The National Tax and Customs Administration of Hungary has released its strategic audit plan for the year 2024, signaling an emphasis on transfer pricing. This plan highlights the administration’s commitment to ensuring compliance and fairness in cross-border transactions, particularly in key sectors such as automotive and pharmaceuticals.
A noteworthy inclusion in the audit plan is the use of data from the recently introduced transfer pricing reporting requirement. This data, submitted for the first time last year, will serve as a critical tool for risk assessment and audit selection. Any discrepancies or potential tax liabilities identified in these submissions may trigger focused transfer pricing audits during the course of 2024.
In alignment with this approach, the audit plan outlines several specific areas of focus:
- Related Party Transactions in the Automotive Industry: Given the high volume and complexity of transactions within this sector, the administration will conduct high-intensity audits to ensure compliance with transfer pricing regulations.
- Transfer Pricing Audits in the Pharmaceutical Sector: Recognizing the unique nature of transactions in pharmaceutical entities, specialized audits will be carried out to verify adherence to transfer pricing norms.
- Advance Pricing Agreements (APAs): The administration will verify compliance with the terms and conditions stipulated in APAs, ensuring that transfer pricing arrangements align with agreed-upon methodologies.
- Transfer Pricing Data Reporting: Scrutiny will be placed on the accuracy and completeness of transfer pricing data submitted by taxpayers for the previous financial year.
- Country-by-Country Reporting and Risky Transactions: Cross-border arrangements will undergo thorough examination, with a focus on transactions identified as potentially risky based on country-by-country reports.
- Audits of Loss-Making or Low-Profitability Taxpayers: Entities engaged in intra-group manufacturing activities and experiencing financial challenges will be subject to transfer pricing audits to prevent potential tax avoidance.
- Related Party Transactions Involving Intangible Assets: Given the value and significance of intangible assets in modern business transactions, audits will ensure appropriate pricing strategies are employed.
- Financial Transactions Between Related Companies: Loans and other financial dealings between related entities will be scrutinized to prevent transfer pricing manipulation.
Considering the heightened scrutiny and increased default penalty of HUF 5 million per transaction, taxpayers are urged to ensure their transfer pricing documentation is comprehensive and accurate. This includes detailed analyses and correct submission of transfer pricing data for the preceding financial year.
In light of these developments, tax professionals must remain vigilant and proactive in addressing transfer pricing obligations. Assistance from experts such as TPA Global, who are well-versed in transfer pricing methodologies and compliance requirements can prove invaluable in navigating this complex landscape and mitigating potential risks. Our team is ready to provide comprehensive assistance and guidance for those seeking support in fulfilling their transfer pricing documentation and reporting obligations.
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