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February 15, 2021

Hungarian Ministry of Finance issues guidance on Mandatory Disclosure Rules

Executive summary

On 28 January 2021, the Hungarian Ministry of Finance published guidance (the Guidance) on the application of the rules set out in the Act XXXVII of 2013 on the rules of international administrative co-operation related to taxes and other levies (referred to as Act XXXVII of 2013) implementing the European Union (EU) Directive on the mandatory disclosure and exchange of cross-border tax arrangements (referred to as DAC6 or the Directive).

The final Hungarian Mandatory Disclosure Rules (MDR) legislation is substantially aligned to the requirements of the Directive. However, most elements of the hallmarks included in the Hungarian MDR legislation are not specifically defined. The guidance published by the Ministry of Finance on 28 January serves as a general explanation on the provisions of the Hungarian MDR legislation and lists several practical examples for a better understanding of the definitions and hallmarks. The Guidance also specifies cases where the reporting obligation lies with the taxpayer and not with the intermediary.

Detailed discussion


The Council of the EU Directive 2018/822 of 25 May 2018 amending Directive 2011/16/EU regarding the mandatory automatic exchange of information in the field of taxation (the Directive or DAC6), entered into force on 25 June 2018.1

The Directive requires intermediaries (including EU-based tax consultants, banks and lawyers) and in some situations, taxpayers, to report certain cross-border arrangements (reportable arrangements) to the relevant EU member state tax authority. This disclosure regime applies to all taxes except value added tax (VAT), customs duties, excise duties and compulsory social security contributions.

Cross-border arrangements will be reportable if they contain certain features (known as hallmarks). The hallmarks cover a broad range of structures and transactions. For more background, see EY Global Tax Alert, Council of the EU reaches an agreement on new mandatory transparency rules for intermediaries and taxpayers, dated 14 March 2018.

Hungary has introduced domestic legislation to give effect to the Directive.2 Hungary also opted for the deferral of reporting deadlines by six months as permitted by the EU Council Directive 2020/876.3 Consequently, reports should be made by 28 February 2021 for ”historical” cross-border arrangements (i.e., arrangements that became reportable because the first step was implemented between 25 June 2018 and 30 June 2020). With respect to arrangements targeted by DAC6 starting on 1 July 2020, where a reportable cross-border arrangement is made available for implementation, or is ready for implementation, or where the first step in its implementation has been made between 1 July 2020 and 31 December 2020, the period of 30 days for filing information should begin by 1 January 2021, meaning the latest date to report these arrangements is 31 January 2021. The date for the first exchange of information on reportable cross-border arrangements to occur by is 30 April 2021.

The Hungarian Ministry of Finance prepared a practical and informative guide on the interpretation of reportable arrangements and the related definitions and hallmarks. The key highlights of the newly issued Guidance are summarized below.

Overview of the Guidance

The Guidance is organized as follows:

  • Information on reporting:

o   Purpose of reporting

o   Person liable for reporting

o   Time of reporting

o   Method of reporting

o   Penalties

  • Interpretations:

o   Definitions

o   Hallmarks

Key provisions of the Guidance


The term "arrangement" is to be construed broadly and may include, any type of transaction, payment, structure, and contract. The term also includes arrangements comprising of several steps or parts, and a series of arrangements as well.

Cross-border arrangements are defined as arrangements concerning more than one Member State or

a Member State and a third country. A cross-border arrangement is reportable if it meets at least one of the hallmarks A-E specified in Annex IV of the Act XXXVII of 2013. The hallmarks can be distinguished as hallmarks which are subject to the main benefit test (MBT), and those which by themselves trigger a reporting obligation without being subject to the MBT.

Main benefit test

The Guidance describes the MBT as an objective test that concentrates merely on the result and not on the taxpayer's intention. It is not necessary for the obtainment of the tax advantage to be the sole result of the arrangement, it is sufficient if it is one of the main benefits. However, the MBT is not satisfied if the tax advantage is merely randomly linked to the arrangement or the available tax benefit is negligible compared to the other benefits (e.g., economic benefits).

The concept of a tax advantage is to be understood broadly to include any situation which results in a reduction in the tax liability. However, for Hungarian reporting purposes, the definition of "tax advantage" may be interpreted narrowly, not taking into account the tax benefits provided by Hungarian legislation (especially rebates and exemptions), if the underlying arrangement (or series of arrangements) are based on real economic and commercial reasons.

Hallmarks A-E

Hallmark A1 – Use of confidentiality clauses

The Guidance clarifies that it is sufficient to have a generally defined condition of confidentiality that limits the reporting of information concerning the expected tax benefit to other intermediaries or tax authorities to fall within the scope of this hallmark.

Hallmark A2 – Remuneration related to tax advantage

The Guidance lists practical examples where this hallmark is triggered. For instance, arrangements where the fees invoiced by the intermediary have to be repaid if the expected tax advantage is not achieved should trigger this hallmark.

Hallmark A3 – Standardized documentation and structures

This hallmark concentrates on tax products that are readily available to the taxpayer, requiring minimal modifications, if at all. Such products are primarily tax-driven, so it is highly unlikely that the product will be sold without the expected tax benefit.

Hallmark B1 – Loss buying

Based on the Guidance, this hallmark covers two particular situations: i) utilizing losses in another jurisdiction, and ii) accelerating the utilization of losses. For MDR purposes, an entity should be regarded as loss-making if it carries losses – regardless of whether it will generate additional losses in the future.

Hallmark B2 – Conversion of Income to capital

The Guidance does not provide specific examples or detailed interpretation for this hallmark.

Hallmark B3 – Circular transactions

The Guidance does not provide specific examples or detailed interpretation for this hallmark.

Hallmark C1 – Deductible payments to related parties

According to the Guidance, arrangements carried out between a head office and its permanent establishment – such as profit allocation – should be outside of the scope of this hallmark, given that permanent establishments are not included in the definition of related parties for MDR purposes.

Hallmark C2 – Depreciation

According to the Guidance, even if a deduction for depreciation is accounted for the same asset in more than one jurisdiction, no reporting is required if income is recognized in both jurisdictions also. Therefore, cases where the double tax treaty allows for crediting profit allocated to the foreign permanent establishment of a taxpayer should be outside the scope of this hallmark.

Hallmark C3 – Relief from double taxation

An example set by the Guidance that satisfies this hallmark is if, as a result of a hybrid transfer, withholding taxes levied are credited in more than one jurisdiction for the same financial instrument.

Hallmark C4 – Transfer of assets with a material difference in the price used for tax purposes

The Guidance stipulates that a difference should be “material” if there is a difference of 40%, or HUF500 million (approximately €1.4 million) between the two values (whichever is the lesser amount).

Hallmark D1 – Circumventing reporting obligations

The Guidance clarifies that where a financial institution transfers money to another country outside of the Common Reporting Standard (CRS), but has no knowledge as to the underlying reason for the transfer and if an arrangement exists, it is typically not reportable.

Hallmark D2 – Obscuring beneficial ownership

According to the Guidance, the beneficial ownership concept should be interpreted in line with Section 3 (38) of the Act LIII of 2017 on the prevention and combating of money laundering and terrorist financing that adopted the definition from 2015/849/EU Directive.

Hallmark E1 – Unilateral safe harbors

Based on the Guidance, multilateral advance pricing arrangements (APAs) concluded between two or more tax authorities should not fall within the scope of this hallmark.

Hallmark E2 – Hard-to-value intangibles

According to the Guidance, an arrangement should be captured by this hallmark if, upon the transfer of the intangible asset, no reliable comparable data exists in terms of future cash flows or income projection, or if the assumptions used in the assessment are very uncertain.

Hallmark E3 – Cross-border transfers

This hallmark should not be triggered if the assets being transferred are shares in a subsidiary. The Guidance also highlights that the determination of earnings before interest and taxes (EBIT) is not specified in the Directive, accordingly, the term should be interpreted in accordance with the Hungarian accounting rules.


The Guidance further elaborates on the two categories of intermediaries. For the purposes of the Hungarian MDR, direct intermediaries should mean those who actively participate in the design of arrangements and tax planning schemes, and the ones advising the clients in this respect. The Guidance specifically lists lawyers specialized in tax law, tax advisor companies and in-house tax departments as examples to this category.

Indirect intermediaries should cover a much wider range including any person that knows or could be reasonably expected to know that they have undertaken to assist with respect to designing, making available for implementation or managing the implementation of a reportable cross-border arrangement should be included. The Guidance names bookkeepers, auditors, trusts, investment funds and financial institutions as examples that may fall within this category.

The Guidance also states that it is unlikely that a person who provides only routine services (such as for example when an accountant processes an invoice for accounting purposes, a tax advisor submits a tax return on behalf of a client or a bank that routinely transfers money) would qualify as an intermediary.


As a general rule, intermediaries should primarily be liable for reporting. The Guidance provides for three situations where the reporting obligation lies with the relevant taxpayer:

  • The intermediary notifies the relevant taxpayer that the reporting would be in breach of the obligation for confidentiality laid down in the domestic legislation governing his activity (legal professional privilege or LPP), and no other intermediary is involved.

  • The intermediary has no EU nexus.

  • There is no intermediary involved in the arrangement.

The Guidance emphasizes that in cases where only part of the information is subject to LPP, the exemption should apply only to that part of information. Also, if the taxpayer – in line with domestic law – relieves the intermediary of the LPP concerning the particular reportable cross-border arrangement, then the reporting obligation should remain with the intermediary.

Besides the above, the Guidance further elaborates on the events triggering a reporting obligation. A reportable arrangement is “made available for implementation” when it becomes practically possible to implement the arrangement, and the intermediary communicates the related information to potential clients. The arrangement is “ready for implementation” when the parties involved are ready to initiate the transaction. As a result, arrangements that have not yet been actually implemented may also be subject to the reporting obligation.

The Guidance also highlights that reporting should be completed electronically on the java based “ÁNYK” platform of the National Tax and Customs Administration of Hungary (NTCA) that is also used for filing tax returns. Pre-registration is not required to do the reporting as the aforementioned platform can be accessed via the company gate of the relevant taxpayer or intermediary.

The KONSTR form (that is the form used for MDR reporting purposes) is in Hungarian, however, it can be filled out both in English and in Hungarian. The KONSTR form should be submitted by the person liable for reporting or its authorized representative. Once the reporting is completed, the NTCA generates a specific Hungarian reference number and sends it separately to the company gateway of the reporting party. This number should be kept for five years and be shared among the parties impacted by the reportable cross-border arrangement. More information on the rules of electronic submission can be found on the NTCA website (,


The Guidance does not provide additional explanations on penalties for non-compliance. Based on the rules stipulated in the Act XXXVII of 2013, in the case of a failure to report or in the case of late, incorrect, false or incomplete reporting, the NTCA may levy default penalties on the persons liable for reporting up to an amount of HUF500,000. However, no such penalties should be levied in the case of late, incorrect, false or incomplete reporting if the person liable for reporting or notification proves that he acted in the given situation as generally expected.

Nonetheless, in the case of a breach described above, the NTCA may levy default penalties up to an amount of HUF5 million if the persons liable for reporting or notification do not complete or do not lawfully complete their liability within the deadline specifically set by the NTCA.

Next steps

Determining whether there is a reportable arrangement raises complex technical and procedural issues for both taxpayers and intermediaries. Due to the scale and significance of the regime enacted, taxpayers and intermediaries who have operations in or involving Hungary should review their policies and strategies for logging and reporting tax arrangements, so that they are fully prepared for timely meeting their obligations.


  1. For background on MDR, see EY Global Tax Alert, EU publishes Directive on new mandatory transparency rules for intermediaries and taxpayers, dated 5 June 2018.

  2. See EY Global Tax Alert, Hungary passes act to implement Mandatory Disclosure Rules, dated 16 August 2019.

  3. See EY Global Tax Alert, Hungary extends MDR reporting deadlines for six months, dated 20 July 2020.


For additional information with respect to this Alert, please contact the following:

Ernst & Young Consulting Ltd., Budapest


The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


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