This year, the Hungarian Tax Authority (NAV) is placing special emphasis on auditing companies that conduct transactions with their related parties, for which it has developed various transfer pricing audit strategies. In addition, taxpayers with the highest tax contributions – including banks, insurance companies, and corporations with multibillion-forint tax liabilities – can also expect increased scrutiny, noted József Vizer, Lead Tax Advisor at ICT Európa. The audits are expected to focus primarily on corporate tax allowances, the pricing of related-party transactions, and the adequacy of transfer pricing documentation. Due to the new global minimum tax, NAV is planning targeted inspections of affected companies, paying special attention to the accounting treatment of taxable profits and carried-forward losses.
Although the Hungarian Tax Authority’s (NAV) audit plan for 2025 was published as early as March, it is still worth reviewing what types of audits the largest taxpayers can expect in the remainder of the year—especially in light of the upcoming deadlines for annual reports and tax returns, which, for calendar-year taxpayers, fall on June 2, 2025.
Priority Taxpayers
According to the NAV’s official statement, audits of key taxpayers and those with the highest tax contributions will again receive special attention this year, due to their significance to the national economy and the scale of their investments.
"Key taxpayers" include credit institutions and insurance companies operating in the form of a joint-stock company, as well as (with the exception of budgetary entities and individuals subject to personal income tax) those taxpayers who have been in operation for at least two years and have a tax contribution of at least HUF 4.8 billion. Taxpayers with the highest tax contributions are those whose tax contribution reaches or exceeds HUF 1.7 billion. In both cases, a prerequisite is that, as of the last day of the year preceding the tax year, the taxpayer must not be under bankruptcy, liquidation, voluntary dissolution, or compulsory strike-off proceedings, and their tax number must not have been revoked." – summarized József Vizer, Lead Tax Advisor and Head of the Advisory Division at ICT Európa Group.
As in previous years, the primary focus for these taxpayers in 2025 will again be on corporate income tax returns—particularly on the use of tax allowances, items increasing or decreasing the tax base, and the pricing of transactions conducted with related parties.
Who Falls Under the Scope of the Global Minimum Tax?
Since 2024, corporate group taxation has expanded to include a new tax type — the global minimum tax — which remains underdeveloped both in terms of its legal framework and practical application. A key question concerning the global minimum tax is whether the covered taxes reach the required 15% effective rate. Although the tax return for the 2024 tax year (for calendar-year taxpayers) is not due until June 30, 2026, the top-up tax liability must already be reflected in the 2024 financial statements. Furthermore, a preliminary return regarding the expected top-up tax must be submitted by November 20, 2025.
In light of the above, the Hungarian Tax Authority (NAV) will place particular emphasis in 2025 on auditing the covered taxes for the 2024 tax year in the case of entities subject to the global minimum tax — with special focus on the accounting treatment of taxable profit, tax liabilities, and carried-forward losses. – József Vizer pointed out.
Among the covered taxes, NAV audits corporate income tax, the income tax of energy suppliers, and the innovation contribution. The fourth tax classified as a covered tax in Hungary — the local business tax — falls under the jurisdiction of the competent local municipal tax authorities.
"Since the innovation contribution is based on the same tax base as the local business tax, if NAV establishes a tax discrepancy in relation to the innovation contribution, it is obliged to notify the relevant municipal tax authorities ex officio. This enables the local authorities to initiate a swift and effective audit of the local business tax." – according to the Head of Division.
Therefore, entities subject to the global minimum tax are strongly advised to exercise heightened caution when preparing their 2024 corporate income tax and local business tax calculations. It may also be prudent to involve an experienced tax advisor in the preparation of the returns, as audits may already occur within the current year. Following the filing deadline, the selection of companies for audit may be facilitated by the requirement that global minimum tax entities must have notified NAV of their status by the last day of their tax year via submission of the GLOBE data sheet.
Companies that meet the exemption criteria under the global minimum tax regime are strongly encouraged to include this information in the notes to their annual financial statements. This is because NAV may take the contents of the financial statements into account when selecting taxpayers for audit. Furthermore, if an exemption applies, the amount of covered taxes becomes irrelevant—significantly increasing the chances of avoiding a tax audit. -as recommended by József Vizer.
Businesses Dealing with Related Parties
Both the corporate income tax (CIT), the small business tax (KIVA), and the local business tax (LBT) bases must be adjusted to reflect the arm’s length price if related-party transactions deviate from market conditions. Among corporate income taxpayers, the following entities are required to prepare transfer pricing documentation if the total value of their related-party transactions (at arm’s length price, either individually or on an aggregated basis) exceeds HUF 100 million in the tax year: Business associations that do not qualify as small enterprises on the last day of the tax year, Cooperatives, European public limited companies (SEs), European cooperatives, and foreign businesses, excluding public benefit nonprofit business associations and state-owned entities.
“Since transactions with related parties pose a high tax avoidance risk both internationally and domestically, NAV has significantly expanded and strengthened its transfer pricing audit capacity in recent years. Accordingly, the 2025 audit plan places considerable emphasis on the examination of arm’s length pricing, broken down into several focus areas,” highlighted the tax expert at ICT Európa.
In its 2025 transfer pricing audits, the Hungarian Tax Authority (NAV) will focus on the following key areas:
- Review of related companies
- Audit of transfer pricing data reporting compliance
- Audit of related-party transactions classified as high-risk based on transfer pricing data reporting
- Review of high-risk transactions identified through CbCR and cross-border reporting data
- Examination of transfer pricing practices related to intangible assets, intra-group financing, and other intercompany financial transactions
- Transfer pricing audits of loss-making or low-profit entities engaged in intra-group manufacturing, agency, commission, or distribution activities
- Verification of whether the conditions specified in advance pricing rulings have been met
Risk of Sanctions and Fines
Any tax shortfall identified during a tax audit that remains unpaid by the due date qualifies as a tax deficiency. A tax penalty of 50% may be imposed on the deficiency—or 200% if the shortfall is linked to the concealment of revenue, falsification or fabrication of invoices, books, or records, or their alteration or destruction. Additionally, a late payment interest may be charged on the tax deficiency from the original due date until the date of the audit report, for a maximum of three years. The rate is calculated per calendar day, based on the central bank base rate effective at the time of delay, increased by 5 percentage points, divided by 365. (The current base rate is 6.5%, but it has reached 13% in recent years.)
In the event of non-compliance with transfer pricing documentation requirements or the related obligation to retain records, the Hungarian Tax Authority (NAV) may impose a default penalty of up to HUF 5 million per documentation. In cases of repeated violations, this amount may increase to HUF 10 million per documentation. **Failure to submit, or incorrect completion of, the transfer pricing data reporting required in the corporate income tax return may result in a default penalty of up to HUF 1 million. – József Vizer pointed out.
The June 2 deadline for preparing and submitting the 2024 annual financial statements, corporate income tax (CIT) and local business tax (LBT) returns, as well as transfer pricing documentation, is fast approaching. Given NAV’s targeted audit strategy, it is highly advisable to involve a tax expert in the preparation of calculations, returns, and transfer pricing files—helping to reduce the risk of audit-related issues. Even if returns have already been submitted, not all is lost: Errors that do not affect the tax base or tax liability can still be corrected, Errors that do affect the tax base or amount of tax payable may be rectified through self-revision, provided the audit has not yet commenced, Transfer pricing documentation can also be reviewed and amended retrospectively, if necessary.
This blog post was written by József Vizer, Lead Tax Advisor at ICT Business Advisory Zrt.
