On 2 December 2025, the Hungarian Ministry for National Economy (NGM) published the draft decree on transfer pricing documentation and data reporting, aiming to completely overhaul the currently effective Decree 32/2017 (X.18.) NGM. The proposal goes far beyond technical clarifications: it introduces substantial changes that will significantly impact Hungarian transfer pricing practices. Below is a summary of the key amendments in the new draft transfer pricing decree and their expected implications.
New structure, new focus: transformation of regulatory objectives
The draft transfer pricing decree indicates a conceptual change already in its title: the focus is clearly on the integrated management of documentation and data reporting. The preamble sets out the objectives in detail: compliance with OECD Transfer Pricing Guidelines, ensuring a reasonable level of tax administration, and supporting risk analysis by the tax authority.
Significantly expanded and revised terminology framework
The proposal completely restructures the definitions section. Key highlights:
- Definition of low value-adding services undergoes a fundamental change: the TESZOR code-based list is abolished and replaced by a detailed, condition-based definition.
- New definitions introduced, such as gross profit margin, net markup, net profit margin, tested party, and return on operating revenue. While these terms are not new to transfer pricing practice, they will now be explicitly included in the decree.
- The draft transfer pricing decree clarifies the definitions of toll manufacturing and contract manufacturing by providing a more precise description of their role in the value creation process.
- For determining a related transaction, the actual economic substance prevails, meaning that a transaction may be relevant for transfer pricing purposes even without invoicing.
New value thresholds and revised exemption rules
Compared to the current regulation, several thresholds will change, affecting the documentation and reporting obligations of many companies:
- New threshold of HUF 500 million: if the total consideration of the taxpayer’s related transactions does not exceed this amount, the taxpayer is exempt from preparing the master file.
- Exemption from local file preparation: the general threshold increases from HUF 100 million to HUF 150 million.
- For cost recharges, a HUF 500 million limit is introduced. Under the new draft transfer pricing decree, only those cost recharges are exempt from local file preparation whose arm’s length value does not exceed HUF 500 million annually.
- A major change: free transfer of funds will no longer be fully exempt from local file preparation.
Simplified local file – a new concept
The new draft transfer pricing decree introduces a simplified documentation system. A simplified local file may be prepared for low value-adding services under specified conditions, for free transfers of funds, and for transactions recharged at unchanged prices, provided they meet the conditions set out in the decree. The simplified local file contains less information but still substantiates the arm’s length price.
New rules on transaction aggregation
The general rules on aggregation remain unchanged. However, a new provision states that certain transaction types – manufacturing, distribution, services, financial, and intangible transactions – may no longer be aggregated with each other.
Significantly more detailed documentation requirements
The transactional section of the local file will be substantially expanded:
- A more detailed functional and risk analysis must be prepared.
- For services, a benefit test becomes mandatory.
- The transaction name must be provided according to the transaction type categories used in data reporting and supplemented with a TEÁOR code where necessary.
- When presenting the related party relationship, all intermediate entities and the nature and extent of majority control must be listed if such control exists indirectly.
Segmented profit and loss statement
The amendment codifies a principle already applied in transfer pricing practice: for profitability analysis of activities affected by related transactions, all relevant revenues, costs, and expenses of operating profit must be allocated at segment level (linked to the related transaction). Items connected to multiple activities must be split using a reasonable method, and the allocation must be complete – no unallocated items may remain.
Significant changes in database search rules
The new draft transfer pricing decree also sets out the fundamental rules for database searches based on company-level data, which are widely used in practice, without mandating the use of any specific database. At the same time, it allows taxpayers to deviate from certain rules of database searches in justified cases.
A database search based on company-level data must meet at least the following requirements:
- Companies must be individually identifiable.
- No inactive (non-operating) companies must be included among the comparables.
- Only independent companies must be included in the sample.
- Data must cover the three years preceding the tested year.
- Financial data must be available for all years considered.
- Companies that are loss-making for at least two consecutive years, or for more than half of the years considered at the operating profit level, must be excluded.
- Screening should primarily be based on primary activity codes, avoiding keyword searches.
- Companies must operate in a geographic area comparable to that of the tested party.
- Companies must also be comparable based on their website information.
If the tested party operates domestically, the comparable geographic area must be determined in the following order: 1. Hungary, 2. V4 countries, 3. V4 plus Bulgaria, Estonia, Croatia, Latvia, Lithuania, Romania, and Slovenia, 4. EU27, 5. Broader regions, only if the sample size is insufficient.
Data reporting: new transaction types
The structure of transfer pricing data reporting will also partly change. The number of transaction types will increase from 53 to 54, and several categories will receive more detailed definitions.
Language of documentation
An important change is that while documentation could previously be prepared in languages other than Hungarian, the new draft transfer pricing decree restricts this: documentation, its amendments, and supporting materials may only be prepared in Hungarian or English going forward. This standardizes language requirements but limits previous practice.
When does it apply?
According to the proposal, the new decree:
- will be mandatory for tax years starting in 2026,
- but may optionally be applied for tax years starting in 2025.
This means that when preparing documentation and data reporting for 2025, companies must already decide which set of rules to follow.
The transfer pricing consulting team of WTS Klient Hungary has extensive experience in interpreting transfer pricing regulations and preparing documentation. We are ready to assist clients in assessing how the new draft transfer pricing decreewill affect their company. As a member of the WTS Global transfer pricing consulting team, we also offer solutions for all transfer pricing-related issues at an international level. Feel free to contact our experts!
This article provides general information and does not constitute advice.
