Category: Hungary

Who hasn’t queued at the in-store customer service desk to have their warranty stamped? Who hasn’t spent hours figuring out which brand service centre to take a faulty product to? And there are many more, similar nuisances we could add. However, changes in the warranty regulations are set to put an end to these from next year. But what’s good for consumers represents a major additional burden for vendors.

When selling consumer goods, the vendor must provide a warranty. So, if our recently purchased kitchen appliance, washing machine, lamp or clock stops working, we should be able to ask the shop that sold it to us to repair or replace it, or perhaps refund us the purchase price. As with other things though, the devil is in the detail. But due to a recently published government decree, these details are set to change from 1 January next year, and essentially in favour of the consumer.

And for drones too…

From January, the range of products that vendors will need to provide warranties for will increase. Not that the list has been short until now: it already includes virtually all household goods, furniture, sports equipment and musical instruments. However, from January, warranties will need to be issued for products such as doors and windows, shutters, bathtubs and taps, and, in keeping with the advances of the modern age, the legislators have also included products such as solar panels, solar systems, electric scooters and drones among the products requiring a warranty.

Banded system instead of one term for all

Standard warranties can currently be enforced within one year for all products. This approach is set to be replaced by a banded system, and from 1 January the sale price of the product will determine the length of the warranty. From then on, the one-year deadline will only apply to products that cost from HUF 10,000 to HUF 100,000. Above that, consumers will benefit from a two-year warranty for products of up to HUF 250,000 and from a three-year warranty above that.

The e-warranty is here

Another positive change for consumers is that they will no longer have to queue up at in-store customer service desks to get their warranties validated if they don’t want to. As an alternative, the new government decree is introducing an electronic warranty, which the store must provide to the customer on the day after the product has been released, at the latest. This can be done by email or via a download link. In the latter case, an important requirement is that the document be kept available until the end of the warranty period, i.e. for up to 3 years if applicable.

Easier, faster

The options available for enforcing the warranty will also change to the advantage of consumers. In the future, the customer will not have to return the defective product to the repair centre indicated on the warranty; it will be sufficient to return it to the seller’s premises, i.e. to the store where it was bought. In other words, say we bought something at Media Markt and it breaks down; we can take it back to Media Markt and the store will be responsible for getting it fixed for us.

Another important change is that from January the law will help prevent the repair from dragging on, by imposing strict deadlines. The vendor will have 30 days from the date of the request to repair the product. If it fails to do so, the new rules allow the consumer to immediately request that the product be replaced or that the store refund the purchase price – and this must be done within 8 days. The replacement or refund within 8 days will also be mandatory if the product fails again after three repairs.

The other side of the coin…

Positive change for consumers means, of course, a major additional burden for both retailers and manufacturers. Not only will they be responsible for ensuring the fault-free functioning of the product for a longer period of time, they’ll also have a shorter time in which to fix the product. And they’ll also have to arrange for the product to be delivered for repair. This may require substantial preparation and planning on the part of these businesses. Perhaps the only good news for retailers is that they’ll just about dodge the Christmas blitz: the new rules only apply to products sold in 2021.

By Gabor Kerekes, Attorney at Law, Jalsovszky

Jozsef Antal, the former Head of Legal and Compliance at Metro Cash & Carry Hungary, has returned to private practice by joining Kapolyi Law Firm as a Partner.

Antal joined Metro Cash & Cary Hungary in January 2020 (as reported by CEE Legal Matters on January 21, 2020). Prior to that, he was the Chief Legal Counsel of Unix Auto since 2019 (as reported by CEE Legal Matters on July 9, 2019). Before moving in-house, he was Partner and Head of Dispute Resolution at Baker McKenzie, a firm he first joined in 1999.

He currently also serves as a Member of the Supervisory Board at the Hungarian Food Bank and is the Vice President of the Hungarian Arbitration Association.

Antal told CEE Legal Matters: “While the head of legal and compliance department role at a multinational company was interesting and demanding, I decided to say ‘yes’ when friends from a reputable and strongly upcoming Hungarian law firm asked me to take over and build further their disputes practice. This seems to be quite an inspiring challenge.”

Originally reported by CEE In-House Matters.

“I have a Slovak address card, so I don’t have to pay taxes in Hungary…” “I just have to make sure not to spend more than 183 days at home”. “I’m a digital nomad, I don’t pay taxes anywhere.” Many similar misconceptions circulate in Hungary regarding the rules of tax residence. However, tax regulations are “much smarter” than that and those who follow false illusions may even be exposed to criminal liability.

Until recently, with a little exaggeration, the subject of tax residence existed in Hungary on the paper of tax laws and international tax treaties only and its examination was never in the focus of tax audits. This has led to a smaller “wave of emigration” since the early 2000s – mostly with destinations to Slovakia, Malta and Dubai. At least according to the address records.

However, a few recent cases have shown that the tax residence of individuals is no longer a pristine area at the Hungarian Tax Office. For instance, the tax office examined the tax residence of an individual who had “moved abroad” in a case hardly a year ago. In doing so, also analysing the cell information of the individual’s telephone, they came to the conclusion that the person had only formally changed its tax residence. And the High Court upheld the tax office’s decision, thereby raising the stakes in the game.

Why is tax residence so important?

Because the country where an individual is resident for tax purposes can tax all of that person’s income – regardless of where the income came from. Certain types of income are exempt from this main rule, if a double tax treaty exists between the two country which , for taxation by the “source country” for certain incomes. In such case, the country of residence either exempts the foreign income from taxation or credits the foreign tax.

But in which country am I resident?

Contrary to popular misconceptions, both domestic and international tax regulations attach importance in this respect primarily to the factual circumstances, and not to the easily changeable formalities and records.

In the first place, the internal law of a specific country determines who is considered to be a resident there. This can be based on nationality, permanent residence, habitual residence, residence permit or a number of other factors. And if someone is considered to be resident in more than one country under the internal rules, the double taxation treaties determine which country may retain the option of taxation according to residence.

In such cases, the individual is primarily resident in the country where he or she has his or her “permanent home”. This “home”, however, is not “that home”… For the purposes of tax rules, the permanent home is any physical place that serves the regular or long-term stay of an individual (up to a few months of the year). The fact that the individual has an address card does not in itself determine the issue of permanent home.

In the case of several “permanent homes”, residence is determined by the location of the centre of the individual’s vital interests. This is an extremely difficult and subjective criterion to apply. What is examined here is the country with which the individual has the closest connections in terms of personal, property, economic and cultural ties – which often do not coincide (such as when someone works abroad but his family has stayed at home).

The so-called “183-day rule” is only analysed after that. That is, if a person has more than one permanent home and the centre of his vital interests cannot be clearly determined, then the person’s residence will be where he or she spends most of the tax year. But we rarely get this far.

So now how can someone become a resident of Dubai or Malta?

Based on the above criteria, even in the light of scanty case law, we can establish that a relatively “safe” change of residence requires moving abroad for at least two years, staying there with a normal home, not spending more than two months a year in Hungary and if family members include a husband, wife, child, dog or even a turtle, they must also move abroad. Otherwise, a Hungarian citizen leaving the country would have a hard time proving that the centre of his vital interests has moved abroad. And if he has only moved in the address register, the battle plan will already be crushed on the criterion of permanent home, which isexamined as a matter of fact.

And what about digital nomads?

A product of our era are the so-called digital nomads, software developers who travel all around the world every year and consider themselves homeless for tax purposes. Do they really evade taxation? It is indeed more difficult to establish tax residence for such persons, but there is – there must be – always a country that has most grounds to establish that a digital nomad is resident there. And if such country does not claim its nomad, then another country might appear down the line. Everyone must pay its check somewhere.

By Istvan Csovari, Partner, Jalsovszky

The Kapolyi Law Firm has advised Duna House, a property brokerage group in Central and Eastern Europe, on its participation in the National Bank of Hungary’s Growth Bond Program. 

According to Kapolyi, Duna House’s bond issuance ”exceeded expectations, [with] institutional investors buying ten-year bonds with a nominal value of HUF 6.6 billion, rated by Scope Ratings.”

Kapolyi’s team included Managing Partner Jozsef Kapolyi and Senior Attorneys Viktor Krezinger and Daniel Nagy. 

The Hungarian Government adopted the Government Decree 408/2020 (VIII.30.) (“Government Decree“) on 30 August 2020. In the Government Decree it was announced that Hungary will close its borders to foreign citizens as of 1 September. 

With regard to border control, Hungary will return to the rules of the first wave of the outbreak: foreign nationals will not be allowed to enter Hungary without a special reason, and Hungarians returning from abroad will be placed in 14-day quarantine or will have to be tested negative twice.

I. Rules for Hungarian nationals

For the purposes of the Government Decree, the following persons shall be treated in the same way as Hungarian nationals:

• those foreign nationals who have the right of permanent residence in Hungary and their family members, if their right of permanent residence is evidenced by documents;

• those foreign nationals who are entitled to stay in Hungary for more than 90 days, provided they present upon entry a valid official permit issued by the Hungarian immigration authority, proving their entitlement to long-term stay;

• a competitor or sports professional of a Hungarian sports organization, if he/she enters the territory of Hungary after participating in an international sports event held abroad; and

• a person participating in an international sports event held abroad by an invitation or delegation issued by name by a Hungarian sports organization, if he/she enters the territory of Hungary after participating in an international sports event held abroad (hereinafter collectively as “Hungarian nationals“).

Hungarian nationals may undergo medical examination by entering Hungary from countries abroad. In case the medical examination establishes the suspicion of infection with Covid-19, the person shall be placed in quarantine designated by the epidemiological authority or, if it does not pose an epidemiological risk, in official home quarantine for 14 days.

At the request of the quarantined person, the epidemiological authority may allow to the quarantined person to participate at the SARS-CoV-2 PCR molecular biologic test.

If two negative SARS-CoV-2 PCR molecular biologic test results taken in Hungary within five days with at least 48 hours’ time difference proves that the person was not infected with Covid-19, the epidemiological authority will issue a declaration on the release from quarantine.

II. Rules for non-Hungarian nationals arriving from abroad

As a general rule, non-Hungarian nationals are not allowed to enter Hungary, but the responsible police authorities may grant exemption for foreign nationals in the cases stipulated in Government Decree. Applications are to be submitted electronically and will be assessed by the responsible police authorities.

Foreign nationals granted with entry permission may undergo medical examination by entering Hungary. In case the medical examination establishes the suspicion of infection with Covid-19, the person is not allowed to enter Hungary. If no suspicion of infection of Covid-19 arises, the person shall be placed in quarantine designated by the epidemiological authority or, if it does not pose an epidemiological risk, in official home quarantine for 14 days.

At the request of the quarantined person, the epidemiological authority may allow to the quarantined person to participate at the SARS-CoV-2 PCR molecular biologic test.

If two negative SARS-CoV-2 PCR molecular biologic test results taken in Hungary within five days with at least 48 hours’ time difference proves that the person was not infected with Covid-19, the epidemiological authority will issue a declaration on the release from quarantine.

III. Exception for affiliated companies

One of the relevant exemptions from the entry restriction is that any employee or leading representative (managing directors) of entities having an affiliated company in Hungary can enter Hungary without any further restriction by establishing the fact of the business proposes of their travel.

By Edina Czegledy, Counsel, and Timea Molnar, Senior Associate, Noerr

An interview with Andras Busch, General Counsel at Siemens Energy Hungary.

CEELM: Can you walk us through your career leading you up to your current role?

Andras: I started practicing law in 2005 as a trainee lawyer, after graduating from the University of Szeged. I got my basic education as a novice in the filed working for Noerr, until I completed my bar exam in 2009, which is when I joined Siemens as an in-house lawyer.

I stayed as a Legal Counsel with Siemens for almost six and a half years, until 2015, when I joined Siemens Healthineers as Head of Legal and Compliance, and then in March of this year I migrated to the position of General Counsel at Siemens Energy Hungary.

CEELM: What are the most significant changes you’ve seen in Hungary’s legal market over your career?

Andras: It’s more and more digital each passing year. Especially lately, court procedures are undergoing a digital overhaul, and public procurement processes as well. These are some big changes for lawyers who are used to doing this in a different way, sometimes going through mountains of paperwork and filing documents in triplicate. Also, there have been a lot of legislative changes – enough to keep us on our toes, forever improving and educating ourselves in order to be able to provide clients with real, tangible advice, which can sometimes be tough.

CEELM: Why did you decide to join Siemens?

Andras: I always wanted to be an in-house lawyer. I think that this position – leading the business, not just counselling it at key junctures – this gives you a great inside perspective into how businesses operate.

CEELM: Tell us about Siemens Energy Hungary and about its legal department. How big is your team, and how is it structured?

Andras: The company is a newly demerged company, active since March 1, 2020, so there aren’t a lot of us – we are but a three-person team. We are currently discussing how to proceed based on legal areas we ought to cover. We have three active sites in Budapest each with its own needs – two of which are factories, requiring daily handling and legal advice.

After the COVID-19 crisis passes we will have to see what the new setup of the market is and what it looks like.

CEELM: What is your typical day at work like?

Andras: Back when I used to work as a trainee there were a lot of major projects which required writing legal opinions, doing very deep legal checks, and evaluating legal problems. In-house, on the other hand, means that you have to advise the business itself on how to proceed based on this advice – not just analyze the legal reality and leave it at that. What I learned as an in-house lawyer in the very beginning is that you have to provide not only advice but also structure the situation – you cannot clutter the field with a 20-page legal opinion when the management needs a yes/no answer.

This sometimes means that you have to think of the broader picture – focus on other topics which are relevant to the business and prioritize daily duties which include a lot of managerial work as well. Still, I don’t just perform managerial duties for the department – I also do operative tasks as a lawyer for the management.

In the past month and a half, however, most of the work has involved following the legislative updates via the Legal Gazette – mostly looking for changes to the employment laws. Sometimes the changes were happening so fast we had to timestamp our advice so as to have the management know the exact hour and minute!

CEELM: What was your biggest single success or greatest achievement with Siemens in terms of particular projects or challenges? What one thing are you proudest of?

Andras: That’s a very good question! I’ve been with Siemens for more than ten years now, so there are quite a few projects that I’m fond of. Still, I have to mention one from the very beginning involving a merger of two factories in a regional company. The end result was that a 400-person company became a two thousand employee behemoth with three sites in Budapest – all in the course of one year! These were very exciting times.

CEELM: How would you describe your management style?

Andras: What I have learned, especially now, is that what must be done first is identify the problem and make decisive calls. I like to label all the issues and provide the management with this layout – often times I know that all they’re waiting for to proceed with a decision is the legal opinion, so there is no time to spare.

I often feel like legal has to be faster than ever before, given the pace with which the world runs these days – business is a living thing now. I like to take a step back whenever I can and take in the big picture, get the broader perspective on things, in order to be able to best direct the team and what we do.

CEELM: On the lighter side, what is your favorite book or movie about lawyers or lawyering?

Andras: What else could I answer: The Devil’s Advocate.

This Article was originally published in Issue 7.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

In March, 2020, the Hungarian Energy and Public Utility Regulatory Authority (HEPURA) published the official results of the first tender procedure of the Hungarian Renewable Energy Support System (METAR), in which bidders were encouraged to apply for state subsidies in (i) power plants between 0.3 MW and 1 MW capacity (the “Small Category”) and (ii) power plants between 1 MW and 20 MW capacity (the “Large Category”).

Approximately 170 bids were submitted to the HEPURA: 40% of which were successful, 30% of which were declared invalid, and approximately 30% of which were valid but did not win any subsidy. In the Large Category, 11 of the 45 accepted bids reached 127.4 GWh/year. Most Large Category bids were submitted in the range of 5-10 MW, and only a few were submitted with a nominal capacity of above 19 MW. The highest successful winning price in the Large Category was 22.75 HUF/kWh, which is considerably lower than the 26.08 HUF/kWh bidding price limit.

It is quite remarkable that the majority of bids came from small and medium-sized enterprises, with no bids coming from large players on the Hungarian energy market. The reason for key players’ lack of interest might be that they did not find the 20 MW capacity limit in the Large Category attractive enough. Meanwhile, the high interest of SMEs in the METAR tender could be explained by the fact that this tender is the only one that provides subsidies for smaller investors, as neither the METAR KAT nor the so called Administrative Premium System supports categories below 1 MW.

It is also worth mentioning that recent changes in the Hungarian renewable legal support scheme (i.e., the introduction of full balancing responsibility for renewable generators as of April 1, 2020) and significant currency exchange rate fluctuation may be risk factors in financing projects. As to the first factor, in Hungary, a specific compensation system has been introduced in order to mitigate the severe financial consequences to solar power plant projects arising from full balancing liability. Pursuant to the new rules, the compensation is a fixed amount not to exceed the amount of the balancing charge which would be payable by the producer. The compensation system will be available only until December 31, 2025. As the second factor, the EUR/HUF exchange rate had significantly increased at the time of the submission of the bids since the end of 2019.

In addition, solar power plant manufacturers are also affected by the COVID-19 crisis, including the resulting shortage of raw materials and appropriate staff, and related disruptions in transportation may also cause uncertainties and possible higher procurement prices in the market.

Despite these difficulties, the first METAR tender can be considered a success, as it both provided investors with an up-to-date overview of the Hungarian market and generated competitive pricing.

It was declared a technology-neutral tender, although all but one bidder plans to build solar power plants. The high representation of photovoltaic panels is in line with the Hungarian National Energy Strategy of Hungary, but there are issues to be addressed by the regulator before the next METAR tender, such as the promotion of other renewable technologies and projects larger than 20 MW, which are likely to attract foreign investors.

No official information is available on the announcement of the next METAR tender, but given the popularity of the first tender and the recent classification of many solar power plant projects as projects of national interest by the Hungarian Government, strong interest is likely.

By Kristof Ferenczi, Managing Partner, Peter Gullai, Associate, and Laszlo Bujaki, Junior Associate, Kinstellar Budapest

This Article was originally published in Issue 7.6 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

As of 1 January 2021, retailers are required to allow the so-called electronic payments, which means that customers will be able to pay for the products and services by credit or debit cards, mobile phones or instant payments instead of cash. This change would not only be more comfortable for customers, but also it may be an effective solution against black market.

The Hungarian retail sector is facing a major change which will have a new phase next year. Due to an amendment adopted by the Hungarian Parliament in July 2020, all of the retailers will be required to enable electronic payment as of next year (1 January 2021).

The above mentioned amendment requires retailers using online cash registers (OCR) to guarantee cashless payments to customers. Cashless payments could mean payments by credit or debit cards, or payments by mobile phones, in which case the store must set up a so-called Point of Sale-Terminal (POS terminal). Furthermore, instant payment is also an acceptable option for retailers falling under the scope of the amendment. Otherwise, retailers may offer to their customers bank transfers (the customer can transfer the purchase price through his/her mobile phone), although, this latter solution is not swift enough. According to Gábor Gion, state secretary of the Hungarian Ministry of Finance, there are approximately 60,000 retailers who use OCRs and only accept cash payments.

Based on the communication of the Ministry of Finance, the Hungarian Parliament is planning to adopt new amendments in order to develop digital solutions this autumn.

By Rita Parkanyi, Partner, KCG Partners Law Firm

Hungarian Attorney Krisztina Toth has joined Bittera, Kohlrusz & Toth as the head of the firm’s Compliance practice.

“Toth will initially focus on building a watertight compliance and ethics program for clients, with a view to expanding the practice area and offering comprehensive compliance services to other businesses in the future,” reports Bittera, Kohlrusz & Toth. “Toth joins the other ten lawyers at BKTP as a solo practitioner, and from previous compliance and data protection roles with heavyweights such as Erste Bank and Metro.’

“To create a compliance program for a client of this scale is an irresistible challenge,” said Toth. “I’m looking forward to working with the team at BKTP and to creating a sophisticated program based on integrated risk assurance, to building basic compliance-awareness across the board and ensuring that all management and staff understands, uses, and applies the basics.” 

Toth obtained her J.D. from Budapest’s Eotvos Lorand University in 2012. Prior to joining Bittera, Kohlrusz & Toth, she spent almost two years with the National Tax and Customs Administration of Hungary, ten months with EOS Faktor, ten months with OTP Faktoring, over a year with Gal and Partners, almost a year with Erste Bank Hungary, and over two years with Metro Cash & Carry Hungary. She spent the past 15 months as a Budapest-based solo practitioner.

“The time between identifying clients’ need for the role and finding Krisztina was mercifully short, and we’re thrilled to have found such a great fit not only for the position but also for our law firm,” said Partner Csaba Bittera. “The rising demand for transparency in business means that compliance, ethics, and data protection will continue to increase in priority, so this is an intriguing avenue for us to explore.”

Arnold Koger has joined Novartis as Head of Legal.

As part of Koger’s role, he will be responsible for Antitrust, Competition, Compiance, Contracts, Ethics, Labour, as well as heading the Novartis Technical Operations Austria legal team based in Kundl on providing strategic legal support to one of the company’s largest production sites.

Koger started his career as an Associate at Cerha Hempel. After that, he worked as a Legal Counsel at Red Bull, as well as a General Counsel and Member of the Executive Committee for L’Oreal Austria, before joining Novartis.

Koger told CEE In-House Matters: “It seems like the right time and challenge to join Sandoz and Novartis in Austria, as the company just committed to penicillin API production in Europe, specifically on the Austrian sites for the next 10 years, ensuring independence in those challenging times.”

Originally reported by CEE In-House Matters.