Category: Hungary

Jalsovszky has advised Janos Kubinszky on the sale of a 100% shareholding interest in KTT Kft. to Axel Johnson International. Ernst & Young advised the buyer on the deal.

KTT is a Hungarian distributor and manufacturer of rubber seals. Axel Johnson International is a privately owned Swedish industrial group. 

Jalsovszky’s team included Senior Associates Agnes Bejo, Associate Levente Bihari, and Junior Associate Szabolcs Szilagyi.

Ernst & Young’s team was led by Partner Ivan Sefer and included Senior Associates Peter Csonga and Szabolcs Posta, Associate Judit Zolan-Lipak, and Junior Associate Zita Pavelko.

Banking and Finance lawyer Gabor Kiraly has rejoined Dentons as a Partner in the firm’s Budapest office. Kiraly had been a Counsel at Dentons from 2015 to 2020, before serving for a short period as Director of Portfolio Management at GB & Partners in Hungary.

According to the firm, Kiraly advises on debt, equity, and distressed debt transactions as well as “a wide range of banking, project finance, regulatory and derivative/treasury matters.”

Kiraly’s previous experience includes ten years as Senior Legal Counsel to the National Bank of Hungary, almost six years with CMS, and five years as Deputy CEO at CIB Bank.

“We are extremely pleased to welcome Gábor back to our team,” said Partner and Head of Banking and Finance group Gergely Horvath. “He is a highly respected lawyer and his experience . . . gives him unrivaled first-hand knowledge of both the public and private sectors.”

“Gabor is a strong addition to our capabilities in Banking and Finance and Regulatory in Hungary and across the region,” added Hungary Managing Partner Istvan Reczicza.

Nagy es Trocsanyi has announced Balazs Karsai and Viktor Jeger will join the firm’s partnership ranks as of July 1, 2021, and January 2022, respectively.

Karsai joined the firm in 2007 as a Trainee and became an associate in 2010. He primarily deals with energy and competition matters, in particular cartel and state aid cases.

Jeger also started as a Trainee with Nagy es Trocsanyi, having joined the firm in 2013. He focuses on litigation, arbitration, and administrative law matters, and also advises and represents clients in cases relating to energy, construction, and property law.

Oppenheim has successfully represented Hell Energy in a trademark dispute before the EU General court regarding the protection of its Hell trademark for coffee-related products.

Hell Energy Magyarorszag Kft is a manufacturer of soft drinks and has recently, according to Oppenheim, “extended its product portfolio with canned coffee products and filed a trademark application with the EUIPO for the sign Hell for coffee-related goods.” According to the firm, the “EUIPO refused the application for all goods except for Malt coffee extracts claiming that Hell in German means light, which can be understood by the average consumer as a reference to ‘light roast’ coffee.” This decision was then confirmed by the Boards of Appeal of the European Union Intellectual Property Office.

The EU General Court annulled the decision of the Boards of Appeal and, according to Oppenheim, highlighted that “the association between Hell and coffee via helle Rostung needs intellectual effort, which means that there is no obvious and direct link between the goods and the sign. Therefore, Hell does not enable the relevant public to immediately perceive in the sign, without further thought, as a description of coffee or one of its characteristics.”

Oppenheim’s team was led by Partner Aron Laszlo.

On 1 July 2021, a new Government decree enters into force in Hungary, prohibiting the placing on the market of certain single-use plastic products and products made from oxo-degradable plastic. The decree was published in Hungary’s Official Gazette on 1 June.

Specifically, the decree prohibits the following products from being placed on the market:

• Cotton bud sticks;
• Cutlery (forks, knives, spoons, chopsticks);
• Plates;
• Straws;
• Beverage stirrers;
• Sticks to be attached to and to support balloons;
• Food containers made of expanded polystyrene (i.e. receptacles such as boxes with or without covers) used to contain food, which is intended for immediate consumption, either on-the-spot or take-away, typically consumed from the receptacle, and ready to be consumed without any further preparation, such as cooking, boiling or heating, including food containers used for fast food or other meals ready for immediate consumption, except beverage containers, plates and packets and wrappers containing food;
• Beverage containers made of expanded polystyrene, including their caps and lids;
• Cups for beverages made of expanded polystyrene, including their covers and lids;
• Lightweight plastic carrier bags with a wall thickness of 15 microns or more, except for those made of biodegradable plastic.

Cups for beverages not made of expanded polystyrene, including their caps and lids, will be prohibited as of 1 January 2023. Certain products are excluded from the scope of the above prohibition, such as cups intended and used for containing food for special medical purposes as well as straws and sticks qualifying as medical devices. The concept of “placement on the market” means the first time when the product is made available on the market, i.e. when it is supplied for distribution, consumption or use on the Hungarian market in the course of a commercial activity, whether in return for payment or free of charge.

Sanctions are connected to waste prevention, meaning that any violation will be sanctioned according to waste-prevention regulations.

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

The constitutional court has rejected a motion against the amendment of the Hungarian Labour Code in 2018, however, it stated the Parliament’s legislative omission. In 2018 the Hungarian Parliament adopted an amendment to the Hungarian Labour Code that resulted in the extension of the maximum duration of the working timeframe in a collective agreement up to 36 months if it is justified by objective or technical reasons, or reasons related to work organisation.

In its ruling issued on 27 May 2021, the Constitutional Court did not find unconstitutional the possibility of the application of a (maximum) 36-month long working timeframe. However, the Constitutional Court has delivered the following important remarks. On one hand, the Constitutional Court considered as a constitutional requirement that the average of the weekly rest period and the average of the extraordinary working time performed by the employee must be calculated on a one year long basis, even if the agreed working timeframe is longer than one year. On the other hand, the Court stated that the Hungarian Parliament had failed to adopt provisions that would guarantee that the employer, by terminating unilaterally the collective agreement, cannot escape its additional obligations for longer working timeframe under the collective agreement while enjoying its benefits.

According to the Constitutional Court’s decision, the Hungarian Parliament is obliged to fulfil its above mentioned obligations and repair its legislative omissions by 31 July 2021.

By Levente Csengery, Partner, KCG Partners Law Firm

The European Commission published the Digital Single Market Strategy for Europe in 2015, the aim of which is the creation of a modern and more European copyright framework system. The Commission presented in 2016 its legislative proposals to modernise EU copyright law, which resulted in the adoption of two directives: one laying down rules on the exercise of copyright and related rights applicable to certain online transmissions of broadcasting organisations and retransmissions of television and radio programmes (“SatCab Directive”) and another on copyright and related rights in the Digital Single Market (“CDSM Directive”).

The Directives were published in the Official Journal of the European Union on 17 May 2019 and the Member States had two years to transpose them. The Hungarian Copyright Act and the Act on the Joint Management of Copyrights and Related Rights already partially comply with the provisions of the Directives, but on certain points it was necessary to amend and supplement the legislation.

The CDSM Directive aims to modernise copyright law and adapt it to the digital environment. In order to comply with the CDSM Directive, based on the amended Copyright Act free use includes the reproduction necessary for the text and data mining of works if the work affected by the use has been lawfully accessed, the rightholder has not objected the fair use in advance and in an appropriate manner, and copies necessary for text and data mining are kept only for the time necessary for the purposes of text and data mining. Under certain conditions, free use may also mean the reproduction necessary for text and data mining of works for the purposes of scientific research carried out by research centres and cultural heritage institutions. Furthermore, a new chapter was introduced in the Copyright Act, dealing with the rules on the use of works not available for trade flows. In addition, another chapter contains the rules for the protection of publishers of press publications. In order to strengthen the position of authors and performers, a new provision is also introduced on the information obligation of the party contracting with authors and performers, under which the author and performer must receive comprehensive information at least once a year on the use of the copyright-relevant rights affected by licence or transfer, the revenue generated and the fees payable.

The Act on the Protection of Trademarks and Geographical Indications has also been amended. The amendment aims at aligning the domestic legal environment with the revised Geneva text of the Lisbon Agreement on Appellations of Origin and Geographical Indications and the Lisbon Agreement on the Protection and International Registration of Appellations of Origin. A notable change is the update of the procedural rules for international applications. The amendment also brings the necessary changes to the definition, description, presentation and labelling of spirit drinks, the use of spirit drink names in the presentation and labelling of other foodstuffs, the protection of geographical indications for spirit drinks, the use of ethyl alcohol of agricultural origin and distillates in alcoholic beverages.

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

Hungary announced to cut the tax on cryptocurrency earnings by 50% to encourage investors to declare income from trading digital tokens such as Bitcoin. The Hungarian Parliament accepted the tax package for 2022 on 9 June 2021. The package contains inter alia significant simplification and tax reduction with regards cryptocurrencies.

More than HUF 300 billion of household investment is kept in crypto assets in Hungary, even by conservative estimation. The Hungarian Government now aims to increase the visibility of the country’s cryptocurrency market and minimize tax evasion, and the lower tax rate with transparent rules are expected to generate several billion forints in additional budget income as well.

Background

Cryptocurrencies have been around for more than a decade now and in the last 5 years 1 Bitcoin went from 750$ to 35.000$. The significant earnings on crypto transactions, however, remained mostly under the radar for tax purposes.

Throughout the EU, although there are overall guidelines and regulations regarding cryptocurrencies, regulation and by extension taxation, is still up to individual countries. Back in 2014, the Court of Justice of the European Union decided in its standalone case C-264/14 that – for VAT purposes – crypto assets to be considered as currency. Since then, the EU is prepared a proposal for a regulation on Markets in Crypto-assets and individual member states are also moving forward and adapting their own tax laws to encompass cryptocurrencies.

In Hungary, crypto assets have not been even defined for tax purposes and earnings on such transactions were considered as ‘other income’ by default. As a consequence – summarizes Balint Zsoldos, Head of Tax at KCG Partners Law Firm – tax implications of crypto assets were disadvantageous (compared to other capital gains) with 15% of income tax and 15.5% of social contribution tax (non-capped) applicable.

New definition, new rate, new rules

The new legislation gives a fairly broad definition: crypto asset is a digital display of value or rights that can be electronically transferred and stored using distributed ledger or similar technology. The new rules should apply to crypto trade and mining, accordingly.

Taxation is based on the ‘black box’ concept: tax point is only triggered when the crypto assets are ‘withdrawn’; i.e. transferred to the bank account in ‘normal’ currency. As long as the crypto assets are stored or exchanged in the crypto world, it remains tax free. Furthermore, taxation of crypto assets will be regulated under capital gains. That also implies that – similar to the controlled capital market transactions – the income should be determined after the transaction profit achieved in the tax year, if it exceeds the amount of transaction losses and the amount of other fees and commissions related to the conclusion of transactions. Also, previous crypto losses for the tax year and the two preceding tax years can be taken into consideration and offset against the crypto income in each tax year.

The tax obligation is also decreased: firstly, crypto income will not be subject to social contribution tax, thus, the decrease in half of effective tax rate and income under 10% of the minimum wage (i.e. current threshold would be HUF 16,740) is not taxable, provided that the individual does not earn income from another transaction on the same subject on that day and the amount of such income in the tax year does not exceed the minimum wage.

Crypto earnings should be declared voluntarily to the Hungarian tax authority or the draft income tax return (as prepared by the tax office) amended, accordingly. As a last-minute modification, the legislation contains that the above rules can be opted for the current tax year of 2021 and previous non-reported earnings can be also considered (whitened) retroactively in the income tax return for 2022.

The above rules should provide a favourable environment for taxation of crypto assets and are aimed to whiten the Hungarian digital economy. For now, taxation of crypto incomes is still based on self-declaration, but it might be expected that tax offices will have more and more information on the transaction from financial service providers, reminds Balint Zsoldos.

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

Allen & Overy has advised Raiffeisen Bank Hungary on the HUF 70 billion issuance of 1.75% bonds due 2031 by Richter Gedeon Nyrt.

Richter Gedeon is a Hungarian multinational pharmaceutical and biotechnology company headquartered in Budapest.

Allen & Overy’s team included Consultant Zoltan Lengyel, Senior Associate Norbert Hete, and Associate Zsuzsanna Gordos.

While the pandemic negatively affected a plethora of legal practices, this does not seem to be the case with employment and privacy, according to Schoenherr Counsel Daniel Gera who says that it has been the principal driver of work recently.

“Looking back, not just at the past few quarters but the last 14 months, really, it was our employment and privacy practice that has seen most work,” Gera says. “Ever since the start of the pandemic our clients had to suffer the shock of uncertainties when it comes to switching to home office, regulating unpaid leave, social security, or unavailability for work.” Luckily for Schoenherr, Gera says that most of their clients have managed to escape the need for severe redundancies.
 

“This year, focusing on the most recent months and the third wave hitting us again, we were prepared, but new issues still came up,” Gera continues and points to matters related to handling employee health, whether or not it is permissible to inquire employees about their vaccination status or candidates during job interviews, and the like. “It is rather natural, then, that privacy aspects arose to follow employment ones.”

 

Focusing on specific types of legal work, Gera says that their firm has been focusing on three things. “Firstly, we had to prepare our clients for home office concerns – we developed internal home office regulations for several clients that we later used to create a template which we could further tailor to specific client needs.” This, Gera says, encapsulates work safety, data privacy, working hour regulations, home office costs, and the like. “Secondly, with many people working from home, we had to define the parameters of electronic communication methods and making the switch from paper forms.” Lastly, he says that a lot of their clients had to implement flexible worktime patterns. “We created ready-made structures to accommodate for this so that employers can pick them up more easily and can avoid worrying about overtime in home office situations.”


Looking ahead, Gera feels that, in upcoming months, the activity levels of the employment and privacy practice will “either be the same or slightly increase, especially with more and more clients opting to implement hybrid working conditions.”