Category: Hungary

If a bank fails to comply with its information obligations in consumer credit agreements, it may be deprived of its right to charge interest and other fees. This applies even if the severity of the violation and its consequences for the consumer varies from case to case.

Background

In a recent judgment published on 13 February 2025, the Court of Justice of the European Union (CJEU) addressed the consequences for banks that fail to comply with their information obligations under consumer credit agreements. The case, Lexitor sp. z o.o. v. A. B. S.A. (Case C 472/23) involved a Polish debt collection company, Lexitor, which had been assigned the rights of a consumer under a loan agreement with a bank. Lexitor claimed that the bank had not fulfilled its obligation to provide necessary information at the time of the contract’s conclusion and sought reimbursement of the interest and charges paid by the consumer.

In addition to the amount of the principal sum of that credit, the consumer was required to pay the bank capital interest, a commission. Also, based on the ’tariff’ by the bank, annexed to the original credit agreement, there could be an increase in charges and commissions under specific circumstances and additional administrative charges have been set out with the applicable amounts in the form of a table. The Polish court referred several questions to the CJEU for a preliminary ruling, seeking clarification on the interpretation of Directive 2008/48/EC, particularly regarding the annual percentage rate of charge (APRC), the modification of charges and commissions, and the proportionality of penalties for failing to provide the required information.

Judgement

Firstly, the CJEU emphasized that consumer credit agreements must clearly and concisely state the APRC at the time of the contract’s conclusion. However, if certain contractual terms are later deemed unfair, resulting in an increased APRC, this does not necessarily constitute a breach of the bank’s information obligations. Secondly, the CJEU highlighted that credit agreements should explicitly and understandably outline the conditions under which associated costs may be modified. If these modifications rely on indicators that are difficult for the consumer to verify, the bank may be in breach of its information obligations. This is particularly concerning if an average consumer cannot assess the circumstances justifying the modification or its impact on costs, making it challenging to gauge the extent of their financial commitment. This can be the case inter alia, the variable economic indicators, including those controlled by the bank itself, and certain other indicators, described in vague terms, referring to legal developments sense.

Lastly, regarding penalties, the CJEU found that if the breach of information obligations prevents the consumer from adequately assessing the extent of their financial commitment, the bank may be deprived of its right to charge interest and charges. The CJEU considers this uniform sanction to be proportionate, although the severity of the breach and its consequences for the consumer may vary depending on the specific case.

Consequences

This ruling underscores the importance of transparency in consumer credit agreements and the potential consequences for banks failing to uphold their legal obligations, including monetary implications for the banks. As a general rule, the CJEU emphasized that consumer credit agreements must be drawn up clearly and transparently for the customers to make informed decisions. As always, the individual case(s) should be assessed and decided by the national courts, but the importance of access to proper information in credit agreements cannot be overstated.

By Balint Zsoldos, Head of Tax, KCG Partners Law Firm

Schoenherr has advised UniCredit Bank Hungary on a design-and-build project to completely refurbish its country headquarters in Budapest and assigned to Fitout Zrt. as the developer.

According to Schoenherr, the project involved upgrading an eight-story office building – partly erected in the 1930s and under partial monumental heritage protection – into a modern workspace with a usable floor area of over 14,000 square meters. 

The Schoenherr team included Partner Laszlo Krupl.

According to the Hungarian government’s announcement, from October 2025, mothers with three children could also be exempt from personal income tax for the rest of their lives (this is already possible for mothers with at least four children since 2020), and the exemption would be phased in for mothers with two children.

The Hungarian Minister of National Economy announced that the introduction of the personal income tax exemption for mothers of at least two children will start in 2026 and will be fully integrated into the tax system in 4 years.

According to the plans, on 1 January 2026, mothers of two children under 40 will become exempt from personal income tax. From 2027, mothers of two children who are between 40 and 50 years old will become exempt from personal income tax. From 2028, mothers of two children who are between 50 and 60 years old will become exempt from personal income tax and from 2029, the exemption will be extended to those who are 60 years old and over. Based on the announcement of the Hungarian Minister of National Economy the lifetime personal income tax exemption for mothers of two and three children will operate in a similar way as the system already in place for mothers of four children. This allowance will be available to all working mothers, regardless of their salary, age or the age of their children. A new addition is that no personal income tax will be deducted from the infant care allowance and childcare allowance.

Following the announcement, speculation broke out in many circles as to whether the tax exemption would apply to all types of income subject to personal income tax. Later, it was clarified that the personal income tax exemption for mothers of two and three children will apply to their wages. This is of particular importance since it means that dividend income and exchange gains and other capital gains are not subject to this exemption from personal income tax.

On 24 March 2025, a proposal to extend the personal income tax allowance for mothers under 30 was also submitted to Parliament. Mothers under 30 are already entitled to personal income tax allowances under the existing legislation, which will be further extended. The personal income tax allowance now would cover wages, benefits and certain income from independent activities, such as self-employment. The changes would enter into force on 1 January 2026, but the allowance would not apply automatically, and would be subject to a declaration with the appropriate content in the tax statement.

By Gabriella Galik, Founding Partner, KCG Partners Law Firm

On 15 January 2025, the new electronic land register was launched in Hungary, although the transitional rules currently still allow for the use of the previous paper-based procedure. At the end of February 2025, the Hungarian Government proposed amendments to the recently implemented electronic land registry system (E-ING) to enhance legal uniformity and bolster the security of real estate transactions.

Under the current draft, one of the changes is that the registration of certain rights does not require the consent of all concerned. This mainly concerns rights of asset management and rights of purchasers to the maintenance of ownership and future construction. Another amendment removes the suspension procedure for certain property rights registrations. For example, if an application is made for the cancellation of a mortgage, a separate lien or a related right of alienation and encumbrance, the land registry will consider these regardless of their ranking, instead of suspending the procedure.

Finally, as the entry into force of Act C of 2021 on the Real Estate Registry and the implementing Government Decree 179/2023 have an impact on the procedures and effects on the Court of Registration, the new rules would also include a transitional provision for the submission of court and company court decisions. Decisions taken before 15 January 2025 could still be the basis for registration even if they are not submitted using the prescribed electronic form. However, this would require the person concerned to apply to the real estate authority and, in the case of decisions of the commercial court, to attach other necessary documents.

The Government is currently seeking public feedback on these proposals, demonstrating a collaborative approach to enhancing the efficiency and reliability of Hungary’s electronic land registry system.

By Denes Glavatity, Attorney-at-Law, KCG Partners Law Firm

In its recent decision of 19 February 2025, the Supreme Court of Hungary (‘Curia’) overturned the second-degree verdict that held fraud victims solely liable and ruled that financial institutions cannot automatically reject compensation claims. This landmark decision might open the doors for customers to claims against their banks in similar cases.

Background

A consumer filed a complaint with the Financial Arbitration Board after the rejection of their reimbursement claim against a bank. The dispute arose when the consumer attempted to sell a product on an online marketplace but was misled by a fake potential buyer to an internet phishing page resembling the bank’s official website. As a result, the consumer became a victim of fraud, leading to an unauthorized transfer of a significant amount from his bank account to an unknown domestic account. The Conciliation Board recommended that the bank reimburse the consumer for the unauthorized payment transaction.

The bank challenged the recommendation in court. A legally binding judgment overturned the Financial Arbitration Board’s recommendation, reasoning that the bank’s liability depended on whether the consumer had acted with due diligence in safeguarding their authentication credentials. The court examined whether the consumer had provided their credentials to an unauthorized party and, if so, whether they exhibited culpable negligence. The second-degree court ruled that the consumer’s actions constituted gross negligence, thereby exempting the bank from its statutory reimbursement obligation.

Curia’s verdict

The Curia, however, emphasized that the second-degree court had incorrectly equated gross negligence with a breach of duty. It clarified that negligence must be assessed individually and with the damage (not the default), considering whether the consumers were subjectively aware of the consequences of their actions and whether they displayed recklessness or indifference toward potential damages. The court also underscored that gross negligence should be evaluated not only based on default but also in terms of the foreseeability of harm. The Curia concluded that the consumer could not have anticipated the damage resulting from the second unauthorized transfer and had not acted with significant negligence. As a result, the Curia reinstated the initial court decision, which had dismissed the bank’s claim, thereby affirming the consumer’s right to reimbursement.

The above implies that banks cannot automatically pass on the liability for fraud to the consumers based on the objective default of a task, but the general and more subjective clause of foreseeability should be assessed on a case-by-case basis. The judgment also lays down, however, in general terms, the conjunctive conditions under which a bank may be exempted from the obligation to reimburse a consumer for the execution of an unauthorised payment transaction as follows: (i) the customer does not behave in a manner which is normally expected in the circumstances of the case to keep the bank card and the personal identification data secure, and (ii) the failure to comply with the obligation constitutes gross negligence as regards the damage caused.

Afterlife of a decision

The decision of the Curia is certainly a step forward in the direction of more effective protection of consumers’ rights, but it also establishes a stricter framework for the banks to avoid liability. This decision, and the ones to follow based on this landmark ruling, may spur financial institutions to enhance their security protocols, taking greater responsibility in preventing financial abuse, since the volume and sophistication of online scams just keep increasing.

By Balint Zsoldos, Head of Tax, KCG Partners Law Firm

Partner in Pet Food Legal Counsel Eszter Barta has become the firm’s new Group Legal Director.

PPF is a European pet food company. PPF has its headquarters in Budapest, Hungary and operates in 10 countries: France, The Netherlands, Germany, Sweden, Italy, Czech Republic, Slovakia, Poland, Hungary and Romania. It provides a wide range of pet food products.

Barta has been with PPF since 2013, when she joined as a Legal Counsel.

Originally reported by CEE In-House Matters.

Hungary’s legal and business landscape is undergoing significant transformation, driven by a steady increase in M&A activity, rapid digitalization, and evolving regulatory frameworks, according to DLA Piper Hungary Partner and Head of Intellectual Property and Technology Zoltan Kozma.

“Over the past few months, we’ve seen a slight increase in M&A activity,” Kozma begins. “While we are still far from the highs of 2021, there is steady growth, particularly in the technology sector, which dominates deals. Renewable energy is another major driver of transactions, as investors continue to seek opportunities in the green transition and the financial sector remains active, with digitalization playing a crucial role in shaping M&A trends,” he adds.

“The EU’s digital agenda has introduced a massive wave of legislation, impacting many areas of work,” Kozma continues. “For example, Hungary was the first EU country to implement the NIS2 Directive, which focuses on cybersecurity, but this rapid implementation created significant challenges. Companies are still struggling to navigate the regulatory landscape, particularly because new amendments followed immediately after the law was enacted, leading to confusion among businesses.”

Furthermore, according to Kozma, another major legal development is the Digital Operational Resilience Act for the financial sector, which “aims to enhance the resilience of financial entities against cyber threats. The AI Act is also a game-changer – now that it’s in force, it places extensive obligations on businesses – not just AI developers but also AI users. This means that companies across various industries must revise contracts, implement AI compliance frameworks, and even update corporate policies to ensure AI governance is in place.”

Focusing specifically on the AI Act, Kozma says that it is having a profound impact on legal advisory services. “It requires businesses to adopt specific contractual clauses when using AI, prompting law firms to handle AI Act compliance and policies. Additionally, the EU Data Act, part of the broader Digital Decade Program, is another crucial regulation affecting IoT users, data generators, and software developers. Although already enacted, many companies are still trying to fully grasp its implications.”

Adding more to the topic of digitalization, Kozma reports that “the electronic land registry system went live in the past few months, streamlining property transactions and improving administrative efficiency. Additionally, introduced a digital citizenship program along with a new electronic signature system.” According to him, this will expedite administrative procedures for Hungarian citizens and enhance interactions with government agencies.

Shifting gears to defense, Kozma states that the sector is becoming increasingly active. “While it was relatively quiet in the past, geopolitical circumstances have led to rising M&A activity and a growing number of R&D projects in defense. We are also seeing more work in defense procurement, which is expected to expand in the coming years.” Meanwhile, in employment law, immigration policies have become stricter for third-country nationals. “Hungary has imposed new rules that make it more difficult for foreign employees to work in the country. Only university graduates receive standard work permits; others get two-year guest permits – a restriction that is causing significant complications for companies seeking to bring in foreign talent,” Kozma explains.

Finally, Kozma says Hungary continues to be a major hub for the film industry, thanks to its generous tax credit system. “A growing number of international productions are choosing Hungary, and new studios are being built to accommodate demand. This has created a stable and expanding market for specialized law firms handling film industry transactions,” he concludes.

10+1 Questions and Answers for Hungarian Companies.

1. What is the EU AI Act and how does it affect businesses in Hungary?
 
The EU AI Act is an EU regulation that establishes harmonised rules for the development, distribution and use of artificial intelligence systems within the EU. It aims to ensure the safe and ethical use of AI, enhancing the internal market while protecting health, safety and fundamental rights.

The AI Act applies to all businesses that develop, use, import or distribute AI systems in the EU, regardless of their location. This includes Hungarian companies that deploy AI systems in the course of a professional activity.

2. Is it already implemented in Hungary? When will it enter into force?

EU regulations, including the AI Act, are directly applicable in Hungary. The provisions of the AI Act are being implemented gradually, with the first significant provisions having already come into force on 2 February 2025.

Hungary is also expected to adopt additional secondary legislation soon. So far, only government decisions have been adopted, indicating that a new enforcement authority will be established to implement the AI Act. This authority is expected to operate under the supervision of the Minister for National Economy, manage the domestic regulatory sandbox, and perform regulatory and market surveillance tasks. Furthermore, a Hungarian Artificial Intelligence Council is expected to be established under the leadership of the recently appointed Government Commissioner responsible for AI. This body will issue guidelines and opinions on the implementation of the AI Act in Hungary.

3. Is it only relevant for IT businesses and large international companies? Can SMEs and microenterprises stop reading this article?

Unfortunately, no. The EU AI Act establishes mandatory rules for any Hungarian business applying AI solutions, including SMEs and microenterprises. Therefore, we recommend continuing to read to learn the basic information relevant to your business. Certain companies, such as developers, importers and distributors of AI systems, must comply with special rules and are advised to seek more detailed legal advice.

4. What are AI systems and how do I know if I use one? What if a company or its employees only use ChatGPT occasionally?

Properly defining AI systems is not entirely straightforward – the Commission even issued a standalone guideline on the topic. In simple terms, AI systems encompass machine-based systems (typically software) designed to operate with varying levels of autonomy. What sets AI systems apart from traditional software is their ability to infer, learn, reason and model from data or inputs. The most common examples of AI-based systems are certain varieties of

• recommendation engines: systems that suggest products, services or content based on user preferences and behaviour;
   
• predictive analytics: systems that forecast future trends or behaviours based on historical data;
   
• virtual assistants: AI-powered assistants like Siri, Alexa or Google Assistant that perform tasks based on voice commands;
   
• robotic process automation: systems that automate repetitive tasks in business processes;
• smart home devices: devices like smart thermostats, lights and security systems that adapt to user preferences and behaviours;
   
• interactive chatbots: AI-powered chatbots that engage in conversations with users to provide information or support.

In case of doubt, you should consult the developer or distributor of the specific software or other system on whether it qualifies as an AI system.

ChatGPT and other similar generative applications also qualify as AI systems. If an employee uses it for professional purposes, the provisions of the EU AI Act will apply.

5. Are all AI systems treated equally? Should businesses stop using them altogether?

The AI Act introduces a risk-based approach that requires businesses to categorise their AI systems based on the level of risk they pose. Developers and users of AI systems must assess and classify their systems into one of the following categories:

• Unacceptable risk: These AI systems present a clear threat to people’s safety, livelihoods or rights and therefore are banned under the AI Act. The regulation lists eight such prohibited practices (e.g. AI systems that manipulate human behaviour or exploit weaknesses).
   
• High risk: AI systems that pose a threat to a person’s health, safety or social status (e.g. assessing creditworthiness during a bank loan application or AI systems used in employee evaluations) are classified as high risk. While these systems can be used, they are subject to strict obligations before being deployed on the market.
   
• Limited risk: These AI systems (e.g. chatbots) carry lower risks but still require transparency. For instance, if an AI system interacts directly with humans, users must be informed that they are interacting with an AI system, especially if it is not immediately obvious to the user.
   
• Minimal or no risk: The AI Act does not introduce specific rules for minimal or no risk AI systems (e.g. spam filters). However, it is still recommended that businesses develop a code of conduct aimed at promoting AI literacy, ensuring that those involved in the development, operation and use of AI are aware of best practices and ethical considerations. 

6. What are prohibited AI practices and when will their ban come into effect?

AI practices such as harmful manipulation and deception, harmful exploitation of vulnerabilities, social scoring, individual criminal offence risk assessment and prediction, untargeted scraping to develop facial recognition databases, emotion recognition, biometric categorisation and real-time remote biometric identification have already been prohibited since 2 February 2025. Businesses should not engage in such practices, otherwise they may face severe sanctions.

7. What action should I take if my business uses only minimal or no risk AI systems?

As a first step, from 2 February 2025, all businesses must ensure that their staff and those responsible for operating or using AI systems have sufficient AI literacy. In particular, businesses should:

• assess the current AI literacy levels within their workforce;
   
• develop and implement tailored AI literacy training programmes;
   
• establish internal policies and procedures, such as a code of conduct for AI usage.

Additionally, businesses should:

• proactively assess their current use of AI systems;
   
• classify AI systems according to the risk level defined by the regulation;
   
• provide transparent information regarding the use of AI systems in consumer services.

Businesses applying limited or high-risk AI systems must further ensure that appropriate measures are in place to address the specific requirements of the AI Act.
 
8. What about businesses that are actively using AI systems? What about AI developers

Such businesses are recommended to seek in-depth legal and technical advice on the implementation of the EU AI Act. AI developers and other providers of AI systems should also keep an eye on the expected introduction of AI regulatory sandboxes. These sandboxes are controlled frameworks set up by a competent authority, offering providers or prospective providers of AI systems the possibility to develop, train, validate and test (where appropriate in real-world conditions) an innovative AI system, pursuant to a sandbox plan for a limited time under regulatory supervision.

The Hungarian Government has also recently acknowledged the need to establish a domestic sandbox through a government decision. Further details are expected to be revealed soon.

9. How will all this be monitored and what are the expected penalties for non-compliance with the EU AI Act?

As mentioned, the detailed rules on monitoring in Hungary are still pending, as the necessary secondary legislation has yet to be issued. Nevertheless, once a monitoring regime is established, non-compliance can result in substantial fines, even up to EUR 35m or 7 % of the company’s total worldwide annual turnover, whichever is higher. These penalties will be enforced starting from 2 August 2025.

10. So, is this everything one needs to know about the EU AI Act? Are there any other publicly available resources?

No, these are just the very basics. The EU AI Act is more than 140 pages long and further implementation rules are expected at both the EU and national levels. The Commission has also issued guidelines to assist the affected companies to comply with the AI Act’s requirements. Businesses are highly recommended to seek customised legal and technical advice to ensure compliance with this new regulatory regime, stay informed about regulatory changes and mitigate legal risks.

10+1. Is the EU Commission’s announced work programme expected to result in the review and potential simplification of the rules prescribed by the EU AI Act?

The 2025 EU Commission work programme foresees a broader assessment of whether the expanded digital acquis of the EU (which also includes the EU AI Act) adequately reflects the needs and constraints of businesses with special regard to SMEs and small midcaps. Nevertheless, the already published information on the upcoming “Digital Package” primarily signals a revision of EU legislation on cybersecurity and data protection, without explicitly mentioning the EU AI Act.

By Gergely Horvath and Akos Kovacs, Attorneys at Law, and Barbara Darcsi, Associate, Schoenherr

Wolf Theiss has advised Uniper on the implementation of photovoltaic projects in Hungary that will jointly deliver 151 megawatt-peak of renewable energy.

Uniper is a European energy company. According to Wolf Theiss, it is developing several PV projects in Hungary – including in Tet and Dunafoldvar – that will generate enough clean energy to supply up to 92,000 households. Construction is scheduled to begin later in 2025, with grid connection planned by 2026 and 2027.

The Wolf Theiss team included Partner Laszlo Kenyeres and Senior Associate Adam Lukonits.

Connecting a holiday in Tenerife with remote work? Sending an employee to China for three months? While ten years ago, these questions were considered unique, today, international mobility has become an everyday part of employment relationships.

In our three-part article series, we aim to explore what employers need to consider from a labor and tax law perspective regarding employee and employer mobility. The first part will discuss the legal considerations related to posting, the second part will cover the tax issues related to posting, and the third part will address the rules surrounding Employer of Record (EOR) services that assist employer mobility.

When is Posting?

One type of posting occurs when an employer temporarily transfers an employee for work purposes to a foreign employer within the same company group. This includes situations where a Hungarian employer decides to send one of its employees, for example, to work at a subsidiary in Germany for two months.

The Hungarian employer may freely decide on secondment for up to 44 working days per year, meaning the employee cannot refuse to work abroad. However, there are exceptions for certain employees in special situations, such as pregnant employees or women with children under three years old, for whom the employer does not have the unilateral right to transfer them abroad. If the employer intends to extend the secondment beyond this time limit, it is only possible with the employee’s consent and mutual agreement between the parties.

In the case of posting, if the duration fits within the above-mentioned timeframe and no other claims arise, the content of the employment contract between the two parties does not change, and the employee remains an employee of the Hungarian company during posting. Therefore, there is no need for the employee and the host country company to sign a new employment contract.

Salary and Other Benefits

Just as the employee’s employment contract does not change, the employee’s salary also does not automatically change during posting. However, there are exceptions. For instance, if the employee’s salary does not meet the minimum wage applicable in the host country, it must be adjusted. This can especially occur if the employer sends the employee to a West European member of the company group. For example, an employee posted to Germany is entitled to a minimum wage of €12.82 per hour during posting, which may be higher than their Hungarian salary. In this case, the employee will be entitled to posting allowance to cover the difference between their Hungarian salary and the German minimum wage.

By law, the employer is required to reimburse the employee for any additional costs incurred due to posting. These could include relocation costs, which cover expenses related to the employee’s travel to and from the host country. The employer must also ensure foreign housing arrangements for the employee. In such cases, the employer must either provide housing abroad at their own expense or reimburse the employee for housing costs. There is no mandatory guideline, or legal requirement regarding the level of housing the employer must provide, nor is the employer required to cover the costs of the employee’s trips to home during posting. However, a well-functioning posting that considers the employee’s satisfaction can only work if the parties discuss and agree on these matters in advance.

Working Conditions

Fundamentally, the labor law provisions of the employee’s home country (Hungary) continue to apply even during posting. However, for certain minimum issues (such as annual leave, maximum working hours, and minimum wage) if the host country’s laws are more favorable to the employee, those provisions will apply instead. This option can provide more benefits for the employee.

For example, in terms of working hours, the posted employee must adhere to the same rules as local workers. So, if an employee is sent to France, they do not have to work the 40 hours per week set out by Hungarian labor law; they only need to work the 35 hours per week required by French labor law. A similar situation exists regarding vacation time. If the host country’s system (e.g., Ireland) provides fewer vacation days, the employee will still be entitled to the number of vacation days calculated according to Hungarian labor law. However, if the host country’s regulations provide more vacation days (such as the German law, which provides a minimum of 24 days), these regulations will apply to the posted employee. Lastly, the employee’s working hours must be arranged to comply with the host country’s working time rules.

Who Issues Instructions and Who Can Send Employees Abroad?

In the case of posting, the employer’s rights will still be exercised by the sending Hungarian employer. This means that the Hungarian employer is the one who can give instructions to the posted employee, supervise their work, and ultimately, has the right to terminate their employment contract.

In practice, however, this process may not always be realistic. There may be a need for the host country’s group company to issue instructions to the employee. This is legally possible, provided that the sending employer informs the employee about this, and the sending and host employers agree to this arrangement in writing.

How Should This Be Done in Practice?

The Hungarian Labor Code and the relevant EU directives only provide the framework for posting. Depending on the situation, the planned duration of posting may require the employer and employee to agree in writing on the specific terms, compensation, or expense reimbursement related to posting. If posting is frequent in a company, it may be advisable to create an internal policy on posting.

Before posting, it is also important to familiarize oneself with the labor laws of the host country, any restrictions, rules, or opportunities offered by the legal system, and any foreign reporting obligations (including permit or visa requirements). It may also be helpful to consult with a foreign legal advisor.

By Dora Agnes Nagy, Attorney, Jalsovszky