Executive summary

Hungary introduced on 23 December 2025 a new, comprehensive Transfer Pricing Decree (Decree), to be applied from the 2026 tax year, with voluntary adoption permitted for 2025. The new Decree reshapes the Hungarian transfer pricing (TP) landscape by tightening compliance expectations and introducing several substantial changes, most notably:

• Transforming local benchmarking from a tax authority expectation into a formal legal requirement
• Tightening segmentation and financial traceability rules

The new Decree significantly increases the complexity of TP compliance requirements in Hungary.

Background

Hungary has progressively developed its TP compliance requirements over recent years. Until now, many of the Hungarian Tax Authority's (HTA) expectations were published only in the form of regulatory guidance, especially regarding benchmarking standards or the segmentation of financials.

The new Decree now formally incorporates these expectations into the legislation.

As a result, taxpayers should expect greater scrutiny and a higher standard of documentation quality going forward, along with an increased likelihood of adjustments and penalties if deficiencies are identified.

Key developments

Local benchmarking becomes legal obligation

The HTA's long-standing practice of challenging centrally prepared global benchmark studies is now supported by explicit legal requirements. The new Decree prescribes that taxpayers must prepare benchmarking analyses that reflect specific comparability expectations, including:

• Strict geographic hierarchy (Hungary → Visegrád Group countries (i.e., Czech Republic, Hungary, Poland, Slovakia) → broader Central-Eastern Europe → European Union (EU) 27 Member States → wider regions)
• Exclusion of loss-making companies
• Reliance on corporate-level financial data

In practice, when benchmarks do not meet these expectations, the HTA has carried out its own local search and relied on its outcome during audits. With these standards now formally embedded in the legislation, taxpayers will have very little room to justify deviations.

Stricter rules on segmentation and financial reconciliation

The Decree requires taxpayers to demonstrate full traceability between the profit level indicators applied in the TP analysis and the Hungarian statutory accounts. This typically includes:

• Segmented profit and loss statements at the level of the tested transaction
• Reconciliation between management reports and local statutory accounting figures (i.e., traceability of metrics to statutory accounts)
• Detailed explanation of allocation keys
• Documentation allowing the HTA to reproduce and verify the calculations

These requirements are expected to become a key audit focus alongside local benchmarking. The chief technical challenge is that companies usually lack reconciliation between TP policy calculations — usually applied based on International Financial Reporting Standards (IFRS) or United States (US) Generally Accepted Accounting Principles (GAAP) accounts — and local statutory calculations, i.e., Hungarian GAAP accounts.

Other significant developments

Transaction name and functional characterization

The Local File must explicitly state the characterization of the Hungarian entity and include the same transaction name as reported in the TP data reporting, along with the corresponding activity code.

Extended DEMPE requirements for intangibles

For transactions involving intangibles, the functional analysis must expressly outline the functions performed, assets used and risks assumed in connection with the development, enhancement, maintenance, protection and exploitation (DEMPE) activities of the relevant intangibles.

Revised framework for low value-adding services

The Decree introduces an updated framework for low value-adding services aligned with the Organisation for Economic Co-operation and Development (OECD) Guidelines, removing previous restrictions based on value thresholds or activity codes.

Mandatory benefits test for intra-group services

Taxpayers must demonstrate that services received provide economic or commercial value, consistent with the OECD benefit test.

Revised thresholds and exemptions

The Decree adjusts several thresholds and exemptions, including Local File and Master File preparation thresholds.

TP data reporting requirements updated

Hungary's extensive TP data-reporting framework is being redesigned, including new transaction categories, new terminologies and stricter alignment with Local File content.

Consolidation rules refined

The Decree confirms the general consolidation principles clarifying that incoming and outgoing transactions cannot be consolidated and specifies five broad categories that cannot be consolidated with each other: (1) manufacturing transactions, (2) distribution transactions, (3) service transactions, (4) financial transactions and (5) transactions involving intangibles.

Next steps

Given the significant changes introduced, multinational groups should consider analyzing the impact of the new rules and adjusting their TP policies accordingly. The following actions may be helpful.

• Reviewing and adjusting benchmarking strategy
• Assessing segmentation and financial reporting capabilities
• Revisiting functional analysis, characterizations and DEMPE
• Enhancing documentation of intra-group services
• Evaluating early adoption for 2025
• Reviewing internal processes and governance

Affected entities should reach out to knowledgeable tax advisors for assistance understanding the changes and navigating the new requirements.