New Transfer Pricing Decrees in Hungary
Hungary’s Decree No. 45/2025 formally mandates full traceability of segmented financial data and a strict benefit test. The Local File threshold increases to HUF 150 million for tax years beginning in 2026.
The Hungarian Ministry of Finance recently transformed existing administrative guidelines into binding legal requirements. Preparing transfer pricing documentation now demands strict alignment between your local statutory accounts and your pricing models. Tax authorities no longer accept generic, centrally prepared group benchmarking studies without extreme local adjustments.
Data from recent corporate setups shows widespread unpreparedness for the new mandatory benefit test. Proving that intra-group services provide a real, quantifiable economic benefit to the local Hungarian entity is now completely mandatory. Auditors will aggressively reject management fees if the taxpayer cannot demonstrate how those specific services improved local operations or profitability.
Your finance team must completely overhaul their accounting segmentation strategy. The decree strictly prohibits aggregating distinct transaction categories, such as manufacturing and distribution. Tracing revenues and costs directly to the specific related-party transaction at the operating profit (EBIT) level prevents severe compliance failures.
Poland’s Local File and Master File Thresholds
Polish regulations mandate a Local File when homogeneous transactions exceed PLN 10 million for goods and financing, or PLN 2 million for services. Master File requirements trigger at PLN 200 million in consolidated group revenue.
Poland calculates these strict documentation thresholds based entirely on net transaction values excluding VAT. Evaluating homogeneous transactions comprehensively across all related parties remains crucial to determine if the limits are breached. Splitting identical service contracts across multiple subsidiaries does not reset the reporting threshold.
We consistently see that foreign holding companies misunderstand the harsh deadlines imposed by the Polish tax administration. Management boards possess exactly ten months following the end of the tax year to finalize the Local File. The electronic TPR reporting form requires management board signatures and falls due at the eleven-month mark.
Transactions executed with entities located in designated tax havens face drastically reduced reporting limits. The threshold plummets to PLN 2.5 million for financial transactions and a mere PLN 500,000 for all other dealings. Dealing with offshore jurisdictions automatically invites severe scrutiny from the National Revenue Administration.
A valid Master File remains crucial for large capital groups operating across the Polish border. The domestic subsidiary must obtain this group-level documentation and translate key financial metrics if requested during an audit. Failing to present a cohesive global pricing strategy significantly increases the local tax adjustment risk.
| Transfer Pricing Rule (2026) | Hungary (Decree 45/2025) | Poland (CIT Act) |
|---|---|---|
| Local File Threshold | HUF 150 million per transaction | PLN 2M (Services) / PLN 10M (Goods) |
| Master File Exemption | Related transactions < HUF 500M | Consolidated group revenue < PLN 200M |
| Safe Harbour (Services) | Strictly 5% mark-up | Strictly 5% mark-up |
| Reporting Form Deadline | Submitted with corporate tax return | 11 months after tax year-end (TPR-C) |
| Financial Segmentation | Mandatory at the EBIT level | Required for complex restructuring only |
Safe Harbour Rules for Routine Services
Safe harbour provisions exempt routine intra-group services from complex benchmarking requirements if margins strictly hit 5%. Both countries demand detailed cost allocation documentation to legally qualify for this protection.
Utilizing the low value-adding services (LVAS) safe harbour drastically reduces your annual compliance costs. Polish and Hungarian rules align closely with OECD guidelines, limiting the acceptable markup to exactly 5%. Neither party can deviate from this absolute margin limit without abandoning the safe harbour completely.
To secure this exemption, the service must qualify as strictly routine and supportive in nature. Core business activities driving the group’s primary revenue generation automatically fail the statutory definition. IT support, human resources, and basic accounting functions perfectly fit the protected categories.
In our practice tracking CEE markets, tax inspectors routinely disqualify safe harbour claims due to missing cost allocation keys. Maintaining a precise mathematical breakdown proving how indirect costs were distributed among group members is absolutely necessary. Simply charging a flat percentage of global revenue immediately invalidates the entire tax exemption.
Poland also extends safe harbour protection to basic financial transactions, specifically intra-group loans. The Ministry of Finance limits the borrower’s maximum margin to 2.6 percentage points above the designated base rate. Total related-party debt cannot exceed PLN 20 million for the entity to utilize this specific financial shield.
Surviving Cross-Border Tax Audits
Defending against concurrent Polish and Hungarian audits requires perfectly synchronized Local Files and robust DEMPE analysis. Any discrepancy between your local documentation and centralized Master File guarantees heavy tax penalties.
Tax administrations across Central Europe now actively exchange pricing data through advanced automated reporting mechanisms. An auditor in Warsaw instantly sees the profitability metrics reported to Budapest. Inconsistencies in functional characterizations between different jurisdictions immediately trigger joint cross-border investigations.
The updated Hungarian decree heavily emphasizes the DEMPE framework for intellectual property transactions. Clearly documenting who develops, enhances, maintains, protects, and exploits the intangible assets protects your deductions. Claiming royalty deductions locally while the foreign parent assumes zero actual risk rarely survives modern tax scrutiny.
Submitting the mandatory Polish TPR form exposes your exact operating margins directly to an algorithmic risk assessment tool. The system flags your entity automatically if reported profitability falls below the median of independent peers. Proactive adjustments prior to year-end closing remain the best defense against algorithmic targeting.
Penalties for documentation failures crush corporate cash flows instantly. Poland imposes a baseline 10% penalty rate on any assessed tax base adjustment, jumping to 30% for a complete lack of documentation. Securing binding Advance Pricing Agreements (APAs) provides robust immunity against these aggressive retroactive assessments.
Frequently Asked Questions (FAQ)
What is the exact deadline to submit the TPR form in Poland in 2026?
The TPR form must be submitted electronically within 11 months after the end of the tax year. For a standard calendar year ending December 31, 2025, the strict deadline is November 30, 2026.
Can I prepare my Hungarian Local File in English?
Yes. The new Hungarian transfer pricing decree explicitly allows taxpayers to prepare documentation in Hungarian, English, or German. Tax authorities no longer mandate immediate translation upon routine requests.
Does a Polish branch of a foreign company need transfer pricing documentation?
Yes. A registered Polish branch functions as a separate entity for transfer pricing purposes. If allocated revenues or costs exceed the statutory PLN 2 million threshold, full local documentation becomes completely mandatory.
How does Hungary treat loss-making companies in benchmarking studies?
The 2026 decree strictly forces you to exclude companies operating at a loss for two consecutive years from your comparable sample. Local Hungarian or regional V4 comparables take absolute priority over broad pan-European data sets.
