• Transfer pricing

Transfer pricing


Prices applied to transactions between related parties are called transfer prices.

While the prices applied to transactions between unrelated parties are shaped by the market, those applied to transactions between related parties are occasionally subject to the business interests of the owners and the bargaining positions of the parties.

Within the same company group revenues can be reallocated, as a result of which taxable income is stated in the books of a company that is subject to a low rate of tax. However, today this poses a significant tax risk as tax audits also cover transfer prices, and those paying tax on a tax base other than a tax base determined on the basis of market prices risk a sizeable tax penalty.

Although international statutory regulations capable of tackling the issues of double taxation and double non-taxation have been around since the 1950s, tax base adjustments warranted by prices other than market prices applied by related parties first featured in Hungarian legislation, namely in the Corporate Tax Act, in 1992. The determination of an arm’s length price was thrust into the forefront of attention by the publication of Ministry of Finance Decree no. 18/2003 (VII. 16.). The entry into force of the decree also marked the adoption of a documentation obligation in Hungary.

Pursuant to the decree, Hungarian taxable persons shall incur a documentation obligation if they supply services and/or goods on the basis of an oral or written agreement concluded with their related parties in the tax year at issue.

Currently, the requirements laid down in MoF Decree no. 22/2009 (X.16) last modified on 21 July 2013 must be observed when transfer pricing records are made.

Tax authority audits have focused on transfer pricing to an increasingly large extent over the past years, and continuous changes in regulations and the fine-tuning of the criteria have been keeping that focus sharp.



  • No internal processes applicable to financial settlement between related parties have been put in place or the individual group members cannot exert direct influence on intra-group prices.
  • Owing to group hierarchy, only scanty information is available on the pricing of purchased services or goods, and obtaining data is difficult.
  • An intra-group transfer pricing policy based on the assumption of a stationary economy, failing to keep up with changes in the economic environment.
  • Central accounting adopted by the parent company fails to fully conform to strict Hungarian regulations.
  • The drafting of transfer pricing documents is a time-consuming task which requires co-operation between members of the staff in various areas of the company.
  • Changes in pricing, a sudden change in net or gross mark-ups and the introduction of a new supply chain require special attention when pricing is substantiated.
  • There are no comparable data on the corresponding transactions of unrelated parties that could be used in respect of the company’s individual products and services.
  • If the circumstances of a transaction change materially, the related document must be prepared again using a methodology that suits such changed circumstances.
  • Owing to changes in the financial indicators of the transaction under review and modifications in comparable data, records must be reviewed, updated and amended each year.
  • Contribution to the financing of the company group’s central functions is an intra-group obligation; however, the determination of the degree and sharing of such contribution may encounter difficulties.


  • A sizeable default penalty (HUF 2 million per contract) for inadequately prepared transfer pricing documents can be imposed.
  • Modifications in the applicable national (domestic) legislation and international regulations quoted as a secondary source of legislation must be monitored on an on-going basis.
  • Transfer pricing records are a key focus of tax authority audits. The tax authority has established a separate department expressly for this purpose.
  • Transfer prices that are different from arm’s length prices may lead to the company’s incurring a tax shortfall affecting several tax types (e.g. corporate tax, VAT and business tax).


  • Working out a corporate transfer pricing policy, a deliberate planning of pricing prior to the actual conclusion of a transaction.
  • Continuous collection and recording of data on pricing between related parties.
  • Drafting of a detailed written contract describing pricing in respect of related party transactions.
  • Collection of rationales underpinning the compliance of intra-group pricing from a tax perspective.
  • Adapting central records to domestic (national) statutory requirements.
  • Making the most of possible streamlining (shared records; records of low added-value intra-group services).
  • Requesting advance pricing arrangements (APA).


Based on our analysis of the pricing adopted by related parties, we offer customised and cost efficient solutions to our clients:

  • Planning and analysis of transfer prices
  • Preparing transfer pricing maps
  • Expressing an expert opinion of contracts between related parties
  • Keeping and reviewing transfer price records
  • An analysis of the transactions already in progress between related parties
  • Conduct of comparable company analyses using international databases
  • Establishment of an arm’s length range
  • Preparation of an advance pricing arrangement, participation in the procedure
  • Support during tax authority procedures
  • Planning of the pricing of intangible assets
  • Putting forward of a proposal for the company group’s corporate structure.


Our consultant group has been engaged in preparing records since the adoption of the obligation to document arm’s length prices.

The experts specialising in transfer pricing work in close co-operation with the staff specialising in national and international taxation issues, which enables us to analyse the impact of the transactions within the individual company groups on the various tax types in a complex manner. Therefore, at request, we can assist with the planning of transfer prices and the conduct of an ex post analysis, for taxation purposes, of the transactions.

Our consultants follow through a number of tax authority proceedings, have up-to-the minute knowledge regarding tax authority practice and the related changes.


As part of BDO’s international network we liaise with our partner offices, which provides the possibility of speedy discussions on international transactions.

Click here to access and download our documents related to transfer pricing in an electronic format.

You can contact us at the following contact points or at tax@bdo.hu.