV inspection on transfer prices are the following:

-  Existence of transfer pricing documentation(s)

-  Conformity with theformal requirements {are they meeting the specifications of the decree on transfer pricing documentation?}

-  Inspection regarding the content of the documentation {whether the related parties have applied arm’s length prices in their transactions?}


On 1st January 2007 the Hungarian legislation introduced the Advance Picing Agreement (APA), where the tax administration determines the applicable arm’s lenght price on the taxpayer’s request. The APA binds the tax authority for a certain period of time given that the characteristics of the deal taken into account during the decision-making remain unchanged. The request on the assessment of the arm’s length price can be submitted only in relation with future transactions. It should contain the followings:

-    the method used for determining the arm’s length price

-    the facts and circumstances supporting the prices

-    the arm’s length price (range of prices).


It is important to mention that the process has a fee, however, it remarkably decreases the tax risk of pricing transactions between related parties.

We have participated in the preparation and review of several transfer pricing documentations since 2003, when the first relevant regulation came into effect. We have also been involved in the preparation and submission of APA-requests, which gave our experts solid experience in this field.