Hungary

1. Hungary was first reviewed during the 2017/2018 peer review. This report is supplementary to Hungary’s 2017/2018 peer review report (OECD, 2018[1]). The first filing obligation for a CbC report in Hungary applies to reporting fiscal years commencing on or after 1 January 2016.

Summary of key findings

2. Hungary’s implementation of the Action 13 minimum standard meets all applicable terms of reference (OECD, 2017[2]).

3. It was recommended, in Hungary’s 2018/2018 peer review report, that Hungary clarify that the annual consolidated group revenue threshold calculation rule applies without prejudice to the OECD guidance on currency fluctuations in respect of an MNE Group whose Ultimate Parent Entity is located in a jurisdiction other than Hungary. Hungary has published updated legislation to clarify this point. The recommendation in the 2017/2018 peer review is removed.

4. It was recommended, in Hungary’s 2017/2018 peer review report, that Hungary take steps to ensure that the appropriate use condition is met ahead of the first exchanges of information. Hungary now has measures in place to ensure the appropriate use of information in all six areas identified in the OECD Guidance on the Appropriate Use of Information contained in CbC Reports (OECD, 2017a). As such, the recommendation with respect to appropriate use issued in the 2017/2018 peer review is removed.

Part A: The domestic legal and administrative framework

5. Hungary has primary law in place for implementing the BEPS Action 13 minimum standard1 (the “CbC Act”) establishing the necessary requirements, including the filing and reporting obligations. No guidance has been published. Since the 2017/2018 peer review, Hungary has provided an update with respect to the processes it has in place to ensure effective implementation.

(a) Parent entity filing obligation

6. Hungary’s 2017/2018 peer review included a recommendation that Hungary clarify that the annual consolidated group revenue threshold calculation rule applies without prejudice of the OECD guidance on currency fluctuations in respect of an MNE Group whose Ultimate Parent Entity is located in a jurisdiction other than Hungary. Hungary has published updated legislation2 has been published which entered into force on 1 January 2019. This emend adds the words or if the central administration of the parent company of the MNE Group is situated in a state or territory outside of Hungary the sum equivalent to EUR 750,000,000 expressed in local currency established by the internal rules relating to country by country reporting of this state or territory to Hungary’s Excluded MNE definition. The recommendation in the 2017/2018 peer review is removed.

7. No other changes were identified with respect to the parent entity filing obligation.

(b) Scope and timing of parent entity filing

8. No changes were identified with respect to the scope and timing of parent entity filing.

(c) Limitation on local filing obligation

9. No changes were identified with respect to the limitation on local filing obligation.

(d) Limitation on local filing in case of surrogate filing

10. No changes were identified with respect to the limitation on local filing in case of surrogate filing.

(e) Effective implementation

11. Hungary’s 2017/2018 peer review included a general monitoring point concerning the fact that was no specific process that would allow it to take appropriate measures in case Hungary is notified by another jurisdiction that such other jurisdiction has reason to believe that an error may have led to incorrect or incomplete information reporting by a Reporting Entity or that there is non-compliance of a Reporting Entity with respect to its obligation to file a CbC report. Since the 2017/2018 peer review, Hungary has provided updated information, explaining that, in such a situation, Central Liaison Office immediately informs Tax Returns Department which takes measures to get the CbC report submitted, and/or corrected, as well as the data elucidated with the involvement of the professional field of the competent directorate based on the registered office of the taxpayer within 15 days. In addition, failure to file, late filing, and inaccurate filing should be a subject to default penalty. In view of this update and specific process, the monitoring point is removed.

Conclusion

12. Hungary’s 2017/2018 peer review included a recommendation that Hungary clarify that the annual consolidated group revenue threshold calculation rule applies without prejudice of the OECD guidance on currency fluctuations in respect of an MNE Group whose Ultimate Parent Entity is located in a jurisdiction other than Hungary. Hungary has published updated legislation. The recommendation in the 2017/2018 peer review is removed. Hungary meets all the terms of reference relating to the domestic legal and administrative framework.

Part B: The exchange of information framework

(a) Exchange of information framework

13. As of 31 May 2019, Hungary has 64 bilateral relationships in place, including those activated under the CbC MCAA, under bilateral CAAs and under the EU Council Directive (2016/881/EU). Within the context of its international exchange of information agreements that allow automatic exchange of information, Hungary has taken steps to have qualifying competent authority agreements in effect with jurisdictions of the Inclusive Framework that meet the confidentiality, consistency and appropriate use conditions. Regarding Hungary’s exchange of information framework, no inconsistencies with the terms of reference were identified.

(b) Content of information exchanged

14. Hungary has written procedures in place that are intended to ensure that each of the mandatory fields of information as required in the CbC template are present in the information exchanged. It has provided details in relation to these procedures.

(c) Completeness of exchanges

15. Hungary has written procedures in place that are intended to ensure that CbC reports are exchanged with all tax jurisdictions listed in Table 1 of a CbC reporting template with which it should exchange information as per the relevant QCAAs. It has provided details in relation to these procedures.

(d) Timeliness of exchanges

16. Hungary has written procedures in place that are intended to ensure that the information to be exchanged is transmitted to the relevant jurisdictions in accordance with the timelines provided for in the relevant QCAAs and terms of reference. It has provided details in relation to these procedures.

17. No information or peer input was received for the reviewed jurisdiction in relation to the timeliness of exchanges. There are no concerns to be reported in respect of the timeliness of exchanges.3

(e) Temporary suspension of exchange or termination of QCAA

18. Hungary has written procedures in place that are intended to ensure that a temporary suspension of the exchange of information or termination of a relevant QCAA be carried out only as per the conditions set out in the QCAA. It has provided details in relation to those procedures.

(f) Consultation with other Competent Authority before determining systemic failure or significant non-compliance

19. Hungary has written procedures in place that are intended to ensure that the Competent Authority consults with the other Competent Authority prior to making a determination that there is or has been significant non-compliance with the terms of the relevant QCAA or that the other Competent Authority has caused a systemic failure. It has provided details in relation to those procedures.

(g) Format for information exchange

20. Hungary confirms that it uses the OECD XML Schema and User Guide (OECD, 2017[3]) for the international exchange of CbC reports.

(h) Method for transmission

21. Hungary indicates that it uses the Common Transmission System to exchange CbC reports.4

Conclusion

22. Hungary has in place the necessary procedures to ensure that the exchange of information is conducted in a manner consistent with the terms of reference relating to the exchange of information framework. Hungary meets all the terms of reference regarding the exchange of information.

Part C: Appropriate use

23. The 2017/2018 peer review included a recommendation that Hungary take steps to ensure that the appropriate use condition is met ahead of the first exchanges of information. Since the 2017/2018 peer review, Hungary has issued an internal regulation5 and provided details in relation to these measures, ensuring the appropriate use of information in all six areas identified in the OECD Guidance on the Appropriate use of Information contained in CbC Reports (OECD, 2017a) and enabling it to answer “yes” to the additional questions on appropriate use. In light of the update provided by Hungary the recommendation on appropriate use is removed.

24. No information or peer input was received for the reviewed jurisdiction suggesting any issues with appropriate use. There are no concerns to be reported in respect of appropriate use.

Conclusion

25. Hungary’s 2017/2018 peer review included a recommendation that Hungary take steps to ensure that the appropriate use condition is met ahead of the first exchange of information. Hungary now has measures in place and the recommendation on appropriate use is removed. Hungary meets all the terms of reference relating to the appropriate use of CbC reports.

Summary of recommendations on the implementation of country-by-country reporting

Aspect of the implementation that should be improved		Recommendation for improvement
Part A	Domestic legal and administrative framework	-
Part B	Exchange of information framework	-
Part C	Appropriate use	-

Notes

← 1. Primary law consists of Chapter V/D for the Reporting and Automatic Exchange of Information Relating to Country-by-Country Reports established by Act XL of 2017 amending Act XXXVII of 2013 on the rules of International Administrative Cooperation Related to Taxes and other Public Duties, implemented in May 2017.

← 2. Hungary indicates that the legislation regarding the amendment of the notion of the ”Excluded MNE Group” has been approved by the Hungarian Parliament on 13 November 2018 and published on 23 November in the Hungarian Official Journal as Section 182 of Act LXXXII of 2018 on the amendments of certain tax laws relating to EU commitments and certain laws regarding tax administration. The following part is added to the original provision: if the central administration of the parent company of the MNE Group is situated in a state or territory outside of Hungary the sum equivalent to EUR 750,000,000 expressed in local currency established by the internal rules relating to country by country reporting of this state or territory.

← 3. Delays due entirely to the fact that an exchange partner was not able to participate in the exchange of CbC reports are not considered to raise concerns with respect to the jurisdiction under review.

← 4. Countries exchanging under the EU Council Directive (2016/881/EU) use the Common Communication Network (CCN).

← 5. Hungary indicates that the internal regulation named Protocal No. 1098/2018 has been issued by the Commissioner of the National Tax and Customs administration on the rules of automatic exchange of information related to country-by-country reporting, and on data exploitation, use for the purposes of risk analyses and audit, which is entered into force on 4 July 2018.

Hungary