Category: Hungary

Kinstellar has advised the MVM Group on developing a 500-megawatt combined-cycle gas turbine power plant at the Matra Power Plant in North-East Hungary.

The MVM Group is a Hungarian power company,

According to Kinstellar, the new facility will replace aging, high-emission lignite-fired power assets and support the expansion of renewable energy sources in the country. The winning development consortium – comprising Elsewedy, West Hungaria Bau, and Status KPRIA – was selected through a public procurement process.

The Kinsetllar team included Budapest Office Managing Partner Balazs Sepsey and Senior Associate Laszlo Bujaki.

Let’s start with the fundamentals: Hungary will need significant additional power plant and battery capacities, and it will need them soon. This necessity persists despite the gross amount of solar power capacity reaching 7.5 GW by the end of 2024, a target initially set for the 2030s. The drive for electrification, the goal to reduce energy imports, the high average age of the existing generator portfolio and the previous focus on solar energy necessitate at least 10 GW of new generation capacities, with a preference for baseload generation and/or storage solutions. The state-owned incumbent MVM is already developing 3×500 MW new combined cycle gas turbine (CCGT) installations and 2×1000 MW new nuclear blocks, but significant private investment is still required.

Challenges and legislative response

The rapid increase in photovoltaic (PV) penetration has nearly saturated the grid, prompting lawmakers to suspend the two most recent application regimes in 2021 and 2024 and to annul the last round of calls for applications a year ago. With no practical possibility for new power plants to obtain feed-in connection capacities in recent years, the Hungarian government has decided to develop a new grid capacity allocation regime. While the framework rules of the new system were enacted at the end of last year, the proposal on the detailed rules (the “Proposal”) have only recently been published by the Ministry of Energy.

Key features of the proposal

Any available capacities will be allocated through competitive tenders conducted at the national level at least every two years. These tenders will be evaluated by a five-member committee, which will assess bids based on a scoring system outlined in the Proposal and the tender notice.

Preference will be given to undertakings who commit to installing battery or other balancing capacities exceeding the minimum requirements, integrating hybrid technologies to enhance performance utilisation, and offering financial guarantees above the specified minimum. Additionally, projects with lower environmental impact will be favoured. A notable addition to the Hungarian regulatory framework is the prioritisation of developers who undertake a recultivation obligation in the event of the power plant’s decommissioning.

The chairman of the evaluation committee will be the president of the Hungarian Energy and Public Utility Regulatory Authority (HEA), with one additional member delegated by the Minister of Energy, while the remaining members are appointed by the chairman. The tender procedure will be carried out by the HEA at the request of the Minister of Energy, based on data provided by the TSO and DSOs. The tender notice will determine the available feed-in capacities for each connection node and technology, the earliest possible connection dates, the amount of connection fees payable, and any obligation to install storage capacities. The HEA will publish the notification on the tender notice on its website, while the tender documentation will be available for purchase for a fee. The first tender notice is expected to be published this summer, with awards potentially announced by the end of 2025.

Financial guarantees and application rules

Applicants must provide a bid guarantee and, if awarded, a performance guarantee. Detailed rules on the financial guarantee, including the method for determining its minimum amount and the conditions for its fulfilment and release, will be specified in the tender notice. Applicants may also opt to provide a higher financial guarantee beyond the minimum requirement. Additional important rules include restrictions on multiple applications and requirements for declarations regarding partial awards. Specifically, applicants from the same corporate group may submit only one application for a given network node. Furthermore, applicants must declare in their tender bids whether they accept partial awards.

Remaining uncertainties and future steps

Several uncertainties remain, and some key details will only be clarified in the tender notice. These include the amount and form of the required financial guarantees, the detailed scoring criteria, the potential connection dates, and the possible appeal process regarding the HEA’s resolution on the tender outcome. The HEA will hold a consultation at the time, place and in the manner specified in the tender notice to provide additional information on the tender procedure. This consultation may assist applicants in preparing proper tender bids that meet the requirements of the Proposal and the respective tender notice. In the meantime, we look forward to providing updates to our existing clients and any other prospective developers.

By Viktoria Hiesz and Gergely Horvath, Attorneys at Law, Schoenherr

Oppenheim and Jipyong have joined forces to launch a dedicated Korean desk in Hungary. With Korea now ranking as Hungary’s third-largest investor and government initiatives driving opportunities in manufacturing and trade, Partners Istvan Szatmary, Jozsef Bulcsu Fenyvesi, Seong Chang, and Ji Hye Lee explore how the partnership aims to bridge cultural and regulatory gaps and enhance regional engagement.

CEELM: Congratulations on the partnership! Why did this partnership make sense for you? What were the considerations that encouraged Oppenheim to open a Korean desk?

Szatmary: Stepping back a little bit, we’ve been working with Jipyong for many years now. We’ve cooperated on various cases and got to know each other throughout that time. With that familiarity established, we realized over the last couple of years that Hungary, on a macroeconomic level, has been attracting more and more capital from Asia – particularly from Korea. In fact, Korea has already become the third-largest investor in Hungary, surpassing many other countries. Additionally, the Hungarian government is actively exploring opportunities in manufacturing and trade, which reinforces the potential for new business avenues. So, from our perspective, forming a partnership like this made perfect sense.

Fenyvesi: As we observed an increased level of interest in CEE, foreign direct investment from Asia was zeroing in on energy, EV batteries, and other manufacturing and technology-driven industries. Large amounts of capital were flowing into Hungary and the broader region. Given our regional outlook, we positioned ourselves as a first point of contact for companies intending to invest and operate here. Furthermore, on a personal note, we already enjoyed a great relationship with Jipyong, so continuing to work together was a very natural step. There is also great potential for expanding our advisory services to other Korean businesses entering the market.

We recognized not just Jipyong’s capacity and experience, but also their disruptive edge in the Korean market: they’re still a relatively young firm with close to 400 professionals, united by a strong drive for excellence. From our viewpoint, that dynamism promises a very fruitful collaboration.

CEELM: Similarly, what was it about Hungary that sparked Jipyong’s interest? Are there plans to look at other CEE markets?

Lee: We have nine offices across eight countries, making us the Korean firm with the most extensive overseas presence. Our overarching strategy is to expand globally and to assist the growing number of Korean businesses that invest in CEE. Hungary stands out as a regional hub for automotive, energy, and EV batteries, so we saw strong momentum there.

Chang: The Korean desk at Oppenheim can also specifically serve clients in other CEE markets like the Czech Republic, Slovakia, and Poland. While we’re currently focusing on the Visegrad countries, we are open to expanding further if clients’ needs require it. With almost 300 Korean companies entering the Hungarian market, many of which we already knew in Korea, it made sense to establish a local presence.

CEELM: What were the main synergies the two firms found in each other?

Szatmary: As we mentioned, approaching Korean clients in Hungary on our own would be challenging, primarily due to cultural differences and initial credibility gaps. From a Korean manager’s perspective, navigating Hungary’s legal environment can be tough without a trusted partner. Our synergy lies in jointly delivering clear, understandable legal advice without language or cultural barriers. That is our cornerstone. Of course, we also share know-how in many areas, but bridging that cultural gap remains crucial.

Lee: Personally, I’ve always been interested in EU regulations and have continued building my business acumen in that direction. I was already supporting Korean clients with a strong focus on the EU region, and this development felt like a natural progression. Moving to Oppenheim allowed me to dedicate my expertise to bridging Korean business interests with Hungary and the broader CEE region in a more concentrated way.

I believe both Jipyong and Oppenheim share a common vision of providing high-quality, client-oriented services. Oppenheim has deep knowledge of Hungary’s legal framework, while Jipyong thoroughly understands Korean businesses. With language barriers minimized and communication styles aligned, the potential for miscommunication is practically gone.

Chang: We had experience with other law firms in the region, but the level of enthusiasm and commitment that we saw at Oppenheim was very similar to our own commitment to the CEE region. The similarities of working style (e.g., response time) convinced us that this partnership would bring the most mutual benefits for our firms.

Fenyvesi: These synergies are enhanced by having Jipyong colleagues physically present and working alongside Oppenheim’s team. That on-the-ground collaboration helps us deepen existing synergies and discover new ones, especially in building direct relationships with Korean businesses here. This collaborative presence also paves the way for further expanding our advisory services tailored to the needs of Korean market entrants.

CEELM: What are the main plans in the short term – how will this new partnership be leveraged initially, and what about the long term?

Szatmary: Beyond the practical side, we do have clear short-term outreach plans. Both firms also keep a long-term perspective in mind, where each near-term decision feeds into our broader strategy. We aim to become the go-to office for businesses across the region. From our very first discussions, we saw how well our firm cultures mesh and realized we can accomplish a lot together.

Lee: Specifically, we want to introduce our presence to as many Korean businesses as possible –through meetings, seminars, and targeted outreach. The hope is that we’ll soon become a ‘cultural leader’ for enterprises looking to enter the Hungarian market, guiding them step by step.

Szatmary: Indeed, building relationships with the local Korean community helps us realize we share a lot of common ground. Engaging with people, culture, and language in a truly meaningful way underscores just how many values we have in common and enables more cohesive cooperation.

Fenyvesi: Looking beyond Hungary, our next aim is to extend this model regionally. We’ve already explored connections and opportunities in nearby countries – it’s a classic pattern for law firms to follow their clients’ capital. Additionally, Jipyong is actively enhancing its understanding of legal technology and operational approaches – focusing on how they handle clients, manage client relationships, and apply their expertise and professionalism across every facet of work. We find this commitment particularly compelling and look forward to learning from it.

2024 brought with it several important changes to Hungarian consumer protection regulations, most notably the changes to mandatory warranty rights. The Hungarian Consumer Protection Authority (“HCPA“) is also devoting significant effort into enforcing these rights in 2025.

As online sales remain a key driver for consumer spending, the HCPA keeps a strong focus on e-commerce platforms and online sales that target Hungarian consumers. As part of its annual “review plan”, the HCPA recently issued a list of areas that will receive increased scrutiny, which include:

• the manipulation of or tampering with consumer reviews;
• price display and regulations related to price monitoring systems;
• compliance with applicable marketing and advertising regulations (in particular if they target or can potentially harm minors);
• a comprehensive and sweeping compliance review of domestic as well as international e-commerce platforms;
• a review of vendor compliance with warranty and refund-related regulations;
• compliance with product safety and labelling regulations; and
• any form of “greenwashing”.

This increased scrutiny is in line with the launch of recent proceedings initiated by the Hungarian Competition Authority (“HCA“) against two major online sales platforms.

A recent proceeding against a Romanian-based international sales platform aimed to verify whether the company had fulfilled the commitments it made in 2021, particularly the nearly HUF 3 billion program it had planned as a means of support for Hungarian businesses. Based on earlier findings by the HCA, the platform’s pricing practices did not ensure that “original” prices reflected the actual typical prices of products.

The HCA also launched an investigation into a Polish online marketplace that operated in Hungary in Hungary as well, suspecting that the company misled consumers with its “Lowest Price Guarantee” campaigns. According to the HCA, the online marketplace did not provide adequate information about the terms of the price guarantee and customers found it difficult to access crucial details. Furthermore, the warranty system included restrictive conditions that made it harder for consumers to enforce their claims and use the coupons they were issued.

In summary, it appears that the relevant Hungarian authorities will continue to remain focused on online sales and compliance with applicable consumer protection, unfair competition and marketing regulations in 2025.

By Miriam Fuchs and Peter Ihasz, Senior Associates, and Bence Andras Kiraly, Associate, Wolf Theiss

A new proposal could eliminate the requirement for remote control regulation in solar power plants with a capacity of less than 5 megawatts (MW).

The automatic Frequency Restoration Reserve (aFRR) accreditation system was introduced in Hungary in 2022, requiring weather-dependent energy producers to have automatic balancing energy regulation capabilities. The Hungarian transmission system operator, MAVIR maintains balancing reserves to ensure grid stability in case of imbalance. However, this regulation allows MAVIR to disconnect non-residential solar power systems at any time to maintain the electricity grid’s balance.

Under the proposed amendment, the obligation to enable remote control regulation would remain only for solar power plants with a capacity exceeding 5 MW, while plants below this threshold would be fully exempt. This change would affect the range of obligated entities, including solar power investors and operators, as well as companies specializing in aFRR compliance. Furthermore, its impact would be felt across the entire Hungarian electricity grid’s security of supply.

While balancing costs in Hungary have generally decreased from their peak levels of one or two years ago, they remain high compared to regional benchmarks. From a national economic perspective, it is crucial to keep MAVIR’s balancing costs (the expenses related to maintaining regulatory reserves necessary for grid stability) as low as possible while ensuring that a sufficient number of assets remain controllable.

Considering these factors, although it is not official yet, independent aggregators are expected to set the aFRR accreditation requirement at 400 kilowatts (kW) instead of MAVIR’s suggested 5 MW. A 400 kW threshold is considered large enough to justify separate accounting, making it a viable business model without causing negative cash flow or significant additional costs. While raising the size threshold to 400 kW would reduce the number of affected power plants, the overall controllable capacity would decrease at a much lower rate. Although market participants largely agree on the need to raise the size limit for remote-controlled regulation, they do not support the proposed increase to 5 MW.

By Eszter Kamocsay-Berta, Managing Partner, KCG Partners Law Firm

Following the year-end legislative news, several changes affecting so-called “green taxes” came into force at the beginning of 2025. The most significant of these is the effective abolition of the dual obligations of the Extended Producer Responsibility (EPR) and the Environmental Product Charges (EPC), except for plastic carrier bags, and the introduction of the EPR penalty rates that have been expected since the introduction of the EPR. At the same time, there are also many changes to the EPR rules.

The amendment aims to reduce the double administrative burden for the obligated parties.

From 1 January 2025, the dual obligation of the EPR and the Environmental Product Charge (EPC) on the packaging, electrical and electronic equipment, batteries, tyres, office stationery, and promotional paper will be abolished. Since the introduction of the EPR, the product charge obligation for these product streams consisted only of administrative tasks and did not constitute a payment obligation, as the introduction of the EPR made the amount of the EPR charge for the relevant product or material stream deductible from the product charge. Although the amendment has not brought any significant financial benefits to companies, it has nevertheless relieved the businesses concerned of a significant administrative burden.

An important change is that from 1 January 2025, plastic carrier bags will be included in the product stream of other plastic products and will remain subject to the product charge as a single product subject to the EPR. A change from the draft was made to the level of the product charge payable on plastic carrier bags, with the deduction of the EPR charge from the product charge as the only product still covered by both pieces of legislation.

Significant uncertainty for businesses has been removed by the definition of the penalty rates for non-compliance with the EPR obligation in the Government Decree on Waste Management Fines, which will enter into force on 1 April 2025.

By Rozsa Rusvai-Darazs, Attorney at law, KCG Partners Law Firm

Decathlon Hungary Legal Counsel Timea Balazs has become the company’s new Head of Legal and Compliance.

Balazs has been with Decathlon since 2017 when she joined as a Legal Counsel.

“During my years at Decathlon, it became clear, how important it is to match your values with the values of the company you work for. A perfect match,” commented Balazs.

Originally reported by CEE In-House Matters.

From 1 January 2025, third-country nationals will no longer be entitled to claim certain personal income tax (PIT) benefits. Third countries are non-EEA countries and countries that have not concluded a bilateral social security agreement with Hungary.

The family tax allowance rule (tax base allowance per month, depending on the number of dependants) applies to individuals who are entitled to family allowances, invalidity benefits or similar benefits under the legislation of an EEA State or a non-EEA State bordering Hungary (Ukraine or Serbia).

From this year, the first spouses’ allowance is no longer available to third-country nationals, but only to citizens of EEA countries and non-EEA countries bordering Hungary. The same applies to the benefit for young people under 25.

Further PIT benefits are not affected by the change: third-country nationals can also apply for the personal allowance for severely disabled individuals as well as the maternity allowance (note that eligibility can be established on detailed knowledge of personal background).

If the foreign individual is a tax resident in Hungary and comes from an EEA member state, Ukraine or Serbia, he/she can claim the same tax benefits as a Hungarian citizen. A non-resident individual may also claim tax benefits if his/her income taxable in Hungary reaches 75% of his/her total income for the tax year, provided that he/she is not entitled to the corresponding benefit in the country of residence and meets the special provisions of the Personal Income Tax Act.

By Gabriella Galik, Founding Partner, KCG Partners Law Firm

A new amendment to the ESG Act has entered into force, which, in addition to changes to the personal and material scope of the Act, contains provisions primarily aimed at easing the burden on businesses and the application of the Act. According to the proposal of the Act, the amendments are necessary in light of the experience gained in the practical application of the ESG Act since its entry into force. The changes entered into force on 19 January, except for the amendment on fines. The main amendments are summarised below, without being exhaustive.

Changes in the scope of the ESG Act

The personal scope of the ESG Act has been amended in two areas. Firstly, public-interest entities will only be covered by the ESG Act in the first instance if they meet the specified thresholds (or at least two of them) for two consecutive financial years. The amendment does not affect other categories of certain enterprises covered by the ESG Act, so of course large enterprises that are of public-interest as large enterprises are also covered by the ESG Act, which may be excluded from the first round of the ESG Act by the amendment. Thus, the amendment is primarily relevant regarding the date of entry into force of the obligations under the ESG Act: large public-interest entities that fall outside the scope of the amended section of the ESG Act as a result of the amendment will not be subject to the ESG Act starting from 1 January 2024, but rather starting from 1 January 2025. (Given the date of entry into force of the amendment, this may effectively exempt certain groups of large public-interest entities from filing ESG reports in 2025).

Another change to the personal scope is that, although regulated financial service providers will continue to be exempt from the sustainability screening obligations under the ESG Act, they will also have to comply with the ESG contributor rules. Thus, from now on, financial service providers will also have to be vigilant to ensure that their activities, which may also be included in an ESG contributor activity, do not constitute unauthorised ESG contributor activities, as the latter will be subject to supervision and fines by the Supervisory Authority of Regulated Activities (SARA).

The material scope of the ESG Act is also amended, as the amendment repeals the already unfortunate Article 1(2) of the ESG Act, which extended the scope of the ESG Act to cover, under certain conditions, the investments and exposures of enterprises. The interpretation of this provision has been a challenge for legislators since the introduction of the ESG Act, who expected the government to use the mandate of the ESG Act to regulate the criteria for classifying an enterprise’s exposure and investment (and thus provide some guidance on the interpretation of the provision). However, the government’s mandate was removed from the ESG Act with the April amendment, and the current amendment simply repeals the entire provision.

Changes in the area of materiality

The ESG Act provided for dual materiality as a matter of general principle, meaning that companies should assess their risks and their materiality both ‘from the outside inwards’, i.e. how external sustainability risks affect the company’s operations, and ‘from the inside outwards’, i.e. how the impacts of the company’s operations can be assessed from an environmental and social perspective. In line with this, the ESG Act also stipulates, amongst other things, that a company must include in its ESG report the information necessary to understand the impact of its activities on sustainability issues, as well as the information necessary to understand how sustainability and social issues affect the development, performance and position of the company and its relationship with society.

The amendment addresses the issues of dual materiality through a so-called simplification or ‘codification clarification’ by deleting the word ‘dual’ from the relevant provisions, so that the ESG Act now refers only to the ‘materiality principle’. However, the amendment does not affect the disclosure and reporting obligations of companies as quoted above, so the materiality of the obligations is not changed, irrespective of the amendment to the principle.

It is therefore difficult to say at this stage whether the simplification and clarification will make it easier for companies to fulfil their due diligence obligations for sustainability purposes, without changing other relevant legal obligations.

Amendments affecting the supply chain and its members

Entities that do not qualify as enterprises (are not required to submit ESG reports) but voluntarily (or are obliged by law) provide ESG data can now fulfil their obligation by completing questionnaires for each supplier group set out in the SARA Regulation as well as by preparing ESG reports and completing the ESG questionnaire. The amendment underlines in several places that ESG reporting is voluntary for these entities.

Another new rule is that companies subject to the Act are obliged to provide their direct suppliers with a free training programme on how to complete the supplier questionnaire (the exact details of which will be set out in a ministerial decree). This will create an additional burden for companies, but on the other hand, a well-designed and implemented training programme will presumably help to collect ESG data and therefore to properly screen the supply chain, thereby supporting the fulfilment of sustainability due diligence obligations in the long term.

Registers and fines

The amendment introduces clear and welcome changes to the content of the various registers kept by the SARA.

Firstly, it removes the obligation to keep registers of companies required to publish an ESG report, given that the information contained therein may also be disclosed in the context of other reporting obligations.

Secondly, it partly modifies and partly completes the scope of the information to be registered in relation to ESG contributors, particularly ESG consultants. For example, the provision requiring the registration of accommodation and title of residence in Hungary for foreign natural person consultants is removed from the ESG Act, which is of concern both from a practical and EU law perspective. However, the rule that ESG consultants’ clients must be included in the register of ESG consultants would not be changed. The necessity of this provision is particularly questionable in view of the new rule requiring companies to register their ESG contributors (including ESG consultants).

Finally, the new rules will allow for the possibility to amend ESG reports already filed, which is likely to address the real needs and problems of companies.

At the same time, the amendment clarifies the provision of the ESG Act that empowers the SARA to impose fines for failure to comply with due diligence obligations for sustainability purposes, which will enter into force on 1 January 2026, so that in addition to failure to comply with the obligations, it also provides for fines for the submission of ESG reports that do not comply with the ESG Act or other relevant legislation.

In summary, the amendment contains several provisions that are responsive to real life challenges and genuinely facilitate the application of the ESG Act, and it is likely to assist companies in meeting their sustainability due diligence obligations. However, the system of the ESG Act and other relevant legislation is understandably still very much in its early stages, and this is probably not the last amendment to clarify, add or repeal the relevant provisions to facilitate the fulfilment of sustainability due diligence obligations.

By Peter Gyorfi-Toth, Partner, ESG Practice Leader, and Dora Dranovits, ESG Practice Coordinator, Senior Associate, DLA Piper Hungary

The global minimum tax initiative aims to ensure that large multinational corporations operating across multiple jurisdictions pay a corporate tax rate of at least 15%.

This measure was deemed necessary to curb tax avoidance strategies where corporations shifted profits to low-tax jurisdictions, exploiting disparities in corporate tax rates worldwide and strategically managing their profit reporting. Spearheaded by the Organization for Economic Co-operation and Development (OECD), this fiscal reform is projected to generate up to €192 billion in additional annual revenue.

As of mid-January 2025, over 130 countries had committed to implementing the global minimum tax on multinational profits. However, in a brief memorandum signed on his inauguration day, January 20, U.S. President Donald Trump directed the Secretary of the Treasury to initiate the withdrawal of the United States from the global tax agreement within 60 days.

This decision introduces significant uncertainty in international tax policy. The effectiveness of the global tax framework is highly dependent on U.S. participation, given that a substantial number of the affected multinational corporations are American. The U.S. appears to anticipate that other nations will refrain from enforcing the global minimum tax rules and will instead continue to adhere to existing bilateral double tax treaties. It remains unclear what sanctions, if any, will be imposed on countries that resist the new U.S. protectionist stance, but the Secretary of the Treasury has been tasked with drafting a list of the most effective countermeasures.

As of 1 January 2024, the international treaty on the avoidance of double taxation between Hungary and the United States expired. This imposes a significant financial burden on both US companies that have a permanent establishment in Hungary and Hungarian citizens who work for US companies. It is no coincidence that last week the Hungarian prime minister’s resolution was published in the Hungarian Official Gazette, in which he authorized the Minister of National Economy to conclude a new agreement with the US on avoiding double taxation and preventing tax evasion.

It is important to note that a previous, modernized double taxation treaty was signed between Hungary and the United States on 4 February 2010. However, as an international treaty, it required ratification by both parties under their respective domestic legal frameworks. While Hungary ratified the agreement in 2010, the U.S. approval process, which involves a preparatory committee, Congress, and the Senate, has stalled for over 15 years, preventing its implementation.

Given these precedents, even if the new U.S. administration endorses the renewal of the convention, the processes of signature, ratification, and eventual enforcement could take several years.

By Denes Glavatity, Associate, KCG Partners Law Firm