Ministry of Finance Guidance on the New Transfer Pricing Documentation Decree

Documentation Thresholds

The new transfer pricing documentation decree introduces new thresholds aimed primarily at reducing taxpayers' documentation burdens. Under the previous rules, if the annual consideration of at least one related-party transaction reached the documentation threshold (HUF 100 million until 2025), the taxpayer was also required to prepare a Master File. By contrast, from 2026 onwards, a Master File will only be required where the aggregate arm’s length value, exclusive of VAT, of related-party transactions subject to Local File documentation exceeds HUF 500 million.

The general transaction threshold applicable to both Local File documentation and transfer pricing disclosure obligations increases from HUF 100 million to HUF 150 million.

The guidance also contains a summary table regarding transfer pricing documentation and disclosure obligations for various transaction types and provides additional practical guidance on a transaction-by-transaction basis.

 Prohibition on amending transfer pricing documentation

One of the most interesting conclusions of the guidance concerns so-called compliance audits, based on which taxpayers could no longer amend their transfer pricing documentation once the audit has commenced. Previously, legal interpretation was not uniform, several experts took the position that the prohibition on amendments only applied in the case of full-scope tax audits aimed at retrospective revision of tax returns. This clarification raises several practical issues, therefore taxpayers should carefully reconsider whether their existing documentation practices have been appropriate.

Language and retention of transfer pricing documentation

From 2026 onwards, transfer pricing documentation can no longer be prepared in French. Only Hungarian, English and German documentation will be accepted. Furthermore, in comparison with the general 5-year statute of limitations period, taxpayers will – as a main rule - be required to retain the Local File and its supporting appendices in a readable format for 8 years.

Master file

The Ministry of Finance guidance provides a detailed overview of the mandatory contents of the Master File and includes practical examples for each section. Taxpayers may therefore wish to review whether the group-prepared Master File meets these criteria and practical expectations.

New rules on combining transactions

The new decree continues to determine whether transactions may be combined based on the side of the transaction on which the taxpayer acts, whether being a supplier or customer. The prohibition on combining intra-group transactions in opposite flows implies that transactions affecting revenues and expenses may not be combined for documentation purposes. For example, related-party purchases of raw materials and services used for manufacturing for related parties cannot be documented within the frame of the same Local file.

From 2026 onwards, the rules on combining are further expanded by stipulating that transaction types belonging to the following five categories may not be combined with each other: manufacturing transactions, distribution transactions, service transactions, financial transactions and transactions involving intangible assets.

Formal requirements of the Local file

Under the new rules, the mandatory content requirements of the Local File are expanded with several elements that are essential for the establishment of the arm’s length remuneration, while existing requirements are also clarified.

1.     Transaction type

From 2026 onwards, the Local File must contain the transaction name used in transfer pricing disclosure that is available from the transaction list, as well as the TEÁOR (NACE) code most relevant for the transaction. The guidance provides detailed practical instructions on this requirement.

2.     Functional analysis

The new decree details the functions and risks expected to be described in the transfer pricing documentation as part of the functional analysis. The list also covers the DEMPE functions related to intangible assets and the associated risks.

3.     Benefit test

Going forward, a benefit test will become mandatory for services received from related parties and must be documented accordingly. The purpose of the test is to assess whether the service created an actual economic value for the recipient, thereby supporting the tax deductibility of the related cost or expense. The tax authority's objective is clear: taxpayers should precisely understand and be able to substantiate why the services are received and paid for.

The guidance provides the following practical considerations for performing the benefit test. Firstly, the existence of the service must be demonstrated for which the agreements and invoices alone are not sufficient, therefore taxpayers are highly suggested that they should collect and retain evidence such as e-mail correspondence, reports, analyses, presentations, attendance records or time sheets.

According to the guidance, the Local File should address:

1. Identification of the local needs: What competencies or resources were lacking at the recipient entity that were – as a consequence - substituted by the service provider?
2. Operational integration: How were the services incorporated into the recipient's business processes?
3. Substitutability: What market alternatives could have been used if the service had not been received from another group entity?

The guidance, similarly to the documentation decree itself, emphasizes that a benefit test must also be performed for financial services such as intercompany loans. This raises practical issues, including whether a debt vs. equity test becomes a mandatory element of the transfer pricing documentation.

The detailed benefit test, as a mandatory content element, conveys a clear message: service recipients must fully understand the nature of the services for which they are paying and whether those services generate real benefits. Consequently, a substantially closer and real-time intra-group cooperation is recommended, taxpayers should already review now, well before year-end, whether they actually possess sufficiently detailed supporting documentation for intra-services received, as well as if they are able to provide supporting documentation to the related party service recipients if they are rendering the services themselves.

When interpreting Hungarian expectations regarding intra-group services and benefit test, it is also worth monitoring the ongoing revision of Chapter VII of the OECD Transfer Pricing Guidelines on intra-group services. Comments to the public consultation draft could have been submitted between June 1 and July 22, 2026, these are available on the OECD website[1], including contributions from the Forvis Mazars working group. The next stage of the revision is expected in November 2026. As the Ministry of Finance guidance does not fully match all aspects of the OECD's preliminary proposals, further clarification of the Hungarian guidance may become necessary once Chapter VII is finalized.

4.     Szegmentálás

Under the new decree, the segmentation of financial and profitability indicators becomes mandatory from a documentation perspective as well. This means that where a taxpayer performs multiple business activities, using company-wide financial data may no longer lead to reliable conclusions, therefore revenues and expenses relating to specific transactions or activities must be separately recorded and documented. For example, if a taxpayer carries out both manufacturing and distribution activities, company-wide financial data must be segmented accordingly.

According to the guidance, segmentation is expected for the following types of activities: toll manufacturing, contract manufacturing, licensed manufacturing, full risk manufacturing, agency distribution, commissionaire distribution, limited risk distribution, full risk distribution, service provision as a routine entity, service provision as an entrepreneurial entity. In practice, a deeper segmentation is generally not expected, although this should be assessed on a case-by-case basis.

The guidance also reiterates a requirement that already existed under previous rules: where a one-sided transfer pricing method is applied and the Hungarian taxpayer is selected as the tested party, the Local File must demonstrate how the financial data used in the analysis can be tied to the taxpayer's financial statements.

This means that taxpayers must be able to trace relevant revenues and costs serving as the basis for invoiced fees, tested profitability ratios, mark-up calculations, as well as the related general ledger account numbers, cost centers, project numbers and allocation keys.

The new decree extends the segmentation and financial reconciliation requirements to situations where a Hungarian company receives invoices from a foreign related party, and the profitability or mark-up of that foreign entity is tested. As a result, it is no longer sufficient to merely state that the service provider charged a cost-plus 5% mark-up. Taxpayers must also demonstrate how the service fee is derived and how the relevant revenues and costs may be tied to the service provider’s financial statements. For example, in the case of centralized management services, detailed cost breakdowns and allocation keys must be obtained from the parent company.

Given these new rules, taxpayers should already investigate whether their accounting and ERP systems are capable of segmenting revenues and costs appropriately depending on to what business activities those may be connected. Where a direct allocation is not feasible, reasonable and rational allocation keys should be identified and implemented. Taxpayers will also need to obtain information from group companies that may have been shared only during tax audits. Obtaining such information during an audit will no longer be sufficient, as these requirements will be mandatory from a documentation and compliance perspective as well. These discussions should begin as early as possible, ideally before year-end, so that taxpayers will not need to encounter negative surprises in May (in the case of taxpayers with a calendar business year), at the time of preparing the transfer pricing documentation. As the Ministry’s guidance highlights, this topic should be treated as an ongoing operational task throughout the year.

Low value-adding services

Previously, low value-adding services were linked to specific industry codes (TESZOR), and the remuneration was required to be based on cost plus a mark-up of 3% to 7%.

The new rules instead seek alignment with the OECD Transfer Pricing Guidelines. Accordingly, qualifying services should not create valuable intangible assets, should not constitute high value-adding activities, should not be connected with manufacturing or distribution activities and should not relate to financial transactions.

However, the legislation introduces a significant deviation from the OECD approach that will require extensive intra-group communication. Specifically, neither the taxpayer nor any of its related parties may provide the same service to third parties. For large multinational groups comprising hundreds of entities, it may be challenging to verify that none of the group entities actually provides the same service externally.

Benchmarking studies

The new decree also introduces key changes regarding comparable company searches. Moving beyond the guidance previously available on the Hungarian Tax Authority’s website[2], the rules on comparable company searches have now been elevated to legislation level.

A key requirement is that the companies included in the database search must have their own identification numbers. Consequently, industry statistics alone cannot be applied. This restriction also limits the databases that taxpayers may use, since certain databases do not satisfy this requirement.

The Ministry's guidance explains in detail the acceptable order of geographic screening criteria, as well as the guidance provides further recommendations regarding mandatory and optional search steps. Most importantly, if a benchmarking study prepared centrally by a corporate group does not comply with the criteria prescribed by Hungarian legislation, the Hungarian tax authority may reject the benchmark and may impose a penalty of up to HUF 5 million.

For this reason, taxpayers should already begin preparations immediately and review jointly with their group headquarters whether the existing benchmarking practices align with the new rules or whether separate Hungarian-compliant benchmarking studies will be required in addition to centrally prepared analyses.

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In light of the matters discussed above, enhanced cooperation between taxpayers and advisors is strongly recommended. Early preparation is particularly essential given the new legislative requirements.

Should you require advice or wish to engage our expert support in the preparation of your transfer pricing documentation, our experienced transfer pricing team is at your disposal.

[1] https://www.oecd.org/en/events/public-consultations/2026/06/public-consultation-on-taxation-revisions-to-chapter-vii-of-the-oecd-transfer-pricing-guidelines.html?utm_term=ctp&utm_medium=social&utm_source=linkedin&utm_content=Publicconsultation%2CCTPcampaign%2C3-CTP%2CTransferPricing

[2] https://nav.gov.hu/ugyfeliranytu/nezzen-utana/tudjon_rola/Vallalati_szintu_adat20210528