31 December 2024 is the deadline
for Country-by-Country Reports (CbCR) and related notifications
By 31 December 2024, taxpayers should comply with their reporting obligations to the Hungarian tax authority (“NAV”) in relation to the Country-by-Country Report (CbCR). Non-compliance can result in a maximum fine of up to HUF 20 million.
In line with the OECD guidelines, Hungarian transfer pricing legislation provides for the following three-tier transfer pricing documentation structure:
· Country-by-Country Report;
· Master File;
· Local File.
(The content of all three elements should be consistent with each other and with the company’s tax return, otherwise, this may raise questions from the tax authority during tax audits).
It is necessary to examine whether the group of companies is obliged to submit a CbC Report to the tax authority in its jurisdiction, which group members are required to do so, and whether any notification obligations arise for the other group members.
Who is subject to the obligation to submit a CbC Report?
Multinational groups of companies that operate in at least two jurisdictions and whose consolidated turnover exceeds EUR 750 million in the tax year preceding the tax year under review (i.e. for the 2023 reporting period, it should be the tax year 2022) are subject to the CbCR obligation.
Given this rather high turnover threshold, the CbC reporting obligation does not apply to the majority of Hungarian-owned groups.
Who has to prepare the CbC Report if the group of companies is subject to the CbCR obligation?
By default, the ultimate parent company is obliged to file a CbC Report in its country of tax residency. However, the ultimate parent company may decide to delegate this obligation to another related company. An important rule is that if the ultimate parent company is located outside the European Union and Hungary does not have an automatic exchange of information agreement with that country, then either the Hungarian company (taxpayer) or any other group member located in the European Union should fulfil the CbC reporting obligation.
However, a Hungarian company should provide information to the NAV even if another member of the group (i.e. not the Hungarian taxpayer) is otherwise required to file a CbC Report.
In this case, notification Form 24T201T should be completed and submitted to the NAV by 31 December 2024. On the form, the group member in charge of the CbC Report preparation for the reporting period should be named, as well as the country of its tax residence should be shown. (If there was a mid-year change in the previously reported data, it should be notified to the tax authority within 30 days of the change).
What sanctions may result from non-compliance with the CbC reporting and notification obligations?
The maximum penalty for non-compliance is HUF 20 million, so it is recommended to check carefully whether the Hungarian taxpayer has any tax return or reporting obligations.
If you have any questions regarding the filing requirements for CbC Reports or the completion of notification Form 24T201T,
please do not hesitate to contact our transfer pricing experts.
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Should you have any questions regarding this newsletter,
the tax experts of VGD Hungary will be pleased to assist you.
This newsletter provides general information and does not constitute tax advice.