EY Survey on the Impact of Global Tax Reforms

Global tax reforms are significantly changing the terms of transfer pricing, with companies most concerned about double taxation and inflation affecting the pricing of related party transactions in the long term, according to an Ernst & Young (EY) survey of large corporate executives in more than 40 countries, including Hungary.

The international financial advisory firm said in a summary sent to MTI that the vast majority of respondents (84%) believe there is a moderate or significant risk of double taxation being extended to their companies, linked to the introduction of global minimum tax rules. Seven in ten (71%) professionals cited inflation and 51% cited higher interest rates as factors affecting their company's transfer pricing practices.

“This high degree of uncertainty in transfer pricing impacts a number of business decisions, such as capital transfers and double taxation," Trace Fultz, EY's global head of transfer pricing said according to the release.

Transfer pricing refers to the pricing of transactions within related parties.

The statement recalls that the Hungarian National Tax and Customs Administration (NAV) has for years placed a high priority on transfer pricing controls. According to EY experts, this is unlikely to change this year, as new reporting obligations will be imposed on groups of companies obliged to keep records. In addition, the relevant legislation requires them to provide information on their related party transactions in their corporate tax returns, they said.

The reform of the international tax system will also bring drastic changes to the lives of domestic companies, András Módos, EY's tax partner, said in the statement. Domestic companies will have to deal with the end of the US-Hungary tax treaty and the introduction of the global minimum tax, while changes to corporate tax and accounting rules will also impose a number of new tasks.

EY's International Tax and Transfer Pricing Survey 2024 was conducted between September and October 2023. In the survey, 1,000 executives from large companies in 47 jurisdictions, including 19 industries in Hungary, were interviewed on various international tax and transfer pricing topics.