Preparing for the new TP regulations– Part 3

The new transfer pricing decree issued by the Ministry for National Economy has entered into force, introducing significant changes to documentation and administrative requirements. The purpose of the new decree is to reduce administrative burdens, curb tax avoidance, and support tax audits. Due to the increasing penalty risks observed in recent years, the new regulation once again draws attention to the critical importance of transfer pricing. For companies, a comprehensive review of their current documentation practices and alignment with the new rules is practically unavoidable. The provisions of the decree apply to tax years starting in 2026; however, taxpayers may choose to apply the new rules already for the 2025 tax year.

Follow our updates to stay informed about the most important actions and guidance — we help you navigate the changes and prepare for the necessary steps.

In previous parts of our news series, we introduced the key aspects of the benefit test (LINK) and highlighted the importance of intra‑group communication (LINK). In this article, we focus on simplified documentation.

Simplified documentation: new possibilities with important limitations

The new decree allows taxpayers to prepare simplified transfer pricing documentation for certain transactions. In such cases, the documentation does not need to include a description of the relevant market, the business strategy, or the justification for selecting the method or profit level indicator. Furthermore, no database search (benchmark) or comparability adjustments are required.

While these provisions theoretically offer significant administrative relief, in practice it is essential to keep in mind that simplified documentation does not fully exempt the taxpayer from substantive requirements. The decree still clearly sets out the mandatory elements that must always be included.

Moreover, compared to the previous decree, the current regulation has expanded in several areas: new content requirements have been introduced that must also be presented in simplified documentation. As a result, the simplification mainly reduces the depth of methodology and analysis, while some sections may need to be elaborated even more thoroughly than before.

Low value‑adding services – simplification with strict criteria

Applying the simplifications related to low value‑adding intragroup services can significantly reduce administrative burdens for taxpayers; however, meeting the required conditions is often more complex than it initially appears. The simplification can only be applied if all statutory criteria are fully met.

The first fundamental condition is that the decree sets thresholds for the applicable mark‑ups:

• in the case of service receipt, the actual net profit mark‑up must not exceed 5%,
• in the case of service provision, it must be at least 5%.

If this condition is met, reviewing the additional requirements may be appropriate.

One of the most critical elements of the definition is that neither the taxpayer nor any of its related parties may provide the given service to independent third parties. In practice, this requirement alone can pose serious challenges, as Hungarian taxpayers often lack access to the necessary information and have limited ability to obtain it from other group entities. One‑off billings also count, and particular attention must be paid to the individual components of seemingly internal, bundled services (e.g., head office charges). These conditions will likely make compliance unfeasible in many large, multinational groups.

Low value‑adding services typically include routine, supportive intragroup services that do not require specialised expertise, do not involve valuable intangibles, and do not entail significant business risks. The legislation also clearly defines which activities cannot fall under this category — among others, manufacturing, assembly, toll manufacturing, distribution, or agency‑type activities, as these create greater economic value and involve substantial risk. Similarly excluded are financial, insurance, and reinsurance services, as well as activities related to the extraction, exploration or processing of natural resources.

New documentation requirements for transactions previously exempt

Simplified documentation is not limited to low value‑adding services; it is also available for transactions such as cost recharges exceeding HUF 500 million from independent parties, as well as the free transfer or receipt of funds. It is important to highlight that these transactions previously required no transfer pricing documentation at all, while the current decree introduces such an obligation — albeit in simplified form.

Not everything is simple in simplified rules: risks behind the new regulation

The new decree is expected to have a substantial impact on the daily operations of businesses; therefore, it is crucial to begin preparations in a timely manner, including the identification of transactions now requiring documentation.

Although the objective of simplification is to reduce administrative burdens for low value‑adding services, its safe application is only possible if the company can clearly demonstrate that all conditions are met. If the tax authority interprets the nature or risk profile of the service differently, applying the simplification becomes particularly risky and may even result in penalties. Thus, the simplified rule is not an automatic relief: it can only be applied with well‑substantiated, carefully prepared documentation.