As the holiday season approaches, most companies are already deep in preparations for year-end closing: financial planning, annual reports, and setting goals for the upcoming year. However, amid the year-end rush, let’s not forget about transfer pricing obligations either!
The last months of the year are especially crucial when it comes to transactions between related parties. Now is the right time to carry out potential year-end adjustments, update or prepare the Master File, and submit the Country-by-Country Report (CbCR) and the related notification form. Meanwhile, reviewing the registration and deregistration obligations regarding related parties is also essential. We have summarised the key tasks in four main points.
1. Year-end transfer pricing adjustment
According to the Hungarian tax authority’s (NAV) audit plan, transfer pricing continues to receive special attention, particularly for companies operating at a loss or with low profitability. Therefore, to ensure legal compliance and minimise tax risks, it is advisable to review transfer prices at year-end and make adjustments if necessary.
The applied prices must comply with the arm’s length principle in accordance with the Hungarian Corporate Income Tax Act and Decree No. 32/2017 (X.18.) of the Hungarian Ministry for National Economy. If the prices applied between related companies fall outside the arm’s length range, the taxpayer must apply an adjustment.
Year-end transfer pricing adjustments can be made:
- with an invoice related to the original transaction,
- at the pre-tax profit level as part of the year-end transfer pricing adjustment, for which it is typically sufficient to issue an accounting document, or
- by modifying the corporate income tax base.
2. Updating or preparing the master file
Another key year-end transfer pricing obligation is updating or preparing the Master File. Since the 2018 tax year, taxpayers required to prepare a local file must also have a master file. The master file presents the entire corporate group and its key intercompany transactions, while the local file focuses on the arm’s length nature of the taxpayer’s specific related-party transactions.
According to Hungarian regulations, the affected taxpayer must prepare the master file by the deadline applicable to the group’s ultimate parent company or, at the latest, by the end of the 12th month following the tax year. For calendar-year taxpayers, this means 31 December 2025 for the 2024 tax year.
If the ultimate parent company is resident in Hungary, the deadline for preparing the master file coincides with the deadline for the local file – for calendar-year taxpayers, this was 31 May 2025 for the 2024 tax year. The same deadline applies if the parent company or the corporate group is not required to prepare a master file, and the Hungarian taxpayer must prepare it instead.
Failure to provide the master file upon request during a tax audit may result in a default penalty of up to HUF 5 million. In case of repeated non-compliance, the maximum penalty increases to HUF 10 million.
3. Fulfilling the CbCR obligation
Among year-end transfer pricing obligations, Country-by-Country Reporting (CbCR) plays a particularly important role. Taxpayers subject to this obligation must submit the required data and notifications to the Hungarian tax authority by 31 December 2025.
CbCR obligation applies to multinational enterprise groups operating in at least two countries with consolidated group revenue of EUR 750 million or more in the previous fiscal year.
Typically, the ultimate parent company submits the report, but this obligation can be delegated to another group member. Even if the Hungarian entity is not the reporting entity, it must notify the Hungarian tax authority accordingly. In this case, taxpayers must indicate on form 25T201T which group entity is responsible for reporting and in which country.
4. Reviewing related party registration and deregistration obligations
To ensure full compliance with transfer pricing regulations, it is essential to:
- carefully identify related-party relationships,
- keep the register of related parties up to date, and
- regularly verify that all registration and deregistration obligations towards NAV have been fulfilled for each related party.
Failure to meet the reporting obligation to the NAV may result in a default penalty of up to HUF 1 million.
Using the T201T form, taxpayers are required to report:
- their related parties’ data,
- any changes in related-party information, and
- the termination of a related-party relationship.
Reports must be submitted within 15 days, starting from the date of the first contract in the case of a new related party. Data reporting is not only a legal requirement but also a tool to reduce tax risks.
As Christmas preparations and year-end tasks compete for our attention, it is worth taking the time to review and organise year-end transfer pricing obligations – so your company can start the new year not only in good spirits but also fully compliant from a tax perspective. Our transfer pricing advisers are available to assist you in preparing documentation, reviewing and fulfilling your company’s transfer pricing obligations, and addressing any questions that may arise.
This article provides general information and does not constitute advice.
