The importance of related party transactions has been reinforced by a recent guideline issued by the Hungarian Tax Authority ("APEH"). In this guideline, APEH has expressed that in the future, it would increasingly focus on related parties and their transactions, by carrying out parallel audits of these entities, and examining their transfer pricing arrangements.
Related party transactions are regulated by rules from several different areas of Hungarian tax law. These include the rules of Hungarian domestic corporate tax, value added tax ("VAT"), tax procedures and also certain international tax rules, such as Hungary's double tax treaties.
Regarding corporate tax, it should be mentioned that domestic Hungarian rules currently in force, in particular the Act on Corporate Tax and Dividend Tax of 1996 ("Corporate Tax Act"), already contain the "arm's length principle". The same principle is also included in the OECD's 1995 Transfer Pricing Guidelines, the provisions of which should
