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Affiliated enterprises have to report their related undertakings in a Country-by-Country (furthermore “CbC”) report until 31 December 2019 for the financial year of 2018. The information therein is used for high level transfer pricing examination and risk assessment. If a company fails to comply with the deadline mentioned above, it may expect a default penalty up to HUF 20 million (~ EUR 60,420) from the Hungarian Tax Authority.

In order to ensure the flow of information from large enterprises to local tax authorities and to be able to explore the structure of such companies easier – hence strengthening transparency –, the CbC report system was introduced in 2017 as a part of the new three-level transfer pricing documentation based on BEPS Action 13. This measure has been adopted by over 90 countries resulting in 2400+ bilateral relationships. Adoption of the CbC report also makes it easier for local tax authorities to gain information from parent companies or subsidiaries formed outside of the country’s territory in question. The report is only obligatory for companies who have reached an income of EUR 750 million in the financial statement of the relevant year.

However, not every member of a multinational corporation is required to compile a CbC report, only the ultimate parent company, who has to submit such report to its competent authority of its tax residence. Other members are also required to notify the national authorities about the fact that there is another member in the multinational corporation that will compile the report. Furthermore, there is a notification obligation arising from change of information that is stored at the database of the local tax authority, which should be reported in 30 days. It is important to underline that a CbC report must be submitted every year and failing to submit the report by the deadline and paying the default penalty imposed for late submission does not exempt the company from compiling and submitting the report.