Country-by-Country Reporting

november 15, 2017

Hungary introduced – based on Action 13 of the BEPS Action Plan, published by the OECD – the new country by country reporting obligation in connection with transfer pricing documentation.

The new regulation relates to Hungarian tax resident companies, who are members of a multinational company group with a total annual consolidated group revenue exceeding EUR 750 million. This threshold is to be checked based on the consolidated financial statement of the group for the financial year preceding the financial year subject to the reporting obligation.

The first reporting obligation relates to the first financial year of the multinational company group beginning on or after 01.01.2016.

The new regulations introduce two types of obligations, on one hand the notification report, on the other hand, the country by country report.

Notification report

The notification report has to be submitted by all Hungarian tax resident companies being member of a multinational company group.

In the notification report, the Hungarian tax resident company reports its status regarding the country by country reporting obligation (see below) and as a consequence, whether it is obliged to submit the country by country report.

The first notification report shall be submitted for the financial year of the multinational company group beginning on or after 01.01.2016. The report shall be submitted in 12 months after the end of the financial year.

The due date for submitting the notification reports for the subsequent financial years is always the last day of the financial year reported.

Possible changes in the data reported shall be reported within 30 days.

Country by country report

Under the general rule, the country by country report shall be submitted by the Hungarian resident company if it qualifies as ultimate parent entity of the multinational company group.

Ultimate parent entity means that it has direct or indirect participations in the other members of the group and it is obliged to prepare a consolidated financial statement in the country of its tax residency (or would be obliged to set up the consolidated financial statement if it was listed in a public stock exchange). No other member of the multinational company group has direct or indirect participation in the ultimate parent entity.

Additionally to the general rule, the Hungarian tax resident company may be subject to country by country reporting even if it does not qualify as ultimate parent entity:

  • if no other member of the group prepares the country by country report;
  • if the Hungarian resident company is appointed by the group to submit the report.

The first country by country report shall be submitted for the financial year of the multinational company group beginning on or after 01.01.2016.

The report by country shall be submitted in 12 months after the end of the financial year reported.

Failing to submit country by country reports or notification reports, late submission, or providing incorrect, false or incomplete information may be subject to a default fine of up to HUF 20 million.

Present document is not meant to substitute for the review of particular transactions or for any related consultation. Our experts are at your disposal for checking the possible obligations of your company and for submitting the corresponding report to the tax authority.