During the last years on the field of transfer pricing, mostly on international level there have been major initiatives as for the transfer price documentation duties alterations. Accordingly, in effect of the BEPS action plan initiated by OECD, this May also the local rules have been modified. Based on this, alongside the transfer pricing documentations the company groups are now obliged to do a CbC report (country-by-country report) also, which is intended to facilitate the success of the international information exchange.
Who is obliged to prepare the CbCR?
The CbCR concerns those Hungarian affiliated entities where the total annual consolidated group revenue exceeds EUR 750 million (or an amount in HUF approximately equivalent to the same, calculated with the monthly average Hungarian Central Bank exchange rate for January 2015) in the fiscal year preceding the reporting fiscal year. As the CbCR needs to be submitted for the first time referring for the year 2016, the revenue barrier should be considered for the year 2015, in the case of a fiscal year corresponding to the calendar year. In general, the parent company is obliged to prepare the report, but there may be different cases (eg.: there is no CbCR obligation in the parent entity’s country, the Hungarian member is the organization appointed as the parent entity.), thus the Hungarian member entities may become the reporting entities.
What does the CbCR consist of?
The most important contents/ elements of the CbCR are the followings:
- revenues (from related and unrelated parties),
- profit (loss) before income tax,
- income tax paid, income tax accrued
- stated capital,
- number of employees
- tangible assets.
Attention, deadlines already for 2017!
Notifications must be submitted
In accordance with the new laws, the Hungarian companies have report obligations as for their fiscal years 2016 and 2017 to the Hungarian tax authority until 31 December 2017 (in case the applied fiscal year corresponds with the calendar year.) This report should contain:
- Hungarian members’ name, registered address, tax identification number
- Entity status (ultimate parent entity, surrogate parent entity, independently obliged for report or not obliged for report – in this case the name and tax residence of the appointed reporting entity must be stated)
- last day of the fiscal year
The report can be submitted electronically to the tax authority. Furthermore, any change in the submitted data must be reported within 30 days.
CbCR filing obligation:
- In case the parent entity, or the surrogate parent entity is Hungarian
- The first CbCR must be filed for the fiscal year commencing on 1 January 2016
- Deadline: End of fiscal year + 12 months ( in the case of calendar year 31 December 2017)
- In case the Hungarian entity is appointed as a group entity separate from the parent entity
- The first CbCR must be prepared for the fiscal year commencing on 1 January 2017
- Deadline: End of fiscal year + 12 months ( in the case of calendar year 31 December 2018)
HUF 20 million default penalty
Failing to submit the report, late submission, or providing incorrect, false or incomplete information may be subject to a default penalty of up to HUF 20 million.
The introduction of this report to the local legislation is only the beginning, as in the year 2017 further significant changes are expected as for the transfer pricing documentation obligations.