Hungary – Legislation on use of Interquartile Range and Median

Category: Benchmark, Range and Median, Other Documents, Transfer Pricing Library, Transfer Pricing News | Tag: , , , , , ,
« | »

As part of tax legislation recently enacted in Hungary, rules governing the application of statistical tools – arm’s length range and adjustments within the range – will now be governed by law.

  • When determining arm’s length prices based on benchmarks of comparables it will now be mandatory to use the interquartile range.
  • If the price falls outside the arm’s length range, adjustment must be made to the median value – unless the taxpayer can prove that another value within the range is more appropriate. 
  • Where the price is within the arm’s length range, taxpayers will no longer be allowed to make year-end adjustments.

The above amendments will have effect for FY 2022 and forward.

Furthermore, certain information related to controlled transactions will now have to be provided in the corporate tax return. Details in this regard will be contained in a later Ministerial Decree.

 

Click here for unofficial English translation

Click here for other translation






Related Guidelines

  1. TPG2022 Chapter III paragraph 3.62In determining this point, where the range comprises results of relatively equal and high reliability, it could be argued that any point in the range satisfies the arm’s length principle. Where comparability defects remain as discussed at paragraph 3.57, it may be appropriate...
  2. TPG2022 Chapter III paragraph 3.61If the relevant condition of the controlled transaction (e.g. price or margin) falls outside the arm’s length range asserted by the tax administration, the taxpayer should have the opportunity to present arguments that the conditions of the controlled transaction satisfy the arm’s length...
  3. TPG2022 Chapter III paragraph 3.57It may also be the case that, while every effort has been made to exclude points that have a lesser degree of comparability, what is arrived at is a range of figures for which it is considered, given the process used for selecting...
  4. TPG2022 Chapter III paragraph 3.65Generally speaking, a loss-making uncontrolled transaction should trigger further investigation in order to establish whether or not it can be a comparable. Circumstances in which loss-making transactions/ enterprises should be excluded from the list of comparables include cases where losses do not reflect...
  5. TPG2022 Chapter III paragraph 3.64An independent enterprise would not continue loss-generating activities unless it had reasonable expectations of future profits. See paragraphs 1.149-1.151. Simple or low risk functions in particular are not expected to generate losses for a long period of time. This does not mean however...
  6. TPG2022 Chapter III paragraph 3.60If the relevant condition of the controlled transaction (e.g. price or margin) is within the arm’s length range, no adjustment should be made....
  1. Italy releases operational instructions on arm’s length range and benchmarking.On 24 May 2022, the Italian Tax Agency (Agenzia delle Entrate) released CIRCULAR NO. 16/E containing operational instructions on issues relating to application of the arm’s length range. The circular – which is based on the OECD transfer Pricing Guidelines, guidance on benchmark...
  2. Spain releases note on arm’s length range and benchmarking.On 25 February 2021, a note was released by the Spanish Tax Agency on number of practical issues relating to application of the arm’s-length range. The note – which is based on the OECD transfer Pricing Guidelines, guidance on benchmark studies issued by...

Related Case Law

  1. Greece vs Cypriot company Ltd., September 2021, Tax Court, Case No 2940This case deals with arm’s length pricing of various inter-company loans which had been granted – free of interest – by Cypriot company Ltd. to an affiliate group company. Following an audit of Cypriot company Ltd, an upwards adjustment of the taxable income...
  2. Czech Republic vs ESAB CZ, s. r. o., May 2023, Regional Court , Case No 31 Af 21/2022 – 99ESAB CZ was a contract manufacturer for ESAB Europe. The contract set ESAB CZ’s target profit margin for 2014 and 2015 at between 2,5 % and 3,5 %, with an adjustment to 3 % if the actual profit margin achieved was outside that...
  3. Spain vs Ferroli Espa̱a, S.L.U., May 2023, Audiencia Nacional, Case No 3400/2023 РECLI:EN:AN:2023:3400Ferroli Espa̱a, S.L.U. is a Spanish manufacturer manufacture of cookers and heaters. In FY 2010 and 2011 the company had various transactions with other companies in the Ferroli Group and reported negative profit margins on these transactions. According to the company this was...
  4. Hungary vs “APA Ktf”, October 2019, Court of Appeals, Case No. Kfv.I.35.504/2018/6The tax authority had set the price range for “APA Ktf’s” request for an advance pricing arrangement (APA) at 12.50 to 22.50 basis points. According to the tax authorities, it follows from points 3.61 and 3.62 of the Guidelines that it is only...
  5. Spain vs “SGGE W T Spanish branch”, January 2023, TEAC, Case No Rec. 00/07503/2020/00/00SGGE W T is a Spanish branch of SGG that carries out distribution and marketing activities related to the information technology network products and services. SGG is part of the KF group which “is an international group that provides solutions and services in...