“Live and learn” goes the saying. The fact that the new school year marks a fresh start not only for pupils but also for those involved in transfer pricing matters—where there is still much to learn—has become evident with the release of a new ministerial decree and the associated Ministry of Finance guidance. Below, we highlight the most critical and sensitive aspects that must be applied starting with the 2026 tax year.

The reframed transfer pricing regulations aim to give substance to the provision in the Act on the Rules of Taxation stating that a taxpayer’s records must be suitable for verifying the determination of tax liabilities. Meeting this requirement necessitates a thorough understanding of the OECD Transfer Pricing Guidelines—even without further domestic implementation—implying that it is worth scrutinizing even our routine procedures.

What is the profitability of the controlled transaction?

Transfer pricing experts often say that functional analysis is the heart of transfer pricing, yet we rarely explain exactly why. However, increasingly stringent requirements regarding so-called profit segmentation tasks are once again drawing attention to the indispensable nature of this analysis. From 2026 onwards—depending on the chosen analytical method—we will be required to allocate all operating revenues and costs across our various activities; it is the functional analysis that reveals exactly how many such activities exist. Clearly, two distinct activities are involved if they fall under different NACE codes (e.g., manufacturing the same product in the same way for both a related party and an independent one while also distributing products from another related party on the domestic market). Yet, profit segmentation may also be required even when the activity itself is identical (e.g., the wholesale of optical products) but some products are sourced from related parties and others from independent ones, while all sales are made to independent parties. In such cases, one must consider not only whether the liability arrangements differ between the controlled transactions but also whether the products themselves are substitutes for one another. Furthermore—since even a blind squirrel finds a nut once in a while—even a manufacturer with a fundamentally exclusive profile might provide support services to other related manufacturing entities, creating a situation where the separate determination of profitability for each activity becomes necessary once again.

In other words, without a functional analysis, we cannot even determine how many profit centres we have from a transfer pricing perspective (which, as noted above, does not necessarily align with how we would book costs by cost center); yet, often, we can only substantiate the appropriate market-level profitability of a controlled transaction by separately determining the profitability of individual activities. And this brings us to the crux of the segmentation: segmentation may not be avoidable even if we have only a single transaction type subject to documentation requirements (while others are not), and—conversely—even if we have multiple transactions requiring documentation, segmentation is not necessarily required, as the level of detail needed depends on the chosen analysis method.

 Not invoiced yet actual transactions

While the new ministerial decree further strengthens the link between the items recorded in the books and the data used for transfer pricing documentation, it also clearly breaks new ground by requiring the pricing of certain related-party transactions that were not invoiced between the parties—or indeed invoiced at all. These obviously include accommodation transactions (such as uncharged rent or uncollected late-payment interest), but also encompass hidden transactions revealed only through functional analysis—for instance, manufacturing and selling products to independent parties based on a formula patented by the parent company without paying royalties, having the terms of transactions with independent parties negotiated and established by Headquarters, or having the local sales team sell products from the Romanian plant on its behalf without separate remuneration.

Benefit test

The actual delivery of intercompany services is difficult to track, yet accounting for them as costs can reduce the local tax base. Consequently, the OECD places great emphasis on verifying that the service provided carries value to the recipient and does not result in duplication. The benchmark for “carrying value” is whether independent parties would also require such a service or would perform it themselves (i.e., the service is necessary, actually performed, and yields a [quantifiable] benefit for the business). Proof that payment is not being made twice for the same service can be provided through job descriptions, specific tasks outlined in contracts, and similar documentation.

Although the mere fact that a substitute service might be available more cheaply on the local market is not a “benefit” issue per se, regarding the pricing of cross-border services, one should anticipate that tax authorities will require more detailed data than before concerning costs actually incurred abroad, their allocation, and the profitability realized.

International Standards, Domestic Features

As previously mentioned, a thorough understanding of the OECD Transfer Pricing Guidelines is a fundamental requirement; however, there is a nuance here that calls for caution. In several instances, we must exercise particular care: whatever is sent by the headquarters or parent company may not necessarily be suitable—without modification—for satisfying local compliance obligations.

Take, for example, the OECD rule regarding the simplified treatment of low value-adding services. Many multinational groups among our clients apply the “safe harbour” rule, which accepts a “cost plus 5%” pricing model for a significant portion of intra-group services without the need for benchmarking. While this provision has been implemented domestically, the local implementation differs regarding the definition of the scope of services covered and the formulation of the 5% margin. The former requires particular care in areas such as software development and certain management or distribution services; regarding the latter, the domestic 5% figure serves as a critical benchmark: if we provide the service, we must charge at least this amount on the total cost base, whereas if we receive the service, we may pay no more than this amount from a corporate income tax perspective.

It is not necessarily a safe approach for the headquarters or parent company to provide a standardized group benchmark to justify the mark-up applied to services provided by the Hungarian entity within the group. If the benchmark fails to comply with the search criteria stipulated in the decree, the tax authority is not obliged to accept it. Relying on an international comparative sample can be particularly risky when it would have been possible to compile the sample using only domestic enterprises. In the future, it will no longer be possible to maintain the previously lenient audit practice that turned a blind eye to the use of benchmarking criteria that did not meet domestic requirements.

Please feel free to contact our consultants if you have any questions.