A new agreement was signed between the Government of Hungary and the United States, the purpose of which is to assess the risks of transfer pricing and the risks of reducing the tax base, as well as to increase the international transparency of the tax authorities. Under the agreement, information on country-by-country annual reports will be automatically exchanged, thus improving tax authorities’ access to international data on the income and tax payments of multinational companies, according to the public consultation. of the draft law.
As part of the agreement, the relevant authorities agree on the timing, method and other details of the exchange of reports between individual countries. Data security and data protection rules, as well as other terms related to the exchange, are recorded in the documents. If problems arise during the implementation of the agreement, the parties are obligated to initiate consultation in order to develop effective solutions.
After the Agreement enters into force, Hungary and the United States may amend it by mutual agreement, and the Agreement shall enter into force upon written notification from the Hungarian Government. However, information exchange will only begin if the terms of the agreement are met.
The agreement will be automatically terminated after two years, unless the parties decide otherwise or the agreement for mutual administrative assistance in tax matters is terminated. The signatories to the agreement ensure that both parties comply with their obligations arising from the agreement.
The current decision is important in controlling international transfer pricing scams, but it also has a role in the effective implementation of global minimum taxes.
Data sharing is not new between the two countries: the current draft agreement will replace 2018 legislation with a similar topic. For the OECD initiative on tax erosion and profit shifting (BEPS) of the system (Base erosion and profit shifting), as well as unilateral national legislation and are linked to increased cross-border information exchange between tax authorities.
A key element of BEPS Action Plan No. 13 is the country-by-country reporting requirement (CbCR), which applies to multinational companies (MNCs) with gross revenues of €750 million or more and requires the submission of an annual country-by-country report covering key elements. Details of financial elements by specialty.
This report provides transparency regarding revenues, income, tax payments, employment, capital, retained earnings, fixed assets, and activities.
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