Hungary has implemented Country-by-Country Reporting (CbCR) as part of its commitment to the OECD’s Base Erosion and Profit Shifting (BEPS) Action 13 initiative. The Hungarian Tax Authority (Nemzeti Adó- és Vámhivatal, NAV) administers these requirements, ensuring multinational enterprises (MNEs) comply with global transparency standards.

This guide is tailored for CFOs and tax professionals operating in Hungary, detailing the criteria for applicability, reporting obligations, filing procedures, penalties, and resources to ensure compliance.

Applicability of CbCR in Hungary

Criteria for Reporting:
CbCR obligations in Hungary apply to MNE groups that meet the following criteria:

• The group’s consolidated annual revenue exceeds HUF 275 billion (Hungarian forints, equivalent to €750 million) in the preceding fiscal year.
• A Hungarian entity is either:
  • The Ultimate Parent Entity (UPE) of the group, or
  • A constituent entity or permanent establishment of the MNE group.

Local Filing Requirements:

• A Hungarian subsidiary or permanent establishment must file a CbC report if:
  • The UPE is not obligated to file in its jurisdiction, or
  • The UPE’s jurisdiction does not have an effective information exchange agreement with Hungary.

Relevant Legislation:

• The CbCR framework is embedded in Hungary’s Act on the Rules of Taxation (Act CL of 2017).

Reporting Requirements

Content of the CbC Report:

• The CbC report should include aggregated financial and tax data for all jurisdictions where the MNE operates, such as:
  • Total revenue (related and unrelated party transactions),
  • Profit or loss before tax,
  • Income tax paid and accrued,
  • Stated capital and retained earnings,
  • Number of employees,
  • Tangible assets other than cash and cash equivalents.

Notification Requirement:

• Hungarian entities must notify NAV annually about the identity and jurisdiction of the reporting entity (UPE or surrogate parent entity).

Submission Platform:

• The report must be submitted electronically through NAV’s platform using the OECD-prescribed XML format.

Resource:
For detailed submission guidelines, visit the Hungarian Tax Authority website: NAV Website.

Filing Deadlines

• CbC Reports must be filed within 12 months of the end of the reporting fiscal year.
  • Example: For a fiscal year ending 31 December 2023, the report must be filed by 31 December 2024.
• Notification of the reporting entity is due within the first fiscal reporting period of the entity.

Penalties for Non-Compliance

Consequences of Non-Compliance:
Non-compliance with CbCR obligations in Hungary may result in:

• Financial penalties of up to HUF 10 million for failure to file or inaccurate reporting.
• Increased scrutiny by NAV, including potential audits or investigations.

Mitigation:

• NAV may waive or reduce penalties if the entity provides a reasonable justification for non-compliance.

Confidentiality and Data Exchange

Confidentiality Assurance:

• CbC reports are protected under Hungary’s confidentiality laws and are used solely for risk assessment and ensuring compliance with transfer pricing regulations.
• Hungary exchanges CbC reports with jurisdictions having effective treaties and agreements, ensuring secure and appropriate data use.