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13.4.4. APAs and Dispute Resolution Mechanisms

Binding Tax Rulings

Binding tax rulings are generally available to secure the tax implications of transactions. Accordingly, the taxpayer may request a preliminary opinion from the Ministry of Finance on tax payment obligations associated with a future business transaction. The Ministry of Finance is obliged to issue its opinion with binding validity if the facts are fully disclosed and the request is countersigned by a lawyer or a tax adviser. The request is subject to a fee of HUF 5 million, which fee is increased to HUF 8 million with respect to  accelerated procedure requests. The opinion is binding on the tax authority in the event of a future audit if the facts and circumstances of the business transaction have been fully disclosed in the request and the applicable tax law had not changed. In addition, for large taxpayers satisfying certain conditions, a special type of corporate income tax ruling is available which remains binding for two years irrespective of future changes in the corporate tax law. The fee of such special ruling is HUF 8 million (HUF 11 million with respect to accelerated procedures). Neither type has any precedent effect on similar transactions.

Advance Pricing Agreement (‘APA’)

In an APA (Advance Pricing Agreement), a taxpayer and the tax authority can agree in advance on the appropriate approach to determine the arm's length price to be charged in transactions between related entities. Under this regime, unilateral, bilateral, and multilateral APAs can be requested. An APA can be requested for future transactions and can be effective for three to five years and can be extended for a further three years. Effective 1 January 2022, taxpayers that are not obliged to prepare transfer pricing documentation can submit an APA request. Accordingly, members of a corporate tax group can submit an APA request in connection with transactions concluded among themselves.

The responsibility for issuing all types of APAs (including those related to transfer pricing matters) has been shifted from the tax authority to the Ministry of Finance effective 1 October 2021. The taxpayer does not have to prepare transfer pricing documentation for the transactions covered by the APA. The application fee is HUF 5 million for unilateral APAs (increased from HUF 2 million effective 1 January 2022) and HUF 8 million for bilateral or multilateral APAs (before 1 January 2022, the application fee was HUF 2 million per jurisdiction involved in the APA).

Mutual Agreement Procedure (‘MAP’)

Taxpayers may request assistance under MAP if taxation has or is likely to occur that is not in accordance with the provisions of a tax treaty to which Hungary is a signatory. Generally, Hungary’s tax treaties permit taxpayers to present a case to the Hungarian Tax Authority within three years from the first notification to the taxpayer of the actions giving rise to taxation not in accordance with the tax treaty. Taxpayers have three years to present a case to the Hungarian Tax Authority under the EU Arbitration Convention.

The Hungarian authorities on 26 August 2021 issued guidance (in English) on APAs under tax treaties, APAs under the Arbitration Convention, and APAs under the EU Council Directive