Grant Thornton Hungary Newsletter

Who will prepare the Transfer Pricing Documentation of your Company for the 2018 tax year?
 

From the tax year starting 1 January, 2018 the transfer pricing documentation consists of two parts: the main document (Master File) and the local document (Local File), that is both of these two documents will be requested by the tax inspectors during the examination of this tax year.

In our view, the parent companies of the multinational entities are the most adequate units to prepare the Master File or have it prepared in appropriate quality with the involvement of an external advisor. The due date of completion of the Master File is not the same as that of the Local File, but it is a much later date, however, it must be prepared not later than within 12 months from the date of the last day of the tax year of the Hungarian subsidiary.

Given, that 12 months could be considered as quite a long time and one could think that it is yet not the time to deal with this issue, nevertheless, we encourage our customers to contact their parent companies and query about their concept relating to the preparation of the Master File. Since, it may happen that the parent company is not obliged to prepare a Master File (for instance, when the parent company is a US-resident ultimate parent company). In such a case, the execution of the tasks to be performed in connection with the preparation of the documentation rests with the Hungarian subsidiary company, if it would like to avoid the 2 million HUF default fine that may be imposed for the lack of the documentation.

Below, please find an exemplary list or a brief summary of the information that need to be collected in such a case:

• the organisational structure of the company group (multinational enterprise group (MNE group),
• a description of the MNE group,
• the presentation of the factors having impact on the business profit (drivers of business profit),
• a description at least of 5 largest products/services of the group,
• a description of the main geographical markets,
• the presentation and description of the supply chain,
• the presentation and description of important arrangements among the members of the group, including the presentation of the related transfer pricing policies,
• a functional analysis, determination and presentation of the functional profile of the group member entities,
• a presentation of main business restructuring transactions taking place within the group,
• a presentation of transactions relating to acquisitions; or divestitures, sales of business segments, business units,
• the presentation of the group’s intangibles,
• the presentation of the transfer pricing policies related to R&D,
• a description of the intra-group financing activities and the transfer pricing policy related to financing,
• the presentation of the group’s consolidated financial statements,
• the list of the group members’ transfer pricing arrangements, advance pricing agreements, or other taxation arrangements, etc.

FIt can be seen that gathering of the above mentioned information is quite time consuming, since the competent person being responsible for the information or the person who is authorised to provide information about these sensitive data must be found either at the headquarters within the company group, or at the individual group member entities. If this is the case, or if you would like to have the local file prepared by us, or have the already made documentation reviewed from the point of view of the Hungarian legislation, then, please contact your consultant partner at Grant Thornton.