Transfer Pricing

Deadline for submitting 2018 Master File is coming

Important deadline is coming: those taxpayers whose tax year equivalent of the calendar year, the Master File for 2018 must be completed by the end of December 2019 at the latest.

From 1 January 2018, the transfer pricing documents of the Hungarian taxpayers consist of two elements: the Master File and the Local File. The Master File presents the group, while the Local File examines the arm’s length principle of the taxpayer’s transactions with its related parties.

Multinational groups that are active in two countries (at least) and whose consolidated turnover exceeds EUR 750 million in the tax year preceding the tax year being audited, have a so-called CbC (Country-by-Country) reporting obligation. Please read our next newsletter for more details.

The necessary information for preparing the Master File is usually available at the parent company, so based on our experiences, the parent company that is most fit to prepare this document to the expected quality. You may enquire at the parent company if they have any documentation concept on how to prepare the Master File and when the Master File will be available, who is in charge, and who can give more information about that.

If the parent company does not deal with the Master File (e.g. because, based on its national regulations, it is not required to prepare one), it is recommended that the Hungarian company arrange for the master document to be produced in-house!

We would like to emphasize, that in addition to the Local File, the Hungarian taxpayer is required to have the Master File as well, because during a future tax inspection, the tax inspector will ask not just the Local File, but also the Master File. If the taxpayer cannot comply with this obligation, then a fine of HUF 2 million per missing document (transaction) may be imposed.

Therefore, it is important that if the company has not received any feedback from its parent company concerning the Master File, or if the parent company does not prepare that, the Hungarian company should arrange for the Master File by the end of this calendar year.

Should you have any specific questions regarding this newsletter or you consider it necessary to prepare the Master File, please contact the experts of VGD Hungary Kft.