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Transfer pricing risks primarily include the potential of a default penalty imposed in case of noncompliance with TP regulations.

Transparent inter-company transactions, consistent and reasonable pricing policy – this is what transfer pricing means to us.įailure to comply with Hungarian transfer pricing regulations may have severe financial consequences. More and more emphasis is laid on the enforcement of these provisions, also demonstrated by the increasing number of transfer pricing related tax audits and more prepared tax authorities. In recent years, this has also been followed by detailed regulations (i.e. “(When) conditions are made or imposed between two (associated) enterprises in their commercial or financial relations which differ from those which would be made between independent enterprises, then any profits which would, but for those conditions, have accrued to one of the enterprises, but, by reason of those conditions, have not so accrued, may be included in the profits of that enterprise and taxed accordingly.” In 1992, Hungary adopted transfer pricing legislation in the corporate tax act in line with the OECD Guidelines, acknowledging that the arm’s length principle (see below) is the international transfer pricing standard to be used.