In our newsletter, we summarized those changes in legislation passed last year that may have an effect from 1 January 2020 on the preparation of transfer pricing documentations, as well as other related obligations and procedures.

• In connection with the special provisions pertaining to tax avoidance practices, the definition of associated enterprises has been refined.
• Pursuant to the transposition of Council Directive (EU) 2016/1164 of 12 July 2016, there is a tax payment obligation on transfers of assets and business, as defined in Act LXXXI of 1996 on corporate income tax and dividend tax (CIT Act). In the course of such exit transactions, the basis of the tax liability is the difference between the market value and the calculated book value of the transferred assets and business, provided that the CIT Act does not otherwise impose an obligation to adjust the tax base for reasons giving rise to the exit.
• In case of non-cash contributions, the transfer pricing rules must be applied also in case of members (shareholders) gaining majority control as a result of the non-cash contribution.
• Such cases of share capital withdrawal where the taxpayer decides to transfer a business share acquired by it for consideration to is members free of charge, within one year, in proportion to their existing business shares, or to withdraw a business share with the application of the rules of share capital reduction, shall also be subject to transfer pricing documentation requirements.
• The retention period for documents related to the determination of tax liabilities on income or assets subject to treaties on the avoidance of double taxation will be increased to ten years.
• The information exchange between Hungary and the United Kingdom (CbCR – Country-by-country report) will remain in place after the exit of the latter from the EU.

In connection with case no. Kfv. I.35.550/2018/12 of the Curia, we call the attention of our clients using cash pooling that the Curia ordered the first-instance tax authority to conduct new proceedings in the case, and simultaneously also repealed the first-instance decision providing that the parent company could not collect deposits, and therefore, it could not earn interests after deposits in connection with such amounts, only loan interests. The press release of the Curia can be found at the following link:
https://kuria-birosag.hu/hu/sajto/kuria-hatarozata-szerint-transzferarazas-kerdese-az-alapul-szolgalo-tenyallas-fuggvenyeben

We hope that you found our summary useful. If you have any further questions in connection with this topic, we are at your disposal.