Harmful Tax Practices – 2024 Peer Review Reports on the Exchange of Information on Tax Rulings

Hungary

Hungary has met all aspects of the terms of reference (OECD, 2021[1]) (ToR) for the calendar year 2024 (year in review), and no recommendations are made.

In the prior year report, as well as in the 2016-2022 peer reviews, Hungary has received one recommendation regarding the application of the “best efforts approach” to identify all potential exchange jurisdictions for past rulings (ToR I.A.2.2). Hungary has resolved this issue and therefore the recommendation is now removed.

Hungary can legally issue four types of rulings within the scope of the transparency framework.

In practice, Hungary issued rulings within the scope of the transparency framework as follows:

Type of ruling	Number of rulings
Past rulings	77
Future rulings in the period 1 April 2016 – 31 December 2016	4
Future rulings in the calendar year 2017	9
Future rulings in the calendar year 2018	11
Future rulings in the calendar year 2019	21
Future rulings in the calendar year 2020	18
Future rulings in the calendar year 2021	27
Future rulings in the calendar year 2022	14
Future rulings in the calendar year 2023	9
Future rulings in the year in review	7

Peer input was received from one jurisdiction in respect of the exchanges of information on rulings received from Hungary. The input was positive, noting that information was complete, in a correct format and received in a timely manner.

Information gathering process (ToR I.A)

1. Hungary can legally issue the following four types of rulings within the scope of the transparency framework: (i) preferential regimes;1 (ii) cross-border unilateral APAs and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles; (iii) permanent establishment rulings; and (iv) related party conduit rulings.

Past rulings (ToR I.A.1.1, I.A.1.2, I.A.2.1, I.A.2.2)

2. For Hungary, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2014.

3. In the prior years’ peer review reports, it was determined that Hungary had not used the “best efforts approach” to identify potential exchange jurisdictions, meaning that Hungary had only identified potential exchange jurisdictions for around half of the past ATRs, although it had identified most potential exchange jurisdictions for APAs but not necessarily the ultimate parent company jurisdiction. Therefore, Hungary was recommended to apply the “best efforts approach” to identify potential exchange jurisdictions for all past rulings.

4. Hungary indicated that under the statute of limitations in its domestic tax legislation, both the right to assess tax and the binding force of tax rulings are limited to a fixed period. As a result, all past rulings issued before 2016 no longer produce legal or tax effects. Consequently, the Hungarian tax administration no longer has the right to require taxpayer to provide information on the potential exchange jurisdictions. Taking this into account, the previous years’ recommendation can be removed.

Future rulings (ToR I.A.1.1, I.A.1.2, I.A.2.1)

5. For Hungary, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

6. In the prior year peer review report, it was determined that Hungary’s undertakings to identify future rulings and all potential exchange jurisdictions was sufficient to meet the minimum standard.

7. Hungary’s implementation in this regard remains and continues to meet the minimum standard.

Review and supervision (ToR I.A.3)

8. In the prior years’ peer review reports, it was determined that Hungary’s review and supervision mechanism was sufficient to meet the minimum standard. Hungary’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Conclusion on section A

9. Hungary has met all of the ToR for the information gathering and no recommendations are made.

Exchange of information (ToR II.B)

10. Hungary has the necessary domestic legal basis to exchange information spontaneously. Hungary notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

11. Hungary has international agreements permitting spontaneous exchange of information, including (i) being a party to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011[2]) (“the Convention”), (ii) the Directive 2011/16/EU with all other European Union Member States and (iii) bilateral agreements in force with 84 jurisdictions.2

12. For the year in review, the timeliness of exchanges is as follows:

 

Future rulings within the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	28	0	N/A	N/A

 

Follow-up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	0	N/A	N/A

13. In the prior years’ peer review reports, it was determined that Hungary’s process for the completion and exchange of templates was sufficient to meet the minimum standard. Hungary’s implementation in this regard remains unchanged and therefore continues to meet the minimum standard.

14. Hungary has the necessary legal basis for spontaneous exchange of information, a process for completing the templates in a timely way and has completed all exchanges. Hungary has met all of the ToR for the exchange of information process and no recommendations are made.

Statistics (ToR IV.D)

15. The statistics for the year in review are as follows:

 

Category of ruling	Number of exchanges	Jurisdictions exchanged with
Ruling related to a preferential regime	0	N/A
Cross-border unilateral APAs and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles	25	Albania, Austria, China (People’s Republic of), Croatia, Czechia, France, Germany, Luxembourg, Montenegro, Netherlands, North Macedonia, Romania, Serbia, Slovak Republic, Switzerland
Permanent establishment rulings	3	De minimis rule applies
Related party conduit rulings	0	N/A
IP regimes: total exchanges on taxpayers benefitting from the third category of IP assets, new entrants benefitting from grandfathered IP regimes; and taxpayers making use of the option to treat the nexus ratio as a rebuttable presumption	0	N/A
Total	28

Matters related to intellectual property regimes (ToR I.A.1.3)

16. In the prior years’ peer review reports, it was determined that Hungary’s information gathering and exchange of information processes for matters related to intellectual property regimes3 were sufficient to meet the minimum standard. Hungary’s implementation in this regard remains unchanged and therefore continues to meet the minimum standard.

Summary of recommendations on implementation of the transparency framework

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
	No recommendations are made.

Notes

← 1.  IP regime for royalties and capital gains.

← 2.  Participating jurisdictions to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Hungary also has bilateral agreements with Albania, Andorra, Armenia, Australia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China (People’s Republic of), Hong Kong (China), Croatia, Cyprus, Czechia, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Iceland, India, Indonesia, Iran, Iraq, Ireland, Israel, Italy, Japan, Kazakhstan, Korea, Kosovo, Kuwait, Kyrgyzstan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Netherlands, North Macedonia, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russia, San Marino, Saudi Arabia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland, Chinese Taipei, Thailand, Tunisia, Türkiye, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan and Viet Nam.

← 3.  IP regime for royalties and capital gains.