business guide hungary

Business Guide

HUNGARYFacts & Figures For Your business

2021

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Business Guide

HUNGARYFacts & Figures For Your business

2021

5DUIHK Business Guide Hungary 2021

For centuries, the Hungarian people, the country’s history, culture and economy have been an inseparable part of Central Europe. Today, it is a re-spected member of the European Union, with a strong and modern econo-my which is deeply integrated in international production and value chains.

Our brochure provides an overview of relevant information for compa-nies which intend to purchase, sell or invest in Hungary.

Coverage includes information on key business related areas such as the general economic profile, labour markets, infrastructure, taxes and the legal framework, local market potential.

This publication shall be a first-step navigator to Hungary. If you want to learn more about business opportunities in or with Hungary, our experts will be happy to provide you with more in-depth information and a wide range of business-related services, a summary of which you may find at the end of this brochure.

Finally, we appreciate any suggestion on how to improve this publication – please feel free to contact us any time.

PREFACEHUNGARY – AN ATTRACTIVE BUSINESS PARTNER

As per Act LXXVI of 2017, DUIHK is subject to regulations

on organisations being supported from abroad.

Imprint

© German-Hungarian Chamber of Industry and Commerce (DUIHK)Budapest, 2020

CEO: Gabriel A. Brennauer

Editor, project manager: Dirk Wölfer

Editorial and production team: Tamás Kelemen

Copy date: December 14, 2020

Legal notice:All rights reserved. The texts, images, graphics and layout of and in this publication are protected by copyright. The illicit use, reproduction or dissemination of the publication or any parts of it will be prosecuted in accordance with the applicable criminal and civil laws.

Contents may be used free of charge upon providing the reference “Source: German-Hungarian Chamber of Indus-try and Commerce (DUIHK)”.

The information contained in this publication has been obtained from reliable sources with due care and diligence. However, DUIHK does warrant completeness, accuracy or timeliness of the information. DUIHK accepts no liability whatsoever for direct or indirect consequences or damages resulting from the use of the information provided.

Certain links in this publication refer to websites maintained by third parties over whom DUIHK has no control. DUI-HK accepts no liability whatsoever for the information contained in those websites.

References: References (e.g. 19) are listed in detail in the Appendix.

6 Business Guide Hungary 2021 DUIHK 7DUIHK Standort Ungarn 2018

CONTENTS

LAND AND PEOPLE

Geography 8Climate 9Population 9Administration 11Political system 11Milestones of history 12

ECONOMIC PROFILE

Business demography 19Economic growth 20Industry 22Tourism 23

INFRASTRUCTURE

Transport and logistics 13Road tolls 15Telecommunications 16Energy 16Research and development 17Hungarian ingenuity 18

LABOUR MARKET

Labour costs 24Labour regulation, 27collective bargaining

Qualifications 28

8 PRICES, INTEREST RATES, CURRENCY

Inflation, interest rates 32Currency 33Currency-History 34Payment system 34

32

LEGAL ENVIRONMENT

Corporate law 49Accounting 50Jurisdiction and dispute settling 50Intellectual property 51

49

INVESTING IN HUNGARY

Foreign Direct Investment (FDI) 37Investment incentives 39

37

TAXATION

Value Added Tax 45Corporate taxes 46Local taxes 47Sectoral taxes 48Social security contributions 48Personal income tax 48

45

SELLING IN HUNGARY

Retail market, purchasing power 41Public procurement 42Fairs and exhibitions 43Competition, consumer protection 44Payment behaviour 44

41

19

24

13

REGIONS

31

DUIHK BUSINESS SERVICES

USEFUL INFORMATION

Travelling to and staying in Hungary 52Working in Hungary 52Public holidays 52

53

52

IMPORTANT ADDRESSES

54

FOREIGN TRADE

35

8 9Business Guide Hungary 2021 DUIHK DUIHK Business Guide Hungary 2021

GEOGRAPHY

With a population of about 10 million people and a national territory of barely 100,000 km2, Hungary belongs to the small-to-medium-sized countries of Europe.

INHABITANTS, HOUSEHOLDS

At the beginning of 2020, Hungary had about 9.77 million inhabitants. The population number has been declining consistently since the early 1980’s, when it was larger by about one million persons. The average population density is 105 people/km², excluding the capital Budapest it is only 87 people/km². 3, 4

There are 4.1 million private households in Hungary; 1.34 million of them are single-person households, and the average number of persons per house-hold is 2.4. 5

About 84 per cent of the territory has an altitude of less

than 200 m above mean

sea level.

Area: 93,023 km² Major rivers:

Danube (Hungarian: “Duna”) – length of the Hungarian section: 417 km Tisza – 596 km

Largest lake: Balaton – surface area: 596 km² Highest mountain: Kékes (Mátra mountains) – height: 1,014 m Total length of state borders: 2,246 km

Neighbouring countries (length of common state borders):

Weather data for Budapest *

CLIMATE

POPULATION

1

2

LAND AND PEOPLE

Slovakia

Romania

Austria

Croatia

Serbia

Ukraine

Slovenia

30

25

20

15

10

5

0

-5

-10

°C mm

120

100

80

60

40

20

0

679 km

453 km

356 km

355 km

164 km

137 km

102 km

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

precipitation (mm) max. temp. min. temp.

* Based on 1981– 2010 data averages

temperature: LH scale, precipitation: RH scale


URBANISATION

About 18% of the population lives in the capital, Budapest, another 52% in other cities and towns. The smallest village is Debréte in Northern Hungary, with just ten residents, but 26 flats. 6

There are 346 towns (including the capital) and 2,809 other municipal-ities in Hungary.

NATIONALITIES

In the latest microcensus (2016), 96% of the population claimed to be Hungarian by nationality, 3.1% identified as Roma, and 1% as German by nationality. 7

There are larger Hungarian minority groups in several neighbouring countries: primarily in Romania (ca. 1.4 million, particularly in Transyl-vania), Slovakia (0.5 m), Serbia (0.3 m, particularly in Vojvodina) and in Ukraine (0.2 m). 8

RELIGION

According to the 2011 census, 39% of the population was Catholic, 14% belonged to Calvinist or Lutheran churches, and 18% did not affiliate with any religion, while 27% did not specify their religious affiliation. 9

6

Cities with more than 100,000 habitants2019

Administrative units(as of 1.1.2020)

Capital city Budapest (1.75 million inhabitants) with 23 urban districts 19 counties (“megye”) 174 rural districts (“járás”) and 23 urban districts of Budapest 345 cities and 2,809 municipalities In the regional statistics of the European Union, Hungary is divided into

seven so-called “NUTS 2” regions.

Hungary is a parliamentary democracy with a single-chamber parliament (National Assembly – “Országgyűlés”). The head of state is the “President of the Republic”. The President is elected by the Parliament for a five-year tenure (with the possibility of one re-election). Legislative bodies are elect-ed on the national level (National Assembly) and at the local level.

The National Assembly has 199 representatives. Regular elections take place every four years; the last poll was held in April 2018. At the local level, mayors and deputies to the local and the regional councils are elected ev-ery five years; the last election was held in autumn 2019.

INTERNATIONAL RELATIONS

Since May 1, 2004, Hungary has been an official member of the European Union, and accordingly, EU law is fully applicable in Hungary. Hungary is entitled to 21 out of 705 seats in the European Parliament.

Hungary joined the so-called “Schengen Area” in 2007; border controls were therefore abolished at the Austrian, Slovenian and Slovakian borders.

Hungary joined NATO on March 12, 1999.

POLITICAL SYSTEM

6

Győr 133,946 Budapest 1,750,216

Miskolc 152,901

Nyíregyháza 116,814

Szeged 160,258

Debrecen 201,112Kecskemét 110,373

Pécs 141,843

ADMINISTRATION


The quality of Hungarian infrastructure – transport and logistics, energy and telecommunications – has improved substantially over the last decades and is being regarded today as supportive for growth and investments.

Traffic volume by means of transport*2019, shares in per cent

TRANSPORT AND LOGISTICS

ROAD TRAFFIC

Hungary has a road network of about 32,000 km in total (excluding mu-nicipal roads), out of which 8,600 km constitute the main grid. In April 2020, the total length of motorways and expressways amounted to 2,100 km, i.e. the network roughly doubled since Hungary’s EU accession.

11

INFRASTRUCTURE

The origins of the Hungarian people still have not been fully ascertained. Most theories place their roots in the Ural Mountains area. From there, Hungarian tribes most likely started to migrate westwards, crossing the Caucasus Mountains, around 1100 BC.

At the end of the 9th century AD, the Hungarians reached the Car-pathian Basin. 895 is considered the year of “homeland occupation”.

About 100 years later, in 996, tribal chieftain Vajk married the Bavar-ian Princess Gisela. At the turn of the year in 1000 he was crowned as King Stephen I. This date is considered the foundation of the Christian state of Hungary.

1526: Hungary suffered a devastating defeat against the Turks in the battle of Mohács. Subsequently, major parts of Hungary were ruled by the Turks and by the Austrians, the Turk occupation lasted for more than 150 years until 1699.

1848, March 15: Outbreak of the Hungarian Revolution against the Habsburgs. It was broken down by the Austrians with the help of Russia.

1867: The Austro-Hungarian Compromise (“kiegyezés”) established the Austrian-Hungarian dual monarchy, Hungary was granted rela-tively broad autonomy within the Empire.

1920: Treaty of Trianon (Versailles) – After World War I, Hungary lost nearly two-thirds of its territory.

1944: Germany seized Hungary, its former ally in World War II. 1949: Establishment of a communist regime. 1956, October 23: National uprising against the communist regime,

brutally defeated with the help of Soviet troops after three weeks. 1989, September 10: Hungary opened its borders to Austria for

East-German refugees. 1989, October 23: Proclamation of the Republic of Hungary. 2004, May 1: Hungary joined the European Union.

Milestones of history

Railway Roads Waterways Pipeline Air

Freight traffic 18 63 4 15 ::

Inland 10 76 0 14 ::

International 22 57 5 16 ::

Passenger transport ** 25 45 0 :: 30

10

* based on tonne-kilometres / passenger-kilometres. ** interurban transport, including cross-border traffic, but

excluding local transport and passenger car traffic.


RAILWAY TRANSPORTThe railway network measures 7,743 km in total (2019), out of which 16% are double or multi-tracked, and 40% are electrified. 13

AIR TRANSPORT

The country's most important airport is the “Liszt Ferenc” Airport in Bu-dapest. In 2019, its traffic reached 16.2 million passengers, while the total number of take-offs and landings exceeded 122,000, i.e. on average the airport handled about 335 flight movements and more than 44,000 pas-sengers every day. 14

Other airports with international traffic: Debrecen (601,000 passengers in 2019) Győr–Pér (16,000) Zalavár–Sármellék (“Hévíz–Balaton”) Pécs–Pogány

ROAD TOLLS

15

16

TRUCKS OVER 3.5 TONS

On approx. 7,000 km of motorways, highways and other main roads, a distance-based toll has to be paid for trucks over 3.5 tons (so-called “HU-GO-System”). The fee depends on the size-category and the environmen-tal classification of the vehicle. Payment can be made online through on-board-units (OBU) or distance-tickets purchased in advance.

PASSENGER CARS AND LIGHT TRUCKS

Toll roads may only be used with a valid electronic vignette (“e-matrica”). Vignettes can be purchased online, at filling stations and at other points of sale, or by a smartphone app.

Emission class A (>=Euro V) B (Euro II-IV) C (<=Euro I)

vehicle-category (axles) highway / non-highway

2 5.063 / 2.153 5.956 / 2.533 6.849 / 2.919

3 7.103 / 3.729 8.356 / 4.387 9.609 / 5.045

4 + 10.995 / 6.858 12.935 / 8.068 15.522 / 9.682

10 days

3,640

16,1007,270

period of validity

D1 (motorbikes, passenger cars up to 7 persons, light commercial vehicles up to 3.5 tons, trailers)

B2 (buses)

D2 (other)

1 month

4,970

22,8309,930

entire country

44,660

207,77044,660

single county only

5,200

20,78010,390

1 year

Road toll fares for commercial vehiclesas of Jan 1, 2021; in HUF per 100 km (fees for express-roads / main roads)

Road toll fares for major categories of cars in HUF, effective Jan 1, 2021

Existing motorways and expressways

Expressways under construction

No major city is farther than 250 kilometers from Budapest, they all can be reached from the capital by car within no more than 4 hours.

There are 3.8 million registered passenger cars in Hungary (end 2019), up more than 25% over the last 10 years. 12

Motorway network in Hungary2020

M3M30

M25

M3

M0

M2

M5

M43

M9

M6

M60

M7

M35

Budapest

M15

M86

M1

M44

M4 M4

M8


In 2019, network-providers reported 12.5 million mobile telephone contracts (131 per 100 residents), but only 3.2 million fixed lines. The number of internet connections was 10.3 million, 70% of which are mobile connections, while 30% are provided via high-speed cable (TV or optical fibre cable). 17

The Hungarian mobile communications network is of high quality in terms of coverage and reliability. The industry-portal, OpenSignal, regularly ranks Hungary among the top countries regarding 4G-availability, download speed and latency experience.

In 2019, about EUR 2.2 bn were spent on R&D in Hungary, i.e. about 1.5% of GDP. The bulk of the R&D expenses (53%) were covered by the private enterprise sector, 33% by the state budget, and another 13% by foreign sources, including the European Union. 22

TELECOMMUNICATIONS

ENERGY

RESEARCH AND DEVELOPMENT

* of 100 countries18

Aside from some lignite fields, Hungary has no major energy sources of their own. Therefore, nearly 70 per cent of domestic primary energy con-sumption must be covered from net imports. 19

About 69% of the domestic primary energy consumption is covered by fossil fuels (predominantly natural gas and petroleum), 16% from nucle-ar energy, and 15% from other sources (renewables, electricity imports and other). 20

Energy prices: Electricity prices in Hungary are among the lowest in the EU. For non-household users, prices are about 20% lower than the EU-average. Natural gas prices for non-household consumers are similar to German price levels.

* average prices for typical midrange consumers (first half of 2020) % global ranking* Mbps global ranking*

Japan 98.5 1 49.3 4

South Korea 98.3 2 59.0 2

US 96.1 3 26.7 25

Netherlands 95.9 4 54.8 3

Canada 93.5 12 59.6 1

Hungary 92.8 18 31.7 17

Austria 91.4 23 34.6 12

Germany 85.8 50 28.7 23

Quality of 4G mobile network systems May 2020

4G availability average download speed

23

21

by sector

total State Higher education Private enterprises

R&D-facilities 3,555 142 1,331 2,082

Employees 84,651 12,846 33,600 38,205

Expenses (HUF bn) 702,199 70,216 99,695 527,290

R&D infrastructure in Hungary 2019

Energy prices in Europe (€/100 KWh)*

For more detailed information on higher education, see chapter “Qualification” (page 28).

Electricity Natural gas

private consumers

private consumers

10.3

3.212.3

3.421.3

6.6

15.33.8

30.4 6.0

21.83.6

industrial consumers

industrial consumers

Hungary EU-27 Germany


Hungary is a modern service economy with a strong industrial sector. The economy is highly export-oriented, even when compared internationally. Hungary’s most important economic partners are the EU member states, particularly Germany.

In Hungary there are about 780,000 firms and corporations, the most common legal form of corporations is the limited company (“kft.”). 24

95% of companies employ less than ten employees, while only about 1,000 companies have more than 250 employees. However, the latter generate more than 40% of the economic output.

ECONOMIC PROFILE

Hungary has contributed several ground-breaking inventions and dis-coveries to the world, from vitamin C to holography and vinyl records. Nobel Prizes have been awarded to 16 scientists and scholars of Hun-garian origin - though only two of them got it for their research at home, while the majority achieved their success at institutions abroad. Some Hungarian inventions are still part of everyday life around the globe.

Various Hungarian inventions are still part of everyday life around the globe.

Anyone charging his or her smartphone can do so thanks to three Hungarian engineers: Ottó Bláthy, Miksa Déri and Károly Zipernowsky who in 1885, invented the power transformer. Without them, none of today’s power adapters, or most electric devices, would work.

Today, most of us communicate using keyboards or touchscreens. However, the most frequently used writing tool is still the ballpoint pen. It was created in 1938 by Hungarian inventor, László József Bíró. That’s why ball pens are still widely known as “biro” in English speak-ing countries.

Even after almost 40 years, the “Magic Cube” of Hungarian inven-tor Ernő Rubik has not lost any of its fascination to fans around the world. A Rubik’s Cube World Championship has been held every two years since 2003. Just as a curiosity: the way to calculate the number of possible combinations of the cube is (8!×38-1) × (12!×212-1)/2, which is more than 4.3 × 1019.

Hungarian ingenuity

Number of employees

less than 10 10-249 250+

Number of enterprises 95 5 0.1

Number of employees 38 34 28

Gross value added 25 35 40

Sales revenues 20 38 41

Export revenues 6 26 68

Economic indicators by company size category 2019, shares in per cent

25

BUSINESS DEMOGRAPHY


* not consolidated, partly estimated data.

26

30

After the collapse of the socialist regime in 1989/90, Hungary’s economic performance suffered a dramatic setback. After a few years of consolida-tion, from 1997 on, the economy was growing by approx. 4% annually, except for the period between 2007 and 2012 when the economy was hit by its own structural shortcomings and the 2008-2009 global financial crisis. In 2018 and 2019, the GDP growth rate hit about 5% and ranked among the top performers in the European Union.

Hungary’s 20 largest private corporations by turnover*2019

Annual growth of Hungarian Gross Domestic ProductChange over previous year in per cent

27, 28, 29

Nominal value: HUF 47,514 bn (EUR 146,1 bn = 0.9% of EU-28 GDP) GDP per capita in Purchasing Power Standards: 74% of EU-28 average Share of private business in gross value added (2019): 84%

Key indicators of the Hungarian GDP2019

Gross value added by branches of economy 2019, shares in per cent

6543210

-1-2-3-4-5-6-7-8

Company Industry Sales Export sales Employees (HUF bn) (HUF bn)

Mol Energy 5,267 3,912 26,330

Audi Hungária Automotive 2,830 2,817 13,096

Bosch Group* Electronics 1,532 1,345 14,864

Mercedes-Benz Manufacturing Automotive 1,218 1,216 14,864

Wizz Air Aviation 1,006 1,003 4,772

Flextronics International Electronics 966 951 3,896

Magyar Suzuki Automotive 796 683 6,518

Samsung Electronics Electronics 762 580 2,350

Ventas Coffee Hungary Tobacco-trade 696 6 1,521

Magyar Telekom Information/

communications 667 58 2,394

Magyar Földgázkereskedő Energy 665 229 13,113

Harman Becker Automotive 611 577 5,603

Tesco-Global Retail 602 3 1,699

Spar Magyarország Retail 576 1 12,906

Lidl Magyarország Retail 552 1 3,330

Richter Gedeon Pharmaceuticals 508 467 458

BorsodChem Chemicals 467 391 5,975

OMV Energy 465 4 263

Cloud Network Technology Information/

communications 455 437 281

E.On Energiakereskedelem Energy 420 0 925

ECONOMIC GROWTH

agriculture 4

manufacturing 22

transport, storage 6

information, communication 5

other services 25

Public administration, education, social services 17

19891990

19952000

20052010

20152019

construction, other industries 9

-11.9

agriculture industry services public sector

trade, accomodation, food services 13


INDUSTRY 4.0

In 2016, a “National Platform Industry 4.0” was set up, which follows objectives and structures of similar initiatives in Germany and other countries. The DUIHK is one of the founding members. The platform’s objective is to share and disseminate know-how and the best practices, while certified “model factories” help domestic SMEs to join the latest international trends of industrial supply and value chains.

INDUSTRIAL PARKS

There are 193 “industrial parks” and 18 “science and technology parks” in Hungary, which host about 3,400 businesses and cooperate with 63 R&D partner organizations (June 2019). These parks offer well-developed infrastructure and a wide range of services for companies hosted there. In order to be eligible for the label “industrial park”, certain minimum stan-dards must be met, e.g. regarding infrastructure and services. 32

Széchenyi bathin Budapest

Lake Balaton, view on Tihany Abbey

* share of export-revenues in total sales revenues

Key branches of industry 2019

Sector production export export- Employees value revenues ratio* (HUF bn) (HUF bn) (%) ('000)

Industry total 34,512 24,986 69.6 1,006

Automotive industry 9,541 8,674 90.6 174

Electronical, optical, electrical goods 5,623 5,250 93.5 150

Food, beverages, tobacco 3,545 1,391 39.5 139

Rubber, plastics, ceramic products 2,953 1,759 60.1 89

Basic metals, metal products 2,689 1,561 58.0 121

Chemical industry 2,558 1,822 71.6 47

Machinery and equipment 1,829 1,475 79.2 60

Hungary has an advanced and strongly export-oriented industry: 65 per cent of industrial goods are sold to foreign customers. For com-parison: this ratio is about 51% in Germany.

The manufacturing industry is characterised by a strong presence of foreign companies, which generate about two thirds of production, their share is even higher in exports.

The most important branches are the automotive, construction, chemical, electric and electronic industries.

Tourism is an important economic factor for the country. In 2019, Hungary was visited 61 million times by foreign tourists and business men, 28 per cent of all trips were at least 2 days long. Foreigners spent about € 7 billion in Hungary, thus contributing considerably to the current account surplus.

The most popular destination for foreign guests is Budapest, while Hungarians prefer the Balaton region the most. 33

INDUSTRY

TOURISM

31


From the employers’ point of view, favourable labour market conditions have largely contributed to the attractiveness of the country as a business location for many years. Some key advantages of the Hungarian labour market are the high levels of skills as well as a fair ratio between qualifica-tions, productivity and costs.

The average labour costs amount to about one third to one fourth of Ger-man levels, but this may vary widely depending on the industry, the specific position and the geographical location. During the past few years, the rise in labour costs increased substantially, which was partly due to a strong rise in public sector wages and in the compulsory minimum wage, as well as to the shortage of skilled labour in various sectors.

LABOUR MARKET

* over previous year, in per cent. ** Conversion HUF-EUR at the average exchange rate of the Central Bank of Hungary (MNB)

Gross HUF change* EUR**

2010 206,863 3.3 751

2015 262,731 4.0 848

2016 276,923 5.4 889

2017 308,994 11.6 969

2018 341,540 10.9 1,071

2019 380,996 11.6 1,171

General minimum wage Skilled workers‘ minimum wage

HUF EUR HUF EUR

2010 73,500 273 89,500 332

2015 105,000 329 122,000 382

2020 161,000 488 210,600 638

34

LABOUR COSTS

Average monthly wagesBusiness sector

Mandatory minimum wages

MINIMUM WAGE

In Hungary, minimum wages apply to all employees. The minimum wage levels are set each year by employers, trade unions and the government. A higher rate applies to jobs that require a higher qualification level.

NON-WAGE LABOUR COSTS

Employers pay a “social contribution tax” on gross wages. In 2016, the government agreed with employers and trade unions on a multiannual scheme, according to which the social contribution tax would be cut in several steps, as long as private sector gross wages would rise at certain minimum rates. According to the deal, the rate was lowered in 2017 from27% of 22%, and in several steps further to 15.5% as of July 1, 2020.

36

454035302520151050

DK

DE

AT

EU

28 SI

GR PT

CZ

EE

SK

HR

HU LV

PL LT RO

BG

46.0

35.9

35.0

27.8

19.2

16.6

13.7

13.6

13.5

12.7

11.1

10.7

10.4

10.4

9.5

7.3

6.0

35

Labour costs selected EU countries2019, euros per hour (business sector)


The Hungarian labour code underwent a fundamental reform in 2012. The new Labour Code offers a competitive combination of flexible regulations for employment, manpower-utilisation and protection of employees’ rights.

Most collective agreements are concluded on a company level; nationwide binding agreements exist only in a few industries.

In Hungary the regular working time is 40 hours per week. The minimum paid leave (holiday) is 20 working days per year, with 1 to 10 additional days added, depending on the employee‘s age. Holidays cannot be compensated in cash. In the case of full-time employment, a maximum of 250 hours of overtime can be ordered per calendar year, another 150 hours can be agreed upon between both parties on a voluntary basis. In general, wages and sal-aries should be set and calculated in Forint.

In case of sick leave, the employee receives a 70% compensation from the employer for a maximum of 15 days per year. From the 16th day on, the em-ployee is entitled to sick pay from social security bodies. Sick leave must be attested from the first day by a medic.

Atypical forms of employment are not widely used in Hungary (3rd quarter of 2020).

Part-time: Out of 4.5 million employed persons, only 5.5 per cent work part-time.

Temporary employment: Less than 6% of labour contracts are temporary.

LABOUR REGULATION, COLLECTIVE BARGAINING

A further element of labour costs is the “vocational training contribution” (1.5% of gross wages), though this may be settled against corporate expens-es on occupational training.

37

GOVERNMENT SUBSIDIES

Social security contributions may be remitted upon request in whole or in part, for a limited period of time in order to support the employment of disadvantaged groups (e.g. underqualified, labour market entrants, elderly employees, women on/after maternity leave). In the case of new invest-ments, special subsidies can be granted under certain conditions, e.g. for training purposes. » See also Section “Subsidies”.

Employer Employee

gross salary 1,000 gross salary 1,000

+ social tax (15.5%) 155 – unemployment contr. (1.5%) 15

+ Vocational training levy (1.5%) 15 – health insurance contr. (7%) 70

= total labour cost 1,170 – pension contribution (10%) 100

– income tax (15%) 150

= net salary 665

Wage related taxes and social charges in effect since July 1, 2020


38

39

40

Population by highest educational degreePopulation of 25+ years, share in per cent

primary school 21

secondary degree – general 26

secondary degree – vocational 26

tertiary degree 23

no educational degree 3

The standard of primary and academic education in Hungary is high. In re-cent years, stakeholders are seeking further measures which should en-able the education system to better and more flexibly match qualification needs to the market demand. Since 2012, the vocational training system in Hungary is undergoing a shift towards the German “dual model”, while in tertiary education “dual study courses” are increasingly launched in co-op-eration between universities and the corporate sphere.

QUALIFICATIONS

* including adult education

Degree number of graduates

Primary school 90,274

Secondary school – high-school 67,072

Secondary school – vocational training 49,190

Tertiary education – university, college 49,132

Number of graduates *2019

VOCATIONAL TRAINING

Since 2012, the vocational training system is being reshaped along the principles of the German “dual model”, i.e. a combination of theory-based training (in vocational schools) and hands-on training in an enterprise. Regional Chambers of Commerce and Industry play an important role in enabling companies to onboard and train apprentices, and in organising the examination system. The current focus is on overhauling curriculars in order to meet the needs of modern professions and industries, and on en-couraging more companies to engage in dual trainings.

Companies may deduct costs of vocational training activities from the “vocational training tax”. » see also section “labour costs”

ACADEMIC EDUCATION

Hungary has 64 universities and colleges (“főiskola”), out of which 27 are run by the state, 23 by religious institutions and 14 by foun-dations or other private institutions. The majority of students (82%) are enrolled in public institutions (2019/20).

Except for medicine and law, most study courses are based on the Bologna system, i.e. they offer a Bachelor course of (usually) six semesters (BA, BSc), and an additional Master course (MA, MSc) of four semesters.

In the autumn semester 2019/2020 a total of 285,000 students were enrolled.

Annually, about 50,000 students acquire a university diploma, a bachelor or a master degree.

About 58% of students receive financial support from the state; 42% have to pay tuition fees.

Service: DUIHK offers an extensive portfolio of training solutions for companies in the field of dual vo-cational training as well as in the fields of adult education and further training for managers.


Economic activity and power is not evenly spread throughout the country. The capital, Budapest, is by far the most important economic centre of the country. About 37% percent of the country’s total value added is being generated there, including the adjacent county of Pest, this share is 47%. Other economically important agglomerations are Győr, Miskolc, Szé-kesfehérvár, Debrecen and Kecskemét. There are remarkable regional differences in economic power per inhabitant too. GDP per inhabitant is twice as high in Budapest compared to the national average.

However, even economically less developed regions can be of interest to potential investors, since labour and other costs may be lower, and public investment subsidies and grants may be higher in these areas.

REGIONS

41

45, 46, 47

* According to ISCED classification

* Jan. 1. ** registered jobseekers. *** Jan.-June

Field of studies Total number of students Number of degrees

Education 28,947 9,129

Humanities and arts 19,648 5,587

Social sciences 21,846 6,438

Law 11,759 2,975

Business and administration 41,796 12,916

ITC technologies 20,488 3,077

Mathematics, life and physical sciences 6,999 2,330

Engineering 30,930 8,496

Architecture and building 7,235 739

Agriculture 8,658 2,373

Health and welfare 29,648 5,280

Services 13,013 2,998

Total 248,704 62,715

Academic degrees by selected fields of studies *2019

Key economic indicators of Hungarian counties *

%

2019

EUR /mth

2020***

1,750 48,795 27,867 1.6 1,429 1,297 13,784 10,851 3.0 1,054 419 5,815 13,937 4.1 1,107 301 4,071 13,645 3.4 1,127 341 3,451 10,108 3.9 1,016 473 7,737 16,665 1.4 1,184 254 3,149 12,425 3.3 1,025 267 2,798 10,374 5.2 909 359 3,338 9,217 8.2 938 300 2,723 9,001 9.9 923 216 2,251 10,305 6.3 1,076 637 6,502 10,076 12.5 883 293 3,015 10,214 8.1 1,035 188 1,157 6,084 11.9 855 527 5,202 9,828 8.9 938 367 3,299 8,900 8.3 927 549 4,298 7,737 10.5 786 502 5,626 11,146 5.3 962 331 2,759 8,207 7.2 828 398 4,021 10,064 3.7 965 9,770 133,791 13,686 5.4 1,144

EUR /capita

2018

‘000 Persons

2020*

BudapestPestFejérKomárom-EsztergomVeszprémGyőr-Moson-SopronVasZalaBaranyaSomogyTolnaBorsod-Abaúj-ZemplénHevesNógrádHajdú-BiharJász-Nagykun-SzolnokSzabolcs-Szatmár-BeregBács-KiskunBékésCsongrád

CentralHungary

Central Transdanubia

Western Transdanubia

SouthernTransdanubia

NorthernHungary

Northern Great Plain

Southern Great Plain

Hungary Total

EUR min.

2018

Population

CountyRegion

GDPJobless

rate**Gross

salaries

LANGUAGE SKILLS

The mother tongue of 97% of the population is Hungarian. About 55,000 people stated German as their mother tongue. 42

About 58% of the 25-64 year old population state that they don't speak any foreign language, while 29% speak one foreign language, 14% two or more (2016). In the age group 25-34 years, language skill ratios are significantly better: 40% speak one, and 20% speak two or more foreign languages. About 52% state they are proficient or good in their best-known language, while 46% have only basic skills. 43

At schools, English and German are the preferred language courses. About 75% of all annual language exams are taken in English, German places second with about 20%. An interesting curiosity: at German lan-guage exams in 2018, 41% of the students failed, at English exams only 32%. In most languages, the majority reaches a B level (according to ECL classifications), only about 10% get a C level degree. 44


Inflation ratesChange over the previous year in per cent

Currency exchange rates of the Hungarian ForintAnnual average rates

2016 2017 2018 2019 Jan.-June 2020

Consumer prices 0.4 2.4 2.8 3.4 3.4

Producer prices – industry -1.7 3.3 5.5 2.1 3.4

Producer prices – construction 2.8 5.2 9.5 9.7 8.1

Export prices -1.0 1.5 3.0 1.7 5.0

Import prices -2.5 1.9 4.0 1.2 2.6

2016 2017 2018 2019 Jan.-June 2020

EUR-HUF 311.5 309.2 318.9 325.4 345.3

USD-HUF 281.4 274.3 270.3 290.7 313.6

CHF-HUF 285.7 278.5 276.2 292.5 324.6

MNB base rate: by the end of the month.

consumer prices: change to the same month of previous year in %.

corporate loan rates: weighted average interest rate on HUF-loans (1-5 years tenure).

Inflation and interest rates

After several years of subdued price growth, inflation picked up again in 2017. The central bank targets a consumer price inflation of 2-4 percent in the medium term. Low inflation pressure facilitated a step-by-step reduction of the central bank’s base rate since the end of 2011, from then 7% to currently 0,6% (as of Nov. 12, 2020). This monetary easing resulted in lower financing costs for businesses as well, which contributed to the growth of corporate investments.

The national currency, the Forint, was declared freely convertible in 1996. In 2001, limitations for capital transactions were repealed too.

The Forint is a “floating” currency, i.e. there is neither a fixed exchange rate target nor a target corridor. However, in practice, the monetary policy of the Central Bank strives to reduce exchange rate volatility versus the Euro and to ensure an exchange rate path, which is in line with macro-economic fundamentals.

By joining the EU, Hungary committed itself to eventually introducing the Euro, provided the relevant economic indicators – usually called the “Maastricht-criteria” – will be met. Hungary presently already meets most of them, nonetheless it seems unlikely that it will join the Euro-Zone within the next few years.

INFLATION, INTEREST RATES

CURRENCY

PRICES, INTEREST RATES, CURRENCY

48 50

49

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

1211109876543210

-1-2

corporate loan rates

MNB base rate

consumer prices


Hungarian foreign trade 2019

Imports Exports Balance

value share value share value in € bn in % in € bn in % in € bn

World total 104.1 100.0 108.9 100.0 4.9

EU-28 76.8 73.8 88.1 80.9 11.3

EU-15 54.7 52.5 62.9 57.8 8.2

of which: Germany 26.3 25.3 30.2 27.7 3.9

New member states * 22.1 21.2 25.2 23.1 3.1

Non-EU countries 27.3 26.2 20.8 19.1 -6.5

Europe 8.8 8.4 9.8 9.0 1.0

Asia 15.5 14.9 5.0 4.6 -10.4

America 2.6 2.5 4.6 4.2 2.0

Hungary is considered one of the most export-oriented economies world-wide. The export of goods and services equalled 82% of GDP in 2019 – near-ly twice the ratio of one of the world’s “export champions” Germany.

Since 2009, Hungary produces considerable trade surpluses, even versus Germany. About 75% of the total turnover (exports and imports of goods) is directed to / from EU member countries. Germany is the most important single trading partner, with an outstanding share of more than one quarter of exports and imports.

The commodity structure of foreign trade is dominated by technology-in-tensive goods: More than half of exports consist of machinery, cars/automo-tive components or electronic and electrical goods.

Hungary can claim to having undergone the highest ever hyperinflation in economic history. The disastrous economic situation after the end of World War II led to an incredible currency depreciation, which was further aggra-vated by massive monetary financing, i.e. “money printing”, forced by the

government. In May 1946, the daily (!) price in-crease exceeded 1.000 per cent, and at the end of July it eventually reached an inconceivable 158.000 per cent. This means that prices were nearly doubling every two hours.

Due to this dramatic devaluation, 1-mil-lion-Pengő banknotes came into circulation in November 1945, and four months later the

first 1-billion-Pengő banknote followed. Shortly afterwards, a new unit, the “Milpengő” (1 million Pengő) had to be created. Starting with the 1-mil-lion-Milpengő banknote, the National Bank even skipped the serial num-bers on the notes. In June 1946, the B-Pengő (1 trillion) was born, and final-ly even “1-billion-B-Pengő” banknotes were printed (=1021 Pengő), though they did not come into circulation anymore.

On 1 August 1946, the Pengő was replaced by the Forint through currency reform. The exchange rate was enormous: 4 × 1029 old Pengős were ex-changed into one new Forint.

"One Billion Milpengő"

banknote from June 1946.

Hungary is not a member of the Eurozone, but it applies the standards of the standardised European payment system, SEPA, for Euro payments in both domestic and international transactions. Bank account numbers are given in the international IBAN-format. Starting in March 2020, domestic bank transfers are being executed within 5 seconds.

PAYMENT SYSTEM

Currency History

51

52

* EU accession countries 2004, 2007, 2013.

FOREIGN TRADE


Agriculture, food

Chemical products

Metals, metal products

Automotive industry

Machinery

Electrical, electronical goods

other

Imports Exports

Foreign companies have brought a considerable volume of investments to Hungary since the early 1990s. By the end of 2019, the total stock amounted more than 87 billion euros. This is equivalent to roughly 8,000 euros per capita, and approx. 60% of GDP. Both ratios are extraordinarily high, even compared internationally. With a share of about 20 per cent German companies are the largest investors in the country. 54, 56

In the private sector, foreign companies employ about 30% of all employ-ees, and generate nearly half of the gross value added. In key branches of the manufacturing sector, e.g. the automotive industry, manufacture of electronic, electrical or machinery products, foreign-owned companies account for even 80-95% of the value added; foreign investors also domi-nate e.g. the telecommunications or the energy sector. 55

INVESTING IN HUNGARY

FOREIGN DIRECT INVESTMENT (FDI)

53

* based on the international Combined Nomenclature of Foreign Trade

Germany 18

Netherlands 15

Austria 9EU other 21

Americas 6

Asia 4

Europe other 7

other 6

56

Hungarian foreign trade by commodity groups*2019, shares in total value (€) in in per cent

Foreign direct investments in HungaryStock in 2019 by country of origin, in € bn

6 9

16 16

8 5

11 18

16 17

22

23

2114

Total:

€ 87.4 bn


Reinvested earnings of foreign companies in Hungary€ billion

7

6

5

4

3

2

1

0

-1

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

54

Share of foreign companies in gross value added of the private sector*2018, in per cent

The most important source of investment incentives are the cohesion funds of the EU. Further instruments are case-by-case subsidies for large-scale investments as well as normative incentives, e.g. tax allowances.

EU FUNDING

The Multiannual Financial Framework (MFF) of the EU for the 2014-2020 period assigned financial grants of 25 billion Euros from the structural funds to Hungary. This makes Hungary one of the top net beneficiaries of these funds nominally, as well as in relative terms to GDP and population. Furthermore, Hungarian farmers receive substantial direct payments of more than € 1 billion annually thanks to the common agricultural policy (CAP) of the EU.

The use of grants from structural funds is based on national “operative programmes”, companies usually have to apply for grants in tenders. Funding is limited to SMEs with less than 250 employees, therefore it is not relevant for most foreign investors. In Hungary, on average 85% of the grants are funded by the EU, the remaining 15% are supplemented from national sources.

The maximum funding rate (i.e. the maximum share of public grants in total investment costs) is regulated by the EU, based on the economic de-velopment level of the given region. In Hungary, the highest funding rate (50%) applies to the northern, eastern and southern parts of the country,

Private economy total

48

Automotive industry

95

Manufacturing industry

67

Information, telecomm.

59

55

INVESTMENT INCENTIVES

* excluding financial sector

Maximum funding rates 2014-2020

Central Transdanubia 35%

Western Transdanubia 25% Southern Transdanubia, Northern Hungary, Northern and Southern Great Plain 50%

Central Hungary 0–35%

57


the lowest (25%) to the western counties. The quota can be raised by 20 percentage points for small enterprises and by 10 percentage points for medium-sized enterprises. Projects in Budapest and some regions of Pest county are not eligible for any EU funding.

INDIVIDUAL CASE-BY-CASE GRANTS

Investment projects of high economic importance which are not eligible for EU funding may be supported upon individual government decisions (so-called “EKD”). These subsidies are subject to certain conditions, e.g. minimum investment volume, number of jobs to be created or scope of R&D activities. Conditions vary by region. In 2019 – 2020 (up to Oct.), the government awarded a total of about € 480 m of EKD grants to 74 in-vestment projects.

EKD-grants are handled primarily by the Hungarian Investment Promo-tion Agency (HIPA). The agency prepares relevant government funding decisions and supports investors in practical issues like selecting busi-ness sites, finding appropriate suppliers, provision and training of skilled staff – both at the governmental and local authority level.

TAX ALLOWANCES

» See Section “Business taxes” (page 46).

FREE BUSINESS ZONES

In economically less developed regions, the government may classify towns as so-called free business zones (“szabad vállalkozási zónák”). Currently, this refers to about 1,200 municipalities, which i.a. can apply for additional subsidies from the National Employment Fund.

There are 4.1 million private households in Hungary, 1.3 million of them are single-person households; the average number of persons per household is 2.3 (2018). 59

The average net income per capita was € 4,950 in 2019, out of that, about € 4,100 was spent on consumption. Incomes are not spread evenly: the decile with the lowest income disposes of just € 1,500, while the upper decile has a net income of € 11,500 per year.

Consumption spending of Hungarian households2019, by group of expenditure

Food, beverages

Housing, energy

Transport

Culture, leisure, education

Telecommunications

Health

Clothing

Restaurants, accomodation

Household equipment

Alcoholic beverages, tobacco

Other

61

SELLING IN HUNGARY

RETAIL MARKET, PURCHASING POWER

999

757

487

337

287

208

195

177

172

143

330

58

altogether:

€ 4,094


Final consumption expenditure of households2019, EUR per capita

EU-28

Slovenia

Lithuania

Estonia

Czechia

Slovakia

Latvia

Poland

Croatia

Romania

Hungary

Montenegro

Bulgaria

Serbia

Albania

60

Thresholds for compulsory EU-wide public tendering are set by EU law, lower limits apply to national procurements and are set annually in the budget law.

In 2019, public procurement in Hungary amounted to about € 10 billion. About 75 per cent of this value was tendered EU-wide, about one third was funded (at least partially) by EU transfers.

Disputes are settled in an arbitration committee at the Hungarian Public Procurement Authority (“Közbeszerzési Hatóság”).

Trade fairs in Hungary are primarily tailored to the domestic market, but there are also several fairs of international relevance. Hungary's leading trade fair organiser is Hungexpo.

PUBLIC PROCUREMENT

FAIRS AND EXHIBITIONS

2020 thresholds for compulsory tendering

Major fairs and exhibitions in Budapest

Subject of central sub-central

Threshold forprocurement

governments governments national tendering

Supply and € 139,000 € 214,000 HUF 15 mservices (€ 428,000 for (€ 428,000 for (50 m for public utilities) public utilities) public utilities)

Works HUF 50 m 5,350 Mio. Euro (100 m for public utilities)

Trade fair/exhibition Sector Month

AGROmashEXPO agricultural machinery / equipment Januar / Februar

Construma construction industry April

Industry Days industry May

(every two years complementedmachinery exhibition “Mach-Tech”)

Automotive Hungary automotive industry October

Sirha Budapest food industry, February(bi-annually) hotels, catering

Utazás (“Travel”) tourism February

62, 63

Threshold for EU-wide tendering17,090

11,940

10,540

10,050

9,750

9,550

9,330

7,860

7,560

7,240

7,050

5,680

5,120

4,440

3,800

Service: DUIHK offers multiple services to exhibitors and visitors of Hungar-ian fairs, and pro-vides joint stands at exhibitions like “Automotive Hungary” or the “Industry Days”.


Taxes on private and corporate incomes have been reduced in recent years, while taxes on consumption remain relatively high. Today, value added tax-es, excise duties and private income taxes are major revenue sources of the budget. Social security contributions are treated outside the central budget in off-budget funds. Local authorities have a limited scope for their own taxes.

Payment behaviour has been improving significantly during the past few years. In the 3rd quarter of 2020, the payment deadline on all invoices averaged about 23 day, while the average time of late payment was 15 days, so on average, the time from invoicing to effective payment was approximately 38 days. 64

The general rate of value added tax (“általános forgalmi adó” – áfa) is 27%, for imported goods an import sales tax applies with the same rate. This general rate is the highest within the EU. Preferential rates of 5% and 18% apply to a range of medical and food products, books or district heating.

PAYMENT BEHAVIOUR

VALUE ADDED TAX

Major tax rates as of July 1, 2020

TAXATION

By joining the EU in 2004, competition laws and regulations of the European Community became binding in Hungary as well.

The anti-trust authority is the GVH (“Gazdasági Versenyhivatal” – http: //gvh.hu). Financial supervision is being executed by the Central Bank (MNB) since 2013. Supervision of consumer protection is devolved to the Consumer Protection Authority (“Fogyasztóvédelmi Hatóság” – http://fogyasztove-delem.kormany.hu/), while food safety is supervised by the National Food Chain Safety Office (NÉBIH - http://portal.nebih.gov.hu).

Large enterprises with more than 250 employees, e.g. retail chains, public utility companies, are obliged to appoint consumer protection advisors in every county in which they pursue business activities.

COMPETITION, CONSUMER PROTECTION

Corporate Taxes

Corporate income tax 9.0

Local business tax max. 2.0

Vocational training contribution 1.5

Consumption taxes

VAT standard rate 27.0

preferential rates 18.0 / 5.0

Private taxes

Private income tax (flat rate) * 15.0

Social security taxes/contributions

employers 15.5

employees 18.5

* applies also to paid dividends


VAT REFUNDING

Foreign companies which are not registered in Hungary and do not process any business transactions that would be subject to VAT payment are enti-tled to a VAT refund. Since 2010, VAT refund claims can be submitted direct-ly to the finance authorities of the company's homeland. However, claims must still fulfil the requirements of the Hungarian Tax Authority (NAV).

ONLINE INVOICING

Since July 1 2020, data of all invoices issued in Hungary must be forward-ed in real-time directly to the Tax and Tariffs Authority (NAV). The cor-porate invoicing software must therefore fulfil the respective technical requirements set by the NAV.

EKÁER SYSTEM FOR ROAD TRANSPORT

In order to prevent cross-border VAT fraud, as of July 1 2015, every freight transport on domestic roads must be reported online to the Tax and Tariffs Authority (NAV) before departure. Special rules apply to transports with ve-hicles of less than 3.5 tons. This so-called EKÁER system is also binding for freights that depart from abroad to a final destination in Hungary.

CORPORATE INCOME TAX

The general corporate tax rate is 9%, which is the lowest in the European Union. Under certain conditions, certain tax allowances apply. The most important one is the “investment tax rebate” (“fejlesztési adókedvez-mény”). This can be granted upon request (or just upon reporting in case of smaller investments) to the Ministry of Finance. The corporate tax to be paid may be reduced by 10-70% (depending on the regional location) for a maximum of 12 years after completion of the investment. Thus, in an ideal case, the corporate income tax rate can be as low as 1.8%. The tax rebate is conditional to the size of the investment:

DonationsCompanies may donate up to 70% of their corporate income tax to a de-fined list of team sports, arts and to film productions. Since these dona-tions may be deducted from the tax base, companies will enjoy a certain reduction in their net tax payments.

Special tax schemesUnder certain conditions, self-employed and small enterprises may opt for simplified tax schemes. Instead of paying corporate income taxes, social se-curity contributions and other liabilities, they may settle their obligations with a single tax at a preferential rate or in a lump sum.

Minimum taxBusinesses with a profit margin of less than two percent of their sales revenue are still bound to pay corporate tax on an “assumed” 2% profit. However, this can be avoided by presenting a detailed statement of rev-enues and costs.

LOCAL TAXES

Municipalities may levy a local business tax (“hipa”), which is based on net earnings (sales revenue minus purchase of goods/services and R&D ex-penses). Municipalities may determine the tax rate freely within a range between zero and a maximum of two per cent.

About half of Hungary's approx. 3,100 municipalities, including Budapest, levy the maximum rate of 2%. Some 40% of municipalities impose a rate of 1-1.9%, while about 200 don’t levy this tax at all. 65

CORPORATE TAXES

Minimum volume of investment for tax rebate eligibility in HUF million

small medium sized large enterprises* enterprises** enterprises

2020

2021

2022

300

200

50

400

300

100

3,000 (6,000 in the Budapest metropolitan region; 1,000 in

underveloped regions)

Service: DUIHK offers a

wide range of services for VAT refunding proce-

dures with German and Hungarian

authorities. For more

information on online invoicing and the EKÁER

system, visit the DUIHK website at Services > Legal and Tax Issues.

* less than 50 employees and less than € 10 mln sales revenues/assets** less than 250 employees and less than € 50 mln sales revenues/assets

For special invest-ment purposes and branches, a minimum volume of HUF 100 applies.


Municipalities may impose further taxes, provided they do not collide with government taxes. Widely used taxes currently in use are:

Buildings tax Tourism tax Local community tax Real estate tax Municipal tax

SECTORAL TAXES

For certain branches or activities, additional taxes apply, which are based on sales revenues or other indicators, e.g.:

Special tax for energy providers – to be paid by energy providers Food chain surveillance tax – food retailers Public health product tax (“Chips-tax”) – first-time

distributors of certain food products Pipeline and cable tax – Operators of underground

cables or pipelines Telecommunications tax – telephone users Financial transactions fee – on financial transfers

and ATM cash withdrawals Insurance tax – on insurance premiums Gambling machine tax – operators

Private incomes (wages, capital incomes and other kinds of personal incomes) are taxed with a single-rate 15 per cent personal income tax (“flat rate”). Tax benefits apply, i.a. for families with children.

Hungarian corporate law stipulates that businesses must be established in pre-defined company forms. The most common company form is the “korlátolt felelősségű társaság” – abbreviated as kft., which is equivalent to the Anglo-Saxon Ltd. or the German GmbH. Other common forms of entities are the “részvénytársaság” – zrt., nyrt. (joint stock company, sim-ilar to German AG), the “közkereseti társaság” – kkt. (general partner-ship) or “betéti társaság” – bt. (limited partnership).

Kft.

The founding contract of a kft. must be filed by a lawyer with a permit that is valid in Hungary. The share capital must be HUF 3 m or more. For for-eign legal entities, it is recommended to appoint an authorised recipient.

SUBSIDIARY, BRANCH OFFICE, REPRESENTATION OFFICE

Foreign companies might pursue their economic activities in Hungary in the form of an independent subsidiary, a branch office (“fióktelep”) or a representation office (“képviselet”). A branch office may conductall busi-ness activities, however, it is not a legal entity. A representation office is neither a legal entity, nor economically independent, hence the scope of permissible activities is strongly limited.

» See Section “Labour costs” (page 24)

SOCIAL SECURITY CONTRIBUTIONS

PERSONAL INCOME TAX

CORPORATE LAW

LEGAL ENVIRONMENT

Service: DUIHK offers complex services to companies for setting up a business in Hungary, including assistance in con-tractual questions, permissions and employment issues.

65


All businesses are liable to bookkeeping (double-entry accounting) in Hungarian language. The annual financial statement / balance sheets may be presented in forints, euros or in US-dollars and should be sub-mitted by no later than May 31 of the following year. Businesses regis-tered in the commercial register must submit the annual accounts and the resolution on the use of the after-tax profit to the Registration Office electronically, and keep a record of this. Hungarian legislation allows for small and medium-sized enterprises (SMEs) and micro-enterprises (with less than 10 employees) to submit a simplified financial statement.

The application of IFRS is compulsory for companies publicly listed on EU stock exchanges and for credit institutions; since 2017, it may be vol-untarily applied by companies with a consolidated financial statement..

Currently there are 158 courts in a four-tier hierarchy: 113 district courts (“járási” or „kerületi bíróság” in Budapest), 20 regional courts (“törvény-szék”), five regional courts of appeal (“ítélőtábla”) and finally the Curia. There is no top-down subordination, i.e. can’t instruct a lower level body. The Curia usually doesn‘t rule on the matter of subject, but issues bind-ing decisions for the sake of consistent jurisdiction across regions and hierarchic levels. 66

The Constitutional Court ensures the conformity of legislation with the constitution, but its mandate is limited in certain areas, such as budget or taxation issues.

Gathering and verifying company data is recommended as soon as the business relationship begins. Relevant information on prospective business partners can be found in the company register. DUIHK offers related services.

Since 2003, amicable arrangement out of court is permissible in most cases. However, such arrangements do not inhibit judicial or arbitration procedures in the future.

Patents can be announced to the Hungarian Intellectual Property Office (“Szellemi Tulajdon Nemzeti Hivatala” – http://www.sztnh.gov.hu/hu) or to the European Patents Office in Munich. National criteria of patentability are based on the European Patent Agreement. Patent protection is granted for 20 years. For inventions, Hungarian law does not prescribe any particular legal protection – they are subject to general copyright law. For trademarks, protection is limited to 10 years, but may be prolonged.

In certain cases, disputes may be settled by arbitration courts. Filing a law-suit is prohibited as long as the arbitration procedure is running. The arbi-tration court’s ruling is binding for the parties.

Enforcement proceedings are equivalent to the European order for pay-ment procedure. A payment summons order issued by a court and not challenged by the debtor immediately constitutes an enforceable entitle-ment. Should the debtor appeal, enforcement is possible only following a binding court ruling. DUIHK offers related services.

An insolvency procedure may be initiated by an authority or upon request. Claims must be submitted within 40 days after the formal announcement of the liquidation procedure. In bankruptcy proceedings, the debtor may get a payment deferral for negotiations of settlement. Concluding a settle-ment with all creditors shall be reached within 60 days.

ACCOUNTING

JURISDICTION, DISPUTE SETTLINGINTELLECTUAL PROPERTY


Citizens of the European Union don't need a visa for entering or exiting Hungary. Hungary joined the so-called Schengen Area in December 2007. This means that no identity checks are performed at the common borders with Austria, Slovakia and Slovenia.

In most cases, EU citizens who work in Hungary don't need a work permit, but must be registered at the tax and social security authorities by the em-ployer. They are liable to pay tax in Hungary if they work for more than 183 days within 12 months. Social security contributions must be paid in Hun-gary if the employment persists for longer than two years. Until then, relief can be granted using the European A1 Form.

When public holidays fall on a Tuesdays or a Thursday, authorities may declare the “bridge-days”, i.e. the preceding Monday and the ensuing Friday, respectively, as a holiday, which has to be compensated by work-ing on a Saturday prior or following the respective date. This also applies to December 24.

TRAVELLING TO AND STAYING IN HUNGARY

WORKING IN HUNGARY

PUBLIC HOLIDAYS

January 1 New Year March 15 National Holiday (Commemoration of 1848 revolution) Good Friday Easter Monday May 1 Labour Day Whit Monday August 20 National Holiday (Commemoration of crowning of King St. Stephen) October 23 National Holiday (Commemoration of the 1956 national uprising) November 1 All Saints' December 25-26 Christmas

USEFUL INFORMATIONThe German-Hungarian Chamber of Industry and Commerce (DUIHK) strives to support successful business between German and Hungarian companies. To this end, the DUIHK

offers a wide range of consulting and tailor-made business services for international and local companies,

provides maintains an extensive network between managers, specialists and public decisionmakers, and

advocates a business-friendly and fair-regulation environment.

Since 1990, DUIHK has built up valuable expertise on local business condi-tions. Today, it counts more than 900 members, which makes it the largest bilateral business organisation in Hungary. Moreover, it is part of the global network of German Chambers (AHK), thus is can refer to the professional support of more than 140 AHK-branches in 92 countries worldwide.

DUIHK provides practical, customized and efficient solutions in both direc-tions: for foreign companies which intend to enter Hungary as a seller, buyer or investor, as well as for Hungarian firms which target German and inter-national markets. Beyond cross-border activities, DUIHK also supports local business in Hungary.

ESSENTIAL SERVICES OFFERED BY THE DUIHK

Market information Up-to-date data about the economy, the legal frame-work and the investment climate Market analyses for specific markets

Market entry services Selection and pre-qualification of customers, sup-pliers, sales partners or service providers Complex services for exhibitors and visitors on German, Hungarian and international trade fairs Site selection for investors Recruitment services

Legal assistance Setting up local firms, consultancy on corporate, tax and labour law Company and solvency information Support in administra-tive matters and permit procedures

VAT refund Application and handling of VAT refunding procedures with German and Hungarian tax authorities

Training and qualification Training programmes, coaching on manage-ment skills Vocational training: strategic and practical consultancy on the im-plementation of corporate training schemes Trainings programmes for spe-cialists, e.g. on energy issues or lean production

SERVICES OF THE DUIHK

duihk.hu


IMPORTANT ADDRESSES

German-Hungarian Chamber of Industry and Commerce

Lövőház utca 30., 1024 Budapest

+36-1-345 7600

www.duihk.hu

[email protected]

Germany Trade & Invest

Friedrichstraße 60, 10117 Berlin

+49 30 200 099-0

www.gtai.de/ungarn

[email protected]

Deutsche Botschaft Budapest

Úri utca 64-66., 1014 Budapest

+36-1-488 3500

www.budapest.diplo.de

[email protected]

HIPA – Hungarian Investment Promotion Agency

Honvéd utca 20., 1055 Budapest

+36-1-872 6520

www.hipa.hu

[email protected]

MKIK – Hungarian Chamber of Commerce and Industry

Szabadság tér 7., 1054 Budapest

+36-1-474 5100

www.mkik.hu

[email protected]

NAV – National Tax and Customs Administration

Széchenyi utca 2., 1054 Budapest

+36-1-428 5100

www.nav.gov.hu

[email protected]

KSH – Statistisches Zentralamt

MNB – Central Bank of Hungary

Szabadság tér 8–9., 1054 Budapest

+36-1-428 2600

www.mnb.hu

[email protected]

Keleti Károly utca 5–7., 1024 Budapest

+36-1-345 6000

www.ksh.hu

[email protected]


31 KSH database, Az ipar termelési és értékesítési adatai szakágazatok szerint [ID403_W];

Alkalmazottak száma nemzetgazdasági ágak, ágazatok szerint [LD2B031]

32 Association of Industrial Parks (IPE), http://ipe.hu/

33 KSH, http://www.ksh.hu/stadat_eves_4_5 (tables 4_5_1i, 4_5_6i, 4_5_9i)

34 KSH, http://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/xls/2_1_32h.xls

35 Eurostat database, Labour cost levels by NACE Rev. 2 activity (lc_lci_lev)

36 NAV, http://nav.gov.hu/nav/ado/jarulek/Minimalber__garantalt_berminimum.html

37 KSH, http://www.ksh.hu/stadat_evkozi_2_1

38 KSH, Microcensus 2016, http://www.ksh.hu/mikrocenzus2016/docs/tablak/04/04_2_1.xls

39 KSH, http://www.ksh.hu/docs/hun/xstadat/xstadat_eves/xls/2_6_3i.xls

40 Educational Authority (OH), special data delivery for DUIHK

41 Educational Authority (OH), special data delivery for DUIHK

42 KSH, Microcensus 2016, http://www.ksh.hu/mikrocenzus2016/docs/tablak/12/12_1.xls

43 Eurostat database, Self-reported language skills (educ_lang_00)

(Adult Education Survey (AES)

44 Education Authority (OH), https://nyak.oh.gov.hu/doc/statisztika.asp

45 KSH, http://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/xls/6_2_1_1h.xls

46 KSH, http://www.ksh.hu/docs/hun/xstadat/xstadat_evkozi/xls/6_2_1_13h.xls

47 KSH database, A továbbszámított népesség száma járások szerint (NT6C01),

Bruttó hozzáadott érték, GDP, 1 főre jutó GDP (GPKD04)

48 KSH database, http://www.ksh.hu/stadat_eves_3_6 (tables 3.6.1., 3.6.6., 3.6.17., 3.6.22.)

49 MNB, http://www.mnb.hu/letoltes/hu0901-vallalkozoi-huf.xls; https://www.mnb.hu/root/

BaseRate/BaseRateExcel/alapkamat.xlsx; KSH database, Fogyasztói árindex termék-

és szolgáltatás csoportok szerint, havi (SF1A07)

50 MNB, http://www.mnb.hu/letoltes/hu0301-arfolyam.xls

51 Romcsics, Ignác: Magyarország története a XX. században, Osiris 2010

52 KSH database, Feladó/rendeltetési országonkénti termékadatok SITC szerint (KAB030)

53 KSH database, Termékszintű adatok KN szerint (KA0120)

54 MNB https://www.mnb.hu/letoltes/fdiaggreurhu.xlsx

55 KSH database, Inward FATS (YE204B)

56 MNB, https://www.mnb.hu/letoltes/aifdistockexclspeeurhu.xlsx

57 EU Commission, http://ec.europa.eu/competition/state_aid/regional_aid/regional_aid.html

58 Central Government, https://2015-2019.kormany.hu/download/

5/52/91000/EKD_támogatas_2014-2019.xlsx

59 KSH, http://www.ksh.hu/docs/hun/xstadat/xstadat_eves/xls/2_2_3_13i.xls

60 Eurostat Database, dataset NAMA_10_PC

61 KSH http://www.ksh.hu/stadat_eves_2_2, tables 2.2.0.-2.2.3.

62 Public Procurement Authority, Annual Report to the National Assembly

63 Procurement Authority, Gazette KÉ 2019

64 Bisnode, https://www.bisnode.hu/tudastar/gondolatok/

fizetesi-tapasztalat-2020-q3/

65 Treasury (Államkincstár), https://hakka.allamkincstar.gov.hu/

66 National Court Authority, https://birosag.hu/en/judicial-system

Abbreviations, acronyms:

DUIHK – German-Hungarian Chamber of Industry and CommerceKSH – Központi Statisztikai Hivatal (Central Statistics Office) MNB – Magyar Nemzeti Bank (Hungarian National Bank)NAV – Nemzeti Adó- és Vámhivatal (Tax and Customs Authority)

1 KSH, Statistical Yearbook 2017, p. 431 ff

2 MET, https://www.met.hu/eghajlat/magyarorszag_eghajlata/varosok_jellemzoi/Budapest/


4 KSH, http://www.ksh.hu/docs/hun/xstadat/xstadat_eves/xls/1_1i.xls


6 KSH – Official list of municipalities, www.ksh.hu/docs/hun/hnk/hnk_2019.xlsx

7 KSH, Microcensus 2016, http://www.ksh.hu/mikrocenzus2016/docs/tablak/12/12_1.xls

8 https://hu.wikipedia.org/wiki/A_határon_túli_magyarok_története

9 KSH, Census 2011, http://www.ksh.hu/nepszamlalas/vallas_sb

10 KSH, http://www.ksh.hu/stadat_evkozi_4_6 (Tables 4.6.1. through 4.6.19.)

11 Magyar Közút (Road Maintanance Authority), https://internet.kozut.hu/kozerdeku-adatok/

orszagos-kozuti-adatbank/az-allami-kozuthalozatrol/


13 KSH, Statistical Yearbook 2017, p. 383


15 HU-GO (Toll Collecting Authority), https://hu-go.hu/documents/document/brochure

16 Nemzeti Útdíj (Toll Collecting Authority), https://nemzetiutdij.hu/articles/article/dijtablazat

17 KSH, http://www.ksh.hu/stadat_evkozi_4_7 (Tables 4_7_1h, 4_7_3h, 4_7_7_2h)

18 OpenSignal, https://www.opensignal.com/reports/2019/05/

global-state-of-the-mobile-network

19 KSH, Statistical Yearbook 2019, p. 260

20 Eurostat database, Electricity production capacities by main fuel

groups and operator [nrg_inf_epc]

21 Eurostat database, datasets nrg_pc_202 through nrg_pc_205

22 KSH, http://www.ksh.hu/stadat_eves_3_4 (table 3_4_4i)

23 KSH, http://www.ksh.hu/stadat_eves_3_4 (tables 3_4_2i, 3_4_3i)



26 Company rankings „Figyelő Top 200” 2020 (source data: Bisnode);

HVG Top 500 2020 (source data: Creditreform)



29 KSH database, A kibocsátás és a bruttó hozzáadott érték [GPKB04]


LIST OF REFERENCES

58 Business Guide Hungary 2021 DUIHK

HUNGARYMap of counties and road network

German-Hungarian Chamber of Industry and CommerceH-1024 Budapest, Lövőház utca 30.

Telephone: +36 1 345 7600Fax: +36 1 315 0744Email: [email protected]

More up-to-date economic data onwww.ahkungarn.hu/wirtschaft

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