Category: Hungary

Dalma Ordogh has joined KPMG Legal Hungary as a Director.

According to KPMG Legal, Ordogh will strengthen the team in the field of banking, financial, and restructuring legal services. 

Before the move, Ordogh was with Kinstellar as a Senior Associate between 2008 and 2015 and as Of Counsel between 2016 and 2025. Earlier, she was with Linklaters as a Junior Associate between 2000 and 2002, as an Associate between 2002 and 2007, and as a Senior Associate between 2007 and 2008. Earlier, she was a Junior Associate with CMS between 1998 and 2000.

Based on the 2017 Central Budget Act, the financial system of the local governments was supplemented by a new source: the solidarity contribution, which is paid to the central budget by a proportion of municipalities with a high per capita tax burden and is aimed at improving equal opportunities.

In addition to this, the 2025 Central Budget Act provides for the payment to the Regional Development Fund of the local business tax surplus of the local municipalities paying the solidarity contribution in excess of the solidarity contribution surplus.

The Regional Development Fund was established toon 1 January 2025 to implement the overall regional development policy, strengthening regional cohesion, reducing regional disparities in development, improving territorial competitiveness, creating conditions for sustainable development, promoting the spatial diffusion of innovation, and equal access to public services. The Fund provides financial support for the achievement of regional development objectives. It is likely that the introduction of the payment obligation of local business tax surplus also contributed to the fact that several municipalities decided to increase certain local taxes from 1 January 2025.

By Lidia Suveges, Attorney at law, KCG Partners Law Firm

The new Hungarian Architecture Act stipulates that areas designated as green zones, agricultural zones or forest zones cannot be selected as new development zones or special non-development zones.

Since most solar power plant investments take place in such special non-development zones, these areas are often affected by the new regulations. An exception is allowed if a replacement area of equal size and with the same or higher biological activity value is designated within the administrative boundaries of the same municipality as the new development zone. This replacement area must be classified as a green zone, agricultural zone, or forest zone. The new rule’s essence is that the overall size of green areas within a municipality’s administrative boundaries must not decrease.

Solar power developers criticize the new rules, since replacement areas cannot be designated outside the municipality’s administrative boundaries. Additionally, the designation of replacement areas involves extra costs, as these areas often require recultivation. Another obstacle is that, according to the regulation, new development zones can only be selected for an investment in case of significant public interest.

Installing 1 megawatt (MW) of capacity requires 1 hectare of land. Due to high connection fees and the need for cost-effective operation, larger projects (20-50 MW) are more popular, which also means greater land requirements. The new regulation is likely to negatively impact many planned (and capacity-approved) projects, necessitating a reassessment of costs and legal requirements.

By Lilla Majoros, Attorney at Law, KCG Partners Law Firm

Eniko Uveges has been promoted to Lead Legal Counsel at Grundfos.

Grundfos is a water solutions company.

Uveges has been with Grundfos since 2022 when she joined as a Global HR Legal Counsel. Earlier, she was the Head of the In-House Legal Department at Deloitte Hungary between 2019 and 2022 (as reported by CEE Legal Matters on May 28, 2019). Earlier still, she was a Lead Lawyer with Cargill between 2013 and 2019, a Corporate Director with HungaroControl between 2011 and 2013, as well as a Legal Director with GTS Hungary between 2008 and 2011. Moreover, she was a Legal Counsel with GTS-Datanet between 2004 and 2008 after beginning her career as an Attorney at Law with Forgo, Varga, and Partners between 2001 and 2004.

Originally reported by CEE In-House Matters.

In 2023, Hungary introduced the Extended Producer Responsibility (EPR) system, which places the financial responsibility for the waste management of circular products on producers.

The EPR system encompasses a wide range of product streams, including packaging, single-use and other plastic products, electrical and electronic equipment, batteries and accumulators, motor vehicles, tyres, office paper, advertising paper, cooking oil and fat, textile products and wooden furniture. Producers, or in the case of foreign manufacturing, the first domestic distributor of such products, are required to comply with registration, reporting and EPR fee payment obligations.

From dual obligations to sole EPR compliance

A significant recent change in the regulatory framework is the removal of the dual obligations that previously applied to certain products. Prior to the recent amendments, products such as packaging, batteries, electrical and electronic equipment, tyres, office paper and advertising paper were subject to both the environmental product fee and the EPR system. These parallel responsibilities created an excessive compliance burden for the affected businesses while securing no additional tax income for the state budget.

With the recent revisions, the environmental product fee payment obligation has been eliminated for these products, and producers are now only required to comply with the EPR system. While this simplifies the regulatory landscape by removing overlapping obligations, it also places greater emphasis on ensuring compliance with the EPR rules.

Changes in sanctions for non-compliance

Failure to meet the EPR registration, reporting or fee payment obligations can result in substantial financial penalties. Businesses that fail to register are required to pay retroactive EPR fees for the products placed on the market before registration.

Another key change introduced by the amendments is the imposition of stricter sanctions for non-compliance with EPR reporting and fee payment obligations. Effective from 1 April 2025, if a producer fails to meet its reporting and fee payment obligations, or if false data is provided leading to a lower fee payment, the competent waste management authority may impose a fine. This fine will be determined by multiplying the difference between the actual quantity and the reported quantity by half of the unit fee established for the relevant product stream. Thus, fines can quickly escalate, especially for businesses with large product volumes.

Timely registration, accurate reporting and diligent EPR fee payments are essential to avoid significant fines and penalties. As Hungary’s EPR system continues to evolve, seeking legal advice and proactively managing compliance will be critical to mitigating financial and reputational risks.

By Viktoria Hiesz, Attorney at Law, and Barbara Darcsi, Associate, Schoenherr

By passing the proposed bill on 25 November 2024, the Hungarian Government enacted significant changes to the taxation of company vehicles, set to take effect in 2025 and beyond. These modifications aim to increase tax revenues and promote the adoption of environmentally friendly vehicles.

Increase in Company Car Tax Rates

As of 1 January 2025, company car tax rates will rise by approximately 20%. The monthly tax amounts will vary based on engine power and environmental classification.

Inflation-linked adjustments

As of 2026, car registration tax rates and the company car tax rates will be adjusted annually based on the inflation rate recorded in July of the preceding year. The Hungarian tax authority will publish the updated rates by 15 December 2024 and for the upcoming years by October 31.

Changes to hybrid vehicle tax exemptions

Hybrid and plug-in hybrid vehicles registered by 31 December 2024, will retain their exemption from vehicle and company car taxes until 31 December 2026. However, vehicles registered after this date will not qualify for these exemptions, reflecting a policy shift to phase out tax benefits for hybrid vehicles in favour of fully electric or zero-emission vehicles. Benefits for plug-in hybrids have already been limited last fall, as cars registered after 1 September 2024 will no longer receive green license plates, thereby losing the free parking option. On plug-in hybrids with a green license plate, the old one must be replaced by 30 November 2026 at the latest.

Implications for businesses

These tax changes present both challenges and opportunities for businesses operating company fleets. The increased tax burden necessitates careful financial planning. To optimize expenses, businesses might consider diversifying their fleets to include more cost-effective or sustainable, low-emission models.

VAT reclaim opportunities

As a positive note, the Government has extended the provision allowing businesses to reclaim 50% of the VAT on operational leasing fees for company cars without maintaining detailed travel logs for an additional 3 years. This measure offers some relief amidst the increasing tax obligations.

By Borbala Maglai, Attorney at Law, KCG Partners Law Firm

The amendment package includes several minor amendments to help interpreting the text of the Hungarian ESG Act, and the provisions of the ESG Act have been brought into line with the content of the regulations supplementing the provisions of the ESG Act in several places. The amendments entered into force on 19 January 2025.

The most significant amendment to the ESG Act is that previously the regulated financial service providers were not subject to the ESG Act. This has been clarified by the amendment, so that if a regulated financial service provider is carrying out ESG contributory activities, it shall be subject to the ESG Act in relation to those activities. Accordingly, a new definition of “regulated financial service provider” has been added to the ESG Act, which covers, inter alia, credit institutions, investment firms, insurance companies and even crypto asset providers.

Another significant amendment is that the “double materiality” principle of the ESG Act has been amended, which is now referred to in the Act as the principle of “materiality” from the date of entry into force of the amendments. The substance of the principle has not changed significantly. Rather, the change may be because the principle of double materiality is also an important principle for sustainability reporting under the CSRD, but the meaning of the principle in the CSRD differs significantly from the meaning of the principle in the ESG Act. It was therefore necessary to amend the name of the principal in order to clarify any potential misunderstandings.

As Hungarian ESG regulation continues to evolve, the ESG Act may be amended at any time, so it is recommended to keep an eye on developments. 2025 will certainly be a significant year for ESG, as it will be the first year of publication of the ESRS-based sustainability reports, which are also worth monitoring.

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

Several amendments to pharmaceutical promotional laws in Hungary came into effect on 1 January 2025, with others following on 1 February 2025. Some of these amendments have long been urged by the pharmaceutical industry.

The changes primarily affect the following areas:

• the promotional regulation of the Act XCVIII of 2006 (“Medicines Thrift Act”) and Decree No. 3/2009 (II. 25.) of the Ministry of Health (“Promotional Decree”) which addresses
  • the costs of promotional events organised by promoter companies and
  • the obligation of promoter companies to submit proof of payments of the sales rep fee to the pharmaceutical authority;
• the reorganisation of the operation of institutional pharmacies.

Changes affecting pharmaceutical promotional practice

The amendment to the Medicines Thrift Act eliminates the obligation for promoter companies to submit proof of payment of the monthly sales rep fee to the National Public Health and Pharmaceutical Centre (NNGYK). From 1 January 2025, reporting of such payments is facilitated between the tax authority and the NNGYK. This change reduces administrative burdens for promoter companies, which previously faced frequent fines for non-compliance with this requirement.

Additionally, the amended Medicines Thrift Act establishes a new cost limit for hospitality at events of promoter companies organised for healthcare professionals (HCPs). The new hospitality limit may not exceed 15% of the monthly minimum wage per person per day, excluding VAT. This significantly alters existing legislation when a lower cost threshold applied to these events. Moreover, unlike previous restrictions, the amended law allows, under certain justifiable conditions, the invitation of individuals beyond the professional sphere.

The related rules in the Promotional Decree have also been amended, streamlining processes for promoter companies by removing redundant administrative steps and transitioning to more efficient electronic submissions. The requirement to provide proof of payment of the sales rep fee to the NNGYK has been removed, and the format of product sample and donation protocols has transitioned from paper-based to electronic submission. These must still be submitted to the NNGYK on a quarterly basis.

Changes affecting institutional pharmacies

New regulations have been adopted under the reorganised institutional pharmacy system in the Medicines Thrift Act, as outlined in our earlier Client Alert “Hungarian legislation reform related to centralised procurement for institutional pharmacies.“

These amendments, effective from 1 February 2025, introduce key definitions of the new system, such as the provider of unified institutional pharmacy services, the unified institutional pharmacy contributor services and the contributor.

For public and private inpatient care institutions that voluntarily participate, the state may facilitate the use of a contributor for institutional pharmacy activities through unified institutional pharmacy contributor services. This contributor will be selected through a public procurement procedure. The winning bidder is then required to establish a project company to carry out the unified institutional pharmacy contributor services.

The inpatient care institution and the project company must collaborate to ensure the necessary conditions for operating the contributor services. This may include the partial delegation of employer rights over pharmacy staff to a person designated by the project company. The provider of the unified institutional pharmacy services is also responsible for other non-institutional pharmacy tasks related to the supply of medicines to patients.

Institutional pharmacies must ensure the separation of institutional and direct community pharmaceutical supply activities, with the professional and operational rules governing this separation defined by law. Additional requirements and rules governing the use of the contributor and its services are described in separate decrees.

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

CMS has advised K&H Bank on the refinancing of the solar portfolio consisting of Obton Group PV plants situated on 15 different locations across Hungary, with a total installed DC capacity of 71.107 megawatts. Forgo, Damjanovic & Partners reportedly advised Obton Group.

K&H Bank is one of the biggest commercial banks in Hungary and is owned by the Brussels-based KBC Group since 1999.

Obton is a Danish investment and development company.

The CMS team included Partners Eszter Torok, Jozsef Varady, and Peter Simon, Senior Counsel Zsofia Hermann, Senior Associate Dorottya Varga-Giesz, Associates Nora Devenyi and Istvan Rigo, and Trainee Lawyers Marton Lazar and Rebeka Erdosi.

The Forgo, Damjanovic & Partners team included Partners Zsofia Fuzi and Reka Bali and Associate Eszter Bedo. 

Starting 1 January 2025, only citizens of Georgia and Armenia will be eligible for residence permits for the purpose of employment and guest worker residence permits. This marks a significant tightening of the previous rules, which allowed citizens of 10 countries to obtain guest worker residence permits and had no such restrictions for residence permits for the purpose of employment. Although these changes do not affect currently valid permits, the new rules will apply to all new permit issuances

As of 1 January 2025, Government Decree 450/2024 (XII. 23.) on the employment of guest workers in Hungary has come into effect. According to the decree, only citizens of the countries listed in Annex 1 can be employed with a residence permit for the purpose of employment or a guest worker residence permit. Currently, Annex 1 only includes Georgia and Armenia. The new restrictions do not affect immigration procedures that were ongoing as of 31 December 2024, nor the validity of residence permits issued by that date. Extensions of permits are also possible under the old rules. However, new permits can only be issued based on the new decree.

According to the above-mentioned decree, the countries listed in Annex 1 are those with which Hungary or the European Union has concluded a readmission agreement. As a general rule, only citizens of these countries can obtain residence permits for the purpose of employment or guest worker residence permits. However, citizens of countries not listed in Annex 1 can also obtain residence permits if their country has a state-recognized organization or office in Hungary that ensures their citizens leave Hungary if they do not comply with the regulations. The list of these countries will be published in a statement by the minister responsible for foreign policy. No such statement has been published yet, so employers should keep an eye on this in the future.

With the changes coming into effect, employers who cannot or do not wish to employ third-country nationals under the seasonal guest worker residence permit or the employment residence permit for the purpose of investment have the option to apply for permits available for highly skilled individuals or those tied to specific nationalities.

Regarding permits tied to specific nationalities, employers should be aware of the list of countries whose citizens can obtain the National Card. Citizens of these countries can reside and work in Hungary with relatively few restrictions and favorable conditions.

If there is no option available based on nationality, opportunities for highly skilled workers may be considered. For third-country nationals with higher qualifications in IT, engineering or natural sciences, the Hungarian Card may be relevant. For those with different degrees and salaries above the special minimum salary, the EU Blue Card could be a solution.

As of 1 January 2025, the decree of the Minister for National Economy on the total number of residence permits for the purpose of employment and guest worker residence permits that can be issued annually in Hungary has been published. According to the decree, the maximum number of these permits for 2025 is 35,000. Although it is unlikely that the number of issued permits will exceed this limit due to the existing restrictions, employers should keep this in mind in case the country restrictions are relaxed.

By Akos Fehervary, Managing Partner, and Nora Ovary-Papp, Counsel, Baker McKenzie