Harmful Tax Practices – 2023 Peer Review Reports on the Exchange of Information on Tax Rulings

528. 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.

529. 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.

530. 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.

531. During the year in review, Hungary has not been able to take additional steps. As such, the recommendation remains.

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

533. 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.

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

535. 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.

536. Hungary has met all of the ToR for the information gathering process except for applying the “best efforts approach” for past rulings (ToR I.A.2.2) and Hungary is recommended to apply the “best efforts approach” to identify potential exchange jurisdictions for all past rulings.

537. 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.

538. 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

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

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

541. 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.

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

543. 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.

[1] OECD (2021), BEPS Action 5 on Harmful Tax Practices - Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD Publishing, Paris, http://www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparency-framework.pdf.

[3] OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, https://doi.org/10.1787/9789264241190-en.

[2] OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris, https://doi.org/10.1787/9789264115606-en.