Budapest Business Journal 2904

HUNGARY’S PRACTICAL BUSINESS BI-WEEKLY SINCE 1992 | WWW.BBJ.HU

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BUSINESS JOURNAL BUDAPEST

VOL. 29. NUMBER 4

FEBRUARY 26 – MARCH 11, 2021

Photo by MTI / Rosta Tibor

SPECIAL REPORT

Taxes & Accountancy

SPECIAL REPORT

Hungarian Tools Help tax Morale, With Leeway for Improvement While Hungary’s tax morale has significantly improved in the past two decades, there is room for improvement to better incentivize taxpayer willingness.

Finding the right balance is a tricky task, however, given the many factors that come into play. 12 SPECIAL REPORT

Will KATA Changes Prompt More Creative Bookkeeping?

Changes in the small taxpayers’ flat-rate tax (KATA) may fail to achieve the lawmakers’ original goal, tax experts warn. 13 SOCIALITE

3 Secretly Influential Hungarians

David Holzer has recently made three deeply satisfying discoveries concerning the Hungarian origins of the unlikeliest of characters: American painter Georgia O’Keeffe, writer Alexander Lenard and architect Antti Lovag. Each influenced their chosen art form in a surprising way.  22

Counting on China NEWS

Q4 GDP Pleasant Surprise, Indicates Quicker Recovery Better-than-expected fourth quarter GDP data suggests a faster recovery than many had anticipated; however, a lot will still depend on the pace of vaccination and the speed of the reopening of the economy. 3

S N EW

Hungary’s economy has shown surprising growth potential, but economists warn it could be restricted by a slow reopening. With EU vaccine supplies slow, Hungary says it must turn to Russian and Chinese supplies. Our photo shows Csaba Lengyel, president of the Albert Szent-Györgyi Clinical Center of the University of Szeged, examining the Chinese Sinopharm COVID vaccine ahead of starting jabs in Hungary’s 3rd city.3, 4

BUSINESS

Hungary M&A Deals Double in Value Last Year, Pipeline Looks Strong Although the value of M&A deals globally fell 8% last year, Hungary had an outstanding 12 months, with deals doubling to total more than USD 1.1 billion, up from USD 530 million in 2019, according to Allen & Overy’s Insights Q4 2020 report. 6

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Budapest Business Journal | February 26 – March 11, 2021

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THE EDITOR SAYS

EDITOR-IN-CHIEF: Robin Marshall EDITORIAL CONTRIBUTORS: Kálmán Béres, Zsófia

Czifra, Kester Eddy, Bence Gaál, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Gergely Sebestyén, Robert Smyth, Zsófia Végh.

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TAXES, MORALE AND EASTERN VACCINATIONS In the 20-plus years I have been living in and reporting on Hungary, the tax morale, the willingness of people to pay their taxes, has improved dramatically. No one really “likes” to pay taxes, of course, and there is nothing new in that. The Pharisees and Herodians were trying to trap Jesus with his own words when they asked the question that prompted that famous “Render unto Caesar that which is Caesar’s” remark, but the very question itself is based on the idea that paying taxes to any central authority is never a totally happy experience.

But the truth is that paying your dues indicates you have bought into the collective; you pay in to finance the state and benefit from its services, whether that is the army, the police, the fire service, healthcare or whatever. That was the problem with post-communist Hungary; for so long people had tried their best to work around an unwelcome system imposed upon them. I vividly remember a conversation with a Fidesz secretary of state responsible for tax affairs who complained that rather than reporting a neighbor who was obviously cheating on his taxes, people would instead regard that person as some kind of Robin Hood hero and ask how he was doing it.

We have moved far beyond that now. The tax debt has reduced even as the amount taken in has increased, a sure sign of a whitening economy. People are happier to pay their taxes, in part because there are fewer of them to pay, as our story on page 16 explains. There is still a way to go along that path; employers in particular would like to see their payroll contributions reduced to make the country more competitive, the business tax is generally unpopular and red tape still abounds.

One recent reform is puzzling, however. Fidesz originally introduced the simplified tax system for

entrepreneurs known as KATA to encourage more people to pay into the system rather than work “black.” From this year they have sought to close a loophole where it says employers avoid payroll taxes by engaging contractors rather than employing staff. But as our story on page 13 suggests, that won’t bring in much money, relatively, and does seem to risk an increase of cash-in-hand payments.

It has also upset all sorts of professional associations, from doctors’ groups, to architects, to waiters.

Admittedly, the latter have other concerns on their minds right now, like when the economy might open and they can get back to work, before they can even begin to “render unto Caesar.” Unusually for us, our cover photo is not linked directly to any one story, but it is connected to one of the most important questions facing the Hungarian economy today, even on the back of surprisingly positive Q4 GDP figures.

The President of Hungary, its prime minister and foreign minister, but also senior infectious disease experts and medical chiefs, as well as leading economists, have all made the point that the speed of opening up and the subsequent economic recovery will be linked, at least in part, to the vaccination rollout.

And that is entirely linked to how many vaccines Hungary can secure. Given the slow drip feed of EU-sourced vaccines, Hungary has used its Eastern connections to secure vaccines from outside the bloc.

You can see why there is the temptation to rely on Russia and count on China.

Robin Marshall Editor-in-chief

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Start This Year Differently: Replace Resolutions With Goals The beginning of the new year is the perfect time to start with a clean slate and set new goals, including improving our health. But instead of making drastic resolutions, why not start by making ourselves aware of what we really want and setting goals to achieve it, be it disease prevention, health preservation, or coping better with an established illness. Nóra Galló, a dietitian at Dr. Rose Private Hospital, looks at formulating goals for a lasting lifestyle change.

Research shows that only 8% of people realize their New Year’s resolutions, even though more than 50% of these involve changes related to a healthy lifestyle, such as exercising more, eating more consciously, losing a few pounds, and so on.

Resolutions that stress that we should eat less, or should do more throughout the year, make exercise and proper nutrition feel more like unpopular chores or tedious mandatory tasks. Goals, on the other hand, motivate us and give us more room for the lifestyle we want to pursue.

Goals can be Adjusted The problem with New Year’s resolutions is that we make them once a year and resolve to keep that promise. Goals, on

the other hand, are more flexible as we can adjust them, perhaps monthly or seasonally. You may be planning a trip in the spring or your wedding in the summer for which you would like to achieve something, and these can be great incentives to motivate us through the coming weeks and months.

Goals are Smaller, More Realistic Resolutions are aspirational in nature and not specific enough. For example, if we resolve not to consume any sugar from now on, or suddenly train 5-6 times instead of zero times a week, we are practically doomed to failure before we even begin. We tend to be

more manageable goals is that they fill us with immediate satisfaction and give us a sense of success.

Goals are Measurable Resolutions give space to the word “should,” as in “I should train more.”

Because of this, everything we plan becomes an opportunity, if we fail to fulfil it, to make us feel bad. Goals, on the other hand, need to be specific and measurable, such as “I will start every day with 15 minutes of exercise” or “I will meditate/ relax for 10 minutes each night.” If one day it turns out that it doesn’t come together, Nóra Galló think about it as a process, rather than letting it arouse guilt in yourself. Changing your lifestyle to put it in a healthier state overambitious, to go too far, without takes time, several weeks or months really thinking through how realistic even. Don’t forget that achieving any the ambition is. Most people make the goal requires your commitment, time mistake of undertaking too much and management skills (for example, where wanting to achieve it too quickly, and to buy healthy ingredients, when to cook/ this doesn’t give us enough time to train/relax, etc.) and the right mindset achieve our goals. to overcome temptations and obstacles.

Instead of New Year’s resolutions, try However, with each small step, we move setting a small goal for each day; for forward on the path to a healthier example, “Today I will drink two liters of lifestyle in which we can incorporate water,” or “I will sleep for 7-8 hours.” At lasting positive changes. the end of the day, we can evaluate and We can help you make a lasting think through what we have achieved difference in your lifestyle this year! that has brought us closer to our bigger health goals. If we commit to smaller goals and try to achieve this gradually over as many days as possible, we will get closer to the coveted healthy lifestyle. The advantage of smaller,

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Budapest Business Journal | February 26 – March 11, 2021

News///macroscope

Q4 GDP a Pleasant Surprise, Indicates Quicker Recovery

Better-than-expected fourth quarter GDP data suggests a faster recovery; however, a lot still depends on the pace of vaccination and the reopening of the economy.

Change in Gross Domestic Product in Hungary, 2008-2020

Annual economic growth rate; seasonally and calendar adjusted and balanced data

Although several sectors suffered from the restrictions introduced in November, the extent of the setback was not as significant as earlier. The economy might perform moderately in the first quarter of the year, Suppan thinks, but a gradual livening might commence, in line with the reopening, in the second quarter. Growth might get an impetus in the second half of the year, he said.

Takarékbank analysts expect 6.8% annual GDP growth this year, followed by an expansion to the same extent in 2022.

Growth Potential ZSÓFIA CZIFRA

The gross domestic product of Hungary went down by 3.7% according to raw data and by 4.3% according to seasonally- and calendar-adjusted and reconciled data in the fourth quarter of 2020 compared to the corresponding period of the previous year. Compared to Q3, the economic performance increased by 1.1% according to seasonally- and calendar-adjusted and reconciled data.

The main drivers of the increase were industry as well as the information and communication sector. For the whole year, the economy shrank

by

5.1%,

strongly contrasting 2019’s 4.6% expansion, Central Statistical Office (KSH) data shows.

The latest data surpassed even the most optimistic analysts’ forecasts and it shows that the recovery potential in the Hungarian economy is much bigger than previously thought. But this year’s re-bounce greatly depends on how long the current restrictions will last, analysts commenting on the data caution.

The 1.1% growth from the previous months in the last quarter of 2020 was a huge surprise, said ING Bank head analyst Péter Virovácz. The main drivers of the growth was industry and exports; however, the question is how the information technology and communications sector was able to balance the setback in the services sector. Also, the construction industry might have added more to the growth than previously expected.

The 1.1% figure was more dynamic than the full year’s average and will have a positive impact on 2021 as well.

ING Bank now predicts 4.3% annual GDP growth for this year, supported by positive risk factors; therefore, the growth rate might even reach 5-6%, Virovácz said.

Quarterly Variation in GDP (2008-2020)

Source:

Waiting on Reopening

Gábor Regős, head of macroeconomics at research institute Századvég, said that yearend GDP growth surprised him as well, especially in light of the restrictions introduced in November. The betterthan-expected data suggests that the Hungarian economy will get back on track in 2021. Its extent, however, will depend on for how long the current restrictions will be imposed. If reopening starts anytime soon, this year’s GDP growth might exceed 4%, he said.

S&P said Hungary’s economic recovery would “gain traction in mid-2021,” with the only major risks to the forecast related to any delay in vaccination rollout and availability of EU funds over the medium-term.

The Market consensus was for a 5% decline for the last quarter of 2020, therefore the 1.1% growth was a great surprise according to K&H Bank head analyst Dávid Németh. While industry and construction started to recover

sooner than previously thought, retail data shows that people became more cautious when it came to consumption; this is mainly due to the loss of jobs as a result of the economic crisis caused by the shutdowns aimed at fighting the pandemic.

Németh thinks that, as many uncertainties are linked to the crisis at the moment, it is hard to predict how quickly the economy will get back on its feet this year. It is still to be seen whether the Hungarian economy will be able to expand in the first three months of this year compared to the fourth quarter of 2020.

That said, due to the low base effect of Q2 2020, the figures are expected to be outstanding in the second quarter of this year. Based on current data, the Hungarian economy is likely to expand by an

annual

4.5%

in 2021. However, if certain segments can reopen sooner than expected, an expansion above 5% is not impossible, he added.

Takarékbank head analyst Gergely Suppan also thinks it was a huge surprise that the Hungarian economy was able to expand from the previous quarter at the end of the year, therefore the earlier predicted “W”-shaped recovery did not occur.

In the meantime, international credit rating agency Moody’s Investors Service acknowledged the growth potential of the Hungarian economy. In its country report issued on February 18, it stated that the Hungarian economy was likely to reach its pre-pandemic performance by 2022.

Although the process of strong economic growth and declining public debt has inevitably come to a halt due to the coronavirus crisis, the epidemic has so far had only a limited impact on the basic Hungarian debt profile, according to Moody’s assessment.

It further stated that it expects Hungary’s improvement in budget and debt ratios, which has characterized the past five years, to resume this year.

A few days prior to the Moody’s report, S&P Global Ratings affirmed Hungary’s “BBB” sovereign rating with a stable outlook at a scheduled review.

S&P said Hungary’s economic recovery would “gain traction in mid-2021,” with the only major risks to the forecast related to any delay in vaccination rollout and availability of EU funds over the medium-term.

It added that government stimulus and EU monies would aid the economic recovery without incurring external imbalances.

Numbers to Watch in the Coming Weeks March 1 will see fourth quarter investment data published by the Central Statistical Office (KSH). The next day, KSH will release its second estimate of Q4 GDP data. January retail trade figures will be out on March 4, and January industrial production will come out on the next day.

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Budapest Business Journal | February 26 – March 11, 2021

Eastern Jabs to Speed Vaccinations as Consultation Launched The Hungarian Parliament voted to extend the government’s stateof-emergency powers for 90 days on February 22, in order, it was argued, to better manage the coronavirus crisis.

MPs approved the extension with a vote of 133 for, 55 against and one abstention.

NICHOLAS PONGRATZ

Earlier this month, Hungarian President János Áder said pandemic restrictions could hopefully be eased in Hungary by May if the rate of vaccination against COVID-19 progresses well. He hoped that the pace of inoculation could be accelerated “by Easter, or in the period after Easter at the latest.”

Comments emphasizing the importance of scaling up vaccinations were also reiterated by Dr. János Szlávik, the chief infectious diseases physician of the South Pest Central Hospital.

“As many people as possible should be vaccinated as quickly as possible to

Coronavirus ///roundup

AstraZeneca vaccines acquired as part of a joint European Union order, Hungary had added Russia’s Sputnik V and China’s Sinopharm vaccine to its vaccine portfolio.

Currently, the Russian and Chinese doses account for more than 40% of the COVID-19 vaccines delivered to Hungary thus far, according to data from the official government website koronavirus.gov.hu.

Hungary received 100,000 doses in its second delivery of the Sputnik V vaccine on February 22. The first delivery of the Chinese Sinopharm vaccine arrived in Hungary on February 16, National Public Health Center (NNK) department head Ágnes Galgóczi said at a press briefing.

Minister of Foreign Affairs and Trade The opening page of the government’s latest national consultation, Péter Szijjártó said in a video posted “On the Restart,” which is being handled online this time. The text reads, on his Facebook page that 50,000 more “On this page you can register for the restart consultation. Once you have vaccines had been sent from China than entered your details, you can complete the consultation questionnaire agreed upon, totaling at 550,000. by opening a link sent to your email address. You will receive this after At an Operational Corps press registration, please look for the confirmation message in your email conference, Müller said the Chinese account! The multi-step registration process serves security purposes.” Sinopharm vaccine elicits a significant, strong response, which “moves” the immune system much better. Many reduce the size of the third wave of the The following week, Orbán updated people are confident that it will provide a coronavirus epidemic,” he told public the figure, saying that by early April, more lasting, possibly higher, degree of media on February 20. Szlávik said the 2.582 million Hungarians will have been protection, she added. number of new infections and deaths per inoculated against the coronavirus and With mass vaccinations gathering pace, day shows that a third wave had started added that the figure could reach 6.8 questions about how this will affect the in Hungary. He said this may be due to million by the end of May or early June. lifting of pandemic restrictions are already the presence of the more contagious Kent being asked. In the ongoing national Task Force variant from Britain, as has also been consultation, the government is asking Major strides furthering vaccinations suggested by chief medical officer Dr. whether those who have been vaccinated are being made this week. At a press Cecília Müller. should be exempt from some restrictions, conference for the Operational Corps on Prime Minister Viktor Orbán told or whether foreign visitors who can February 23, István György, who heads the document their inoculation should be the Kossuth Rádió in his weekly interview task force coordinating the vaccine rollout, only ones allowed in the country. that 2.448 million Hungarians have thus far registered for COVID-19 vaccinations, said the number of Hungarians inoculated Other survey questions will address against the coronavirus was expected to as of February 12. All Hungarians the evening curfew, the opening of climb over 800,000 during the week. who have registered to date could be hotels, restaurants and sport facilities, He said that in addition to the inoculated by Easter, if a Chinese vaccine and whether restrictions should be lifted BioNTech/Pfizer, Moderna and is added to the mix, he said. gradually or all at once.

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Top Legal

EXECUTIVES In Hungary

2021 The most influential legal executives in the Hungarian economy

The Top Legal Executives magazine is a special annual publication of the Budapest Business Journal. It forms part of our “Top” brand, and is a sister publication to Top Expat CEOs in Hungary.

Like Top Expat CEOs, the magazine has a focus on people rather than policy. It presents the profiles of the most influential legal executives working in the Hungarian economy, focusing on outstanding achievements and how the Hungarian legal market is developing.

Those profiles of Hungary’s top “legal eagles” are set against a review of how the Hungarian legal system operates, including the functioning of the Curia (the Supreme Court of Hungary) and the Constitutional Court, as well as the Budapest and national bar associations, among other things.

Why Should I Subscribe?

• Provides an essential overview of how Hungary’s legal system operates.

• Get an insight into the biggest cases of 2020, and likely legal developments in 2021.

• Get to know the personalities behind the legal business.

• Read personal accounts from the country’s top lawyers, detailing how they got into law in the first place and what prompted their choice of specialty.

Please forward your subscription request to: circulation@bbj.hu, or order your copy in the webshop at bbj.hu

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Market Pays Tribute to a ‘Daring’ and ‘Inspiring’ Developer The Budapest Business Journal was saddened to learn on the day our last issue was published that Attila Kovács, founder and managing partner of DVM group and Horizon Development, had died aged just 51. Gary Morrell spoke with market players about the architect and developer’s contribution to real estate in Budapest, his promotion of the city and Hungary, and about the man as a person.

“Attila was a superb real estate developer. He was responsible for many of the best buildings developed in the modern era in Budapest, as well as for establishing an excellent property company. More importantly, Attila was one of the finest individuals I have had the honor to know. He will be sorely missed by all those who knew him as a colleague or friend.”

Noah Steinberg, chairman & CEO, Wing

a highly professional attitude towards national and international stakeholders.”

Zsombor Barta, president of HuGBC “Attila’s objective with both DVM group and Horizon Development was to create uncompromised quality and long-term value. With sparkle in his eyes and with his energetic charisma, he promoted his business, his country and his fellow Hungarian real estate professionals. Unreplaceable!”

Zoltán Borbély, country manager, Atenor Hungary “The activity of Horizon Development and DVM group brought something completely different from what anybody dared or could do before. They preserved some prominent, high-value buildings in the downtown and gave them a real function and life again. Attila was a big believer in Budapest. He insisted that Budapest and its architectural values were on the same level as other European capitals.”

Mátyás Gereben, country manager, CPI Hungary “Horizon Development and DVM group successfully combined modern technology and innovation with tradition.

This shows that listed buildings can be efficiently used by occupiers while investors can enjoy financial returns.

Attila was a passionate entrepreneur and used every opportunity to show the treasures of his hometown. We will miss him a lot. May he rest in peace.”

Péter Számely, executive director real estate finance, Hypo Noe

GARY J. MORRELL

“Horizon Development epitomized the daring conceptualization of difficult but valuable development projects in downtown Budapest. Central to its strategy is the promotion of architectural quality as a value driver, combined with sustainability as the future proofing of the project. I loved Attila’s intuition, which challenged the number crunching in the Excel sheet. I will miss Attila and will miss all the unborn projects from Horizon Development and DVM group.”

Pál Baross, director of the campus development office at CEU

News | 5

Attila Kovács “This country and this profession has lost one of its greatest ambassadors. Attila was not only highly professional as an architect and businessman, but lead by example that only the best is good enough. His works are pieces of fine art and excellence to challenge the status quo. I personally feel absolutely torn about his loss. I liked him very much and honestly think of him as one of the most inspiring people I ever came across.”

Gábor Borbély, head of business research and development, CBRE Hungary “DVM group and Horizon Development added important landmark projects to the city and positively influenced

the quality of our built environment.

This includes the preservation of historical building heritage as well as new buildings. The Szervita Square Building is an example of how design and aesthetics can be incorporated into a partially historic environment; Váci 1 or Eiffel Palace are examples of the preservation of heritage buildings incorporating up-to-date functionality.

Horizon Development and DVM group were the first companies to adapt both sustainability certification schemes (LEED and BREEAM) for Eiffel Palace on the Hungarian market. Attila was always a very open-minded gentleman and had

“Attila was a big promoter of Budapest and Hungary and did so by creating something different. His projects filled the gap where it was needed, and he made sure that they were delivered in style and at the highest quality.”

Valter Kalaus, managing partner, Cresa Hungary “Horizon Development has proven that quality makes the difference and that visionary concepts are competitive in each market cycle. Attila was the best ambassador possible for the industry and the city. Not only as a role model but more, designing and developing outstanding buildings and landmarks.”

Hubert Abt, CEO, New Work Offices For a more detailed obituary of the life and works of the man, including tributes from his company, see our online article “Obituary: ‘Visionary architect’ and developer Attila Kovács, MRICS”

Three of Attila Kovács’ landmark Budapest projects of rebirth, aesthetics, preservation and functionality: Vaci 1, Eiffel Palace, and the Szervita Square Building.

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Budapest Business Journal | February 26 – March 11, 2021

Business

and the buyer demands changes because the acquisition is not what he thought?

Hungary M&A Deals Double in Value Last Year, 2021 Pipeline Looking Strong

Although the value of mergers and acquisitions deals globally fell by 8% last year as uncertainty over the COVID-19 pandemic gripped markets, Hungary had an outstanding 12 months, with deals doubling to total more than USD 1.1 billion, up from USD 530 million in 2019, according to law firm Allen & Overy’s Insights Q4 2020 report.

KESTER EDDY

The Hungarian figures were boosted by some large deals across Central European jurisdictions, including the sale of Goodman’s real estate portfolio for a purchase price of some EUR 1 bln and another involving Aegon’s insurance and pensions portfolio for EUR 830 mln, Balázs Sahin-Tóth, counsel with Allen & Overy in Budapest, told a professional audience online from the Hungarian capital on February 11.

After the event, the Budapest Business Journal talked to Sahin-Tóth to probe deeper into the whys and wherefores of M&A last year, and what the market expects in 2021.

BBJ: As you stated, the CEE region accounted for just under USD 14.5 bln of the European M&A total last year.

Within this, transactions involving Hungarian assets doubled to over USD 1.13 bln in 2020. Although small in absolute terms globally, this seems an amazing figure for Hungary. What’s behind this?

Balázs Sahin-Tóth: It is thanks to bigticket deals, such as the Aegon, Goodman and SVEA [a debt collection company] sales. This might be just sheer luck.

BST: No, price adjustment means that completion accounts are prepared as of the date of completion, to see what is really in there, in the target company, when it changes hands. Based on various financial metrics, the price can go up and/or down. This is agreed in the share sale and purchase agreement.

BBJ: In which case, what does this difference tell us? Does it mean that CEE deals are “cleaner”, or is it that buyers simply don’t trust the courts, don’t want to turn to them even if the assets are not what they were led to believe?

BST: As above, buyers are willing to take more risks against a hope for higher yield on their investment.

BBJ: Citing last year’s biggest deals, you say these show that CEE can deliver sizeable transactions, and this trend is likely to continue into 2021. Indeed, you say you are working on several new deals.

Do these involve Hungary? Could you say something about the sectors involved?

BST: Yes, Hungary is affected. We are working on an IT, a TMT [Technology, Media and Telecom] deal, but it is highly confidential.

BBJ: Apart from those mentioned, are there sectors in which you expect to see significant M&A action in Hungary in 2021-2022?

BST: Yes, plus all other sectors which are in financial distress; i.e. distressed M&A will increase, for example in hospitality, hotels and cinemas.

Balázs Sahin-Tóth We don’t see any specific reasons why Hungary would excel on M&A. That is, apart from the good tax regime, but that was not the driver behind these deals.

BBJ: Regarding the Goodman and Aegon deals, could you say what values the Hungarian components of these deals were?

BST: No, as these are confidential data.

[Editor's note: see Addendum]

BBJ: In your press material, you say that within Europe, CEE saw some of the least competitive deal conditions during 2020, with only 33% transacted through an auction process, and no deals at all highly competitive. How do you define “highly competitive” here?

BST: By “highly competitive” we mean that there was more than one bidder at the final stage of the auction process.

BBJ: And why has this trend begun? Is it simply too few buyers? If so, why, especially when the value of deals has doubled?

BST: Because sellers have been more focused on finding the right buyer and started bilateral discussions. The costs of a bilateral deal are lower and as these are conducted privately, so the reputational risk is lower if the sale fails.

BBJ: You said “dealmakers in CEE also seemed more content with deal conditions, with only 53% of deals highly conditional, versus a Western European average of 77%.” Could you explain this

in layman’s terms? Does “dealmakers” here mean the buyers, or both sides?

BST: Dealmakers refers to both the seller(s) and buyer(s). This means that in the CEE, only mandatory regulatory approvals, that is from the competition office, national bank or a ministry, are accepted as conditions precedent to completion. Elsewhere, there are additional conditions, such as the buyer finding bank financing, repeated warranties being true and accurate as at completion, etc.

BBJ: What does it mean that in CEE “only 53% of deals are highly conditional”? Why is this? It seems that buyers in CEE trust the deal making process more than in Western Europe.

Surely, given the less mature markets here, they should be more cautious?

BST: My guess is that the targets that were sold, for example Aegon, were very attractive to the buyers. For example, insurance as a sector has been boosted due to COVID. CEE is also a growth market compared to Western Europe, as it gives higher yields. Hence, buyers were willing to take more risks.

Ultimately, probably this is a [case of] high risk-high reward economics.

BBJ; You also stated: “Few of them required price adjustments, with just 21% of deals in 2020 requiring this, versus 46% in Western Europe.” What are these “price adjustments”, are these retroactive, i.e. after the deal is signed

BBJ: Last year, Allen & Overy noted regulatory uncertainty was holding back deals, globally and in Hungary and CEE, especially in sectors like green energy and healthcare. Have these regulatory issues been addressed at all in the past 12 months?

BST: Not really, the business risk remains the same. Government can change the support schemes and this would upset any business plan. In other words, a high exposure to government regulation that may change is, and remains, a high business risk.

BBJ: Allen & Overy seems to have had a fair chunk of the M&A work in the past 12 months. You were involved in the Aegon, Goodman and SVEA transactions. Have your staffing levels changed as a result?

BST: Our staffing levels have not materially changed. We have lean and flexible teams who can be deployed on any incoming new transaction. In the CEE, lawyers are more generalists than in mature markets, meaning we can move from one sector to the other, from one type of deal to another.

Addendum Hungarian website Telex.hu reported that of the EUR 830 mln in the Aegon deal, EUR 549.5 mln was allocated to the Hungarian business and that in the Goodman sale, of the EUR 1 bln purchase price, EUR 168.5 mln went to Hungary.

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Business | 7

DI P LOM AT IC A L LY S P E A K I N G : U K R A I N I A N A M B A S S A D OR L I U B OV N E P OP

‘Huge Unused Potential’ in Ukrainian-Hungarian Trade Hungary and Ukraine have a long history.

Hungary was just the third country to recognize its massive northeastern neighbor’s independence from the former Soviet Union in 1991, and Wikipedia places the 150,000 ethnic Magyars in the country as the seventh biggest Hungarian diaspora in the world.

Relations soured in 2017, however, with an education law that Hungary claims is an attack on minority language rights, although some of that tension appears to have eased recently.

Liubov Nepop, Ukraine’s Ambassador to Hungary since May 2016, talks to the Budapest Business Journal about the current state of the bilateral relationship.

ROBIN MARSHALL

BBJ: What is the basis of bilateral trade between Hungary and Ukraine and what direction is the trend heading in?

Liubov Nepop: The coronavirus epidemic negatively influenced the general situation in the world and, unfortunately, Ukrainian-Hungarian bilateral trade is not exemption. In 2019 our trade turnover reached USD 2.8 billion. In January-September 2020, it amounted to USD 1.953 bln, which is 13.7% less than in the same period of 2019. Ukrainian exports to Hungary reached USD 1.05 bln (a fall of 19.8%), while Ukrainian imports constituted USD 904 million (down by 5.1%).

But in June 2020, we restarted work of the Joint Intergovernmental Commission on Economic Cooperation and I hope it will give an impetus to our trade. There is a huge room for further interaction in agribusiness, water management, infrastructure, manufacturing, energy,

agencies. Thus, the business climate has improved significantly, which has allowed Ukraine to jump up 48 rungs in the “Doing Business” ranking since 2014 and it now occupies 64th place.

BBJ: Many of our readers will be aware of the dispute between Hungary and Ukraine over the 2017 education law and its minority language restrictions.

Hungary’s foreign minister visited Kyiv in late January. What is the latest situation?

LN: After adopting the law on education, Ukraine sent it to the Venice Commission and implemented recommendations received. In January, Ministers Kuleba and Szijjártó agreed on holding a first meeting of a working group on education. The goal of the group is to move the issue of education from the political to expert dimension and to discuss how we can cooperate in the framework of implementing education reform and the legislation adopted. I hope we’ll succeed in this and fully restore the traditionally good relations between our countries.

BBJ: Ukraine’s ambitions to join NATO and the European Union also became tied up in this. What’s the latest here?

Liubov Nepop the healthcare and IT sectors, trans border and cross border cooperation.

Ukrainian diplomats are ready to support establishing ties in these and another spheres. The work of the Ministry of Foreign Affairs of Ukraine in boosting business contacts is facilitated by the Council of Exporters and Investors, created last year as an effective instrument to develop business relations with our foreign partners.

Ministers Dmytro Kuleba and Péter Szijjártó agreed on holding an online Ukrainian-Hungarian business forum in April. We are also working on organizing a tourist forum. Traditional destinations like Kyiv, Lviv, Odesa, culinary and wine tours, rural and medical tourism are just a few examples of what Ukraine has to offer. So, there is a huge unused potential in bilateral trade and we encourage businesses from both sides to discover it.

BBJ: What are the main sectors for Ukrainian exports to Hungary and Hungarian exports to Ukraine?

LN: Hungary is among the top nine most important trade partners for Ukraine and ranks fourth among European countries in terms of bilateral trade, having 5.8% of the total amount. Hungary ranks 11th for receiving Ukrainian exports. Hungary mostly exported electrical appliances and supply, natural gas, and medication

to Ukraine in 2019. Electrical appliances and supply, natural gas, and electricity were among the top three commodities imported by Hungary from Ukraine.

BBJ: Who are the largest Ukrainian investors in Hungary. How much FDI are we talking about, and how many jobs have been created?

LN: Ukraine has invested USD 4.4 mln in the Hungarian economy, mainly in industry (processing industry; water supply; sewerage, waste management); transport, warehousing, postal and courier activities; professional, scientific and technical activities.

At the same time Hungary is among the top 20 investors for Ukraine (it actually ranks 14th). A number of Hungarian companies successfully operates in Ukraine, including OTP Bank, Pannonplast, Babolna, WizzAir and Gedeon Richter. In general, Hungary has invested USD 360.1 mln in our economy, which is 1% of total FDI in Ukraine.

Over the past several years, the Ukrainian government undertook key reforms such as carrying out significant fiscal consolidation, moving to a flexible exchange rate, enhancing the transparency of public procurement, simplifying business regulations, stabilizing and restructuring the banking sector and establishing anti-corruption

LN: Ukraine’s goal to join NATO and the EU is enshrined in our constitution and remains our priority. It was confirmed during the latest visit of the Prime Minister of Ukraine to Brussels in February at his meeting with NATO Secretary General and at the Ukraine-EU Association Council. Last year, on June 12, we became a NATO Enhanced Opportunity Partner and we are looking forward to getting a Membership Action Plan (MAP), a program of advice, assistance and practical support tailored to the individual needs of countries wishing to join the alliance. In relation to the EU, we are implementing the Association Agreement and have agreed to launch a comprehensive review of its achievements to deepen sectoral integration. These practical aspects can enhance our cooperation with all NATO and EU member-states, including Hungary.

BBJ: These issues aside, how are political relations? Are there areas of cooperation?

LN: Hungary supports the sovereignty and territorial integrity of Ukraine in countering Russian aggression against our country, which continues since 2014.

We are grateful for Hungarian support of the EU sanctions against Russia, organizing vacations for children and giving medical treatment to our wounded soldiers. Hungary allowed transit for Ukrainian citizens, when the coronavirus pandemic started, and gave humanitarian support to Ukraine to counter the pandemic. It is really important to remember that Ukraine and Hungary have a lot of things connecting us, and it is worth to make efforts to build on them, overcoming our disagreements and basing our relations on mutual respect.

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Budapest Business Journal | February 26 – March 11, 2021

Why you Should Watch Commodities Very Carefully Les Nemethy explores the reasons why you should carefully observe commodities over the coming months, whether you are an investor, or an economist.

Demand Growth in Metals to Supply Electric Vehicle Battery Production 2019 v 2030 Nickel

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Aluminium

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Phosphorus

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Iron

13.0x

Copper

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Graphite

10.0x 9.0x

Lithium

If you are an investor, commodities may represent an excellent investment opportunity. While equities almost universally suffer from frothy valuations, commodities have only recently begun a recovery from cyclical lows, and there appears to be considerable runway for further growth. Many commodity experts are now talking about a “great rotation” from high-priced equities and bonds into commodities.

If you are an economist, or trying to understand economic trends, you will know there is a raging debate about whether inflationary or deflationary forces will prevail. Commodity inflation plays into the inflationist camp, and by studying what’s happening with commodities, you will have pretty powerful evidence of how inflation is creeping into the supply chain.

Commodities as an Investment The majority of asset classes are overvalued, including most equities and bonds. Commodities, however, reached a cyclical low relative to equities in 2020. The picture is more nuanced if one looks at individual commodities and it also pays to understand the supply and demand relationships; there is a story behind each commodity.

For example, uranium was booming until Japan’s Fukushima meltdown in

The Corporate Finance Column

Cobalt

3.0x

Manganese

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2011, after which the bottom fell out of the market. Many reactors were shut down or mothballed. From a peak price over USD 130/lb in 2007, uranium dropped into the teens, in a market where it takes at least USD 50-60/lb to bring new capacity onto the market.

Many uranium mines, including some of the largest, shut down. For more than a decade, the industry used up massive amounts of inventory, which are expected to run out within a few years.

The United States, Europe and China have each set aggressive carbon neutrality objectives, where nuclear plays a significant role, particularly in China where more than 200 reactors are either in planning or development stage.

The price of uranium is still circling around USD 30/lb; the price of uranium mines have begun to climb, some with considerable room to run.

Another interesting story is gold. In 1980, when investors were losing confidence, gold reached around USD 20,000/oz (in 2021 dollars) compared to the current price of about USD 1,760, despite having an excellent performance in 2020.

Very few portfolios hold gold, which provides an excellent hedge or

Source: BloombergNEF

diversification. When investors lose confidence in fiat currencies, want to de-risk their portfolios or protect against negative real yields on bonds, they flock to gold. Historical examples of this are seen between 2000 and 2002, when the Nasdaq declined by 78%; between 2000 and 2008, gold and silver mines went up fivefold. Similarly, in 1973-74, the S&P halved, while gold mining stocks went up fivefold, according to Crescat Capital LLC Apple’s market cap is now approximately triple that of the entire gold and silver mining sector. There is a good chance that a few years from now that ratio will have reversed.

Electric Demand

For the next decade, a big issue in commodities will be how to supply the massive rise in electric vehicles, solar panels, chips, etc. The chart shows the commodity increases required just for electric vehicle batteries: Vast amounts of investment will be required. It will be an incredibly exciting and volatile time for investors.

Many commodities have seen high double digit or low triple digit price increases over the past year or two

(for example, lumber up by 250%), which have already begun to feed into supply chains, with farther to run.

Uranium prices, for example, will need to increase from USD 30 to a minimum of USD 50 to bring new supply onto the market. Inflationary pressures may be even larger if the United States and China establish their own supply chains for strategic materials.

Increases in oil and gas prices could become a major contributor to inflation.

Over the past few years, low prices depressed capital and exploration drilling. If post-pandemic demand roars back, major energy price increases could be in the offing.

Future price movements of most commodities will depend to a great degree on the recovery and growth of China, by far the largest consumer of commodities in the world. So far, it is the post-pandemic leader among major nations in economic growth.

So next time you read that U.S. Secretary of the Treasury Janet Yellen thinks deflation is a greater danger than inflation, or that the Fed knows how to control inflation, think about it, and watch commodity pricing carefully. Once inflation takes hold, it has historically proven very difficult to put the genie back into the bottle.

Disclaimer: The author owns positions in resource companies. The contents of this article are for information purposes only.

Investors should conduct their own due diligence or consult a financial advisor.

Les Nemethy is CEO of EuroPhoenix Financial Advisers Ltd. (www.europhoenix.com), a Central European corporate finance firm.

A former World Banker, he is author of Business Exit Planning (www. businessexitplanningbook.com) and a former president of the American Chamber of Commerce in Hungary.

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U.S.-Hungarian Relationship to be Built on ‘Hope, Ambition, Mutual Interest’ “Hope, ambition and mutual interests” are the three key phrases that sum up Hungary’s approach to its relationship with President Joe Biden’s administration, Szabolcs Takács, the country’s ambassador to Washington, told members of the American Chamber of Commerce at an online Business Forum.

ROBIN MARSHALL

Takács had spoken about the importance of the 100th anniversary of HungarianU.S. diplomatic relations and about the long-term agenda of the embassy, but the questions from AmCham members very much focused on the future. He was asked where he was most optimistic about future cooperation.

“Hungary is following the changes in global economic supply chains,” he said.

“Those changes have come to light as a result of the pandemic. If we can identify the areas that result from these changes, that might create new opportunities.”

From the Hungarian said, he said “The ambition is very high.” The embassy is aiming to help more Hungarian companies move into the American market environment. For that to be successful, those companies had to be aware of the business climate in the United States, but get that right and you can shoot for the stars, quite literally, he suggested.

“Hungary and the United States have tried to identify possibilities in space research. Last September, the Minister of Foreign Affairs and Trade signed a memo of understanding with Virgin Galactic. Further research, I believe, may identify some areas unknown to us; that is the hope.”

America’s top diplomat, Secretary of State Anthony Blinken has Hungarian ancestry (his maternal grandparents were Hungarian Jews), and his father, Donald, served as U.S. Ambassador to Hungary from April 1994 to November 1997. Might that lead to greater U.S. attention being paid to Hungary?, one AmCham member asked.

“I believe what is important is what we articulated in our letters, sent by

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look for the economic advantages to be gained through sustainable development.

“There will be cooperation and competition between the U.S. and Europe, but healthy competition, which might bring the U.S. and Europe closer.”

Close enough to look to reboot the abandoned Transatlantic Trade and Investment and Investment Partnership, in the wake of a mini-deal agreed in November 2020 over lobster imports?

“Hungary believes we [Europe] should negotiate a free trade agreement,” he said, but he admitted he wasn’t sure how likely success would be. “There are major differences between the major EU economies and the United States.”

COVID Recovery

If that is for the future, the more immediate goal is the post-COVID period. “The American political elite is turning its attention to economic recovery. [….] This should be good news for Europe and all stakeholders waiting for a new era of transatlantic cooperation.”

American businesses have certainly been pulling their weight when it comes to the Hungarian economy, the ambassador said.

“I am very pleased to report that U.S. companies have created the most jobs in Hungary since the outbreak of the pandemic: 2,496 jobs since last March.

That is almost 25% of all jobs created.”

One consistent area of disagreement between American administrations of all stripes and Hungary has been the latter’s reliance – along with much of Europe – on Russian gas. An important step away from that had been the opening of the LNG terminal in Krk, Croatia, for Szabolcs Takács unloading American gas.

“It was D-Day for energy policy because after 70 years the United States has found a new home in the United States. arrived in Europe,” Takács said, adding the Prime Minister and followed up by We are deeply grateful.” that for those past 70 years Hungary had other ministers,” the ambassador said.

If that represented part of the past, no alternative to dependency on Russian Those called for a “high level and very there was no doubt Biden administration gas. He stressed that “cooperation with intensive relationship, building on what will have an important part to play in Russia will remain important,” as will has happened” before. shaping the future. the Neptune Deep gas field project off “Hungary is always very open and “The new government has quite clearly Romania’s Black Sea coast. ready for direct dialogue – as long as demonstrated its ambition to return to “While climate is high on the agenda there is mutual respect, and I am certain multilateral diplomatic cooperation.” of the United States, it does not mean there is – to be able to discuss more The ambassador said he expects an abrupt distancing from gas,” Takács sensitive and difficult issues as well.” “enhanced U.S. cooperation with Western pointed out, adding that, for Hungary, There is, after all, a long history Europe,” especially the larger powers like “gas will remain an important element” connecting the two nations. “2021 is Germany, France and Italy, and “a new of its energy mix, alongside solar and, a significant year of celebration and era of U.S.-British relations. The first perhaps more controversially, nuclear. commemoration as exactly 100 years European leader President Biden reached “Achieving climate goals, we believe, is ago Hungary and the United States out to was Boris Johnson,” Takács not possible without nuclear.” established diplomatic relations after pointed out.

Energy also remains an important area the end of World War I,” the ambassador “What we have seen is that a of regional cooperation, as outlined in a pointed out in his earlier remarks. clear priority for the new U.S. letter sent to the Biden administration by “It has been a very turbulent, administration is climate,” the Bulgaria, acting as the current rotating sometimes very painful, certainly ambassador said, describing it as president of the Three Seas initiative, historic era that brought some very a “cornerstone” of emerging U.S. which takes in the countries of Austria, dark chapters, but also very policy, with important departments Bulgaria, Croatia, the Czech Republic, promising chapters.” like energy, transport and agriculture Estonia, Hungary, Latvia, Lithuania, Global Importance “all highlighting the importance of Poland, Romania, Slovakia and Slovenia.

One event that was in turn both dark and shifting policy towards climate.”

The initiative seeks to promote promising had been the 1956 Uprising, While Takács believes U.S. climate cooperation between the 12 states and a moment of “Hungarian, European and czar (and former Secretary of State and their partners, contributing to economic global importance.” one-time presidential hopeful) John growth and energy security, as well Takács noted that 1.5 million Kerry will work closely with counterparts as boosting cohesion and unity in Hungarians are also American citizens, such as Frans Timmermans, the Europe. The letter, fully endorsed by representing 10% of the 15 million Executive Vice President of the European Hungary, restates the need to prioritize Hungarians around the world. The 56ers Commission for the European Green developments in energy, infrastructure who fled Hungary for America “were Deal and European Commissioner for and digital transformation, ahead of the victims of history, who had to leave, but Climate Action, both parties will also next Three Seas summit in Sofia this June.

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WHO’S NEWS

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Budapest Business Journal | February 26 – March 11, 2021

Do you know someone on the move? /// Send information to news@bbj.hu

New General Manager at Helm of Roche’s Budapest office Roche Szolgáltató (Európa) Kft. has announced the appointment of Martin Kikstein as its new general manager.

Before his most recent appointment, Kikstein worked as CEO at Roche Group’s service center in Malaysia, which serves 17 countries in the Far East and the Pacific. During his tenure there, the center won the Kincentric Best Workplace Award in 2020 in Malaysia.

Prior to leaving for Malaysia five years ago, Kikstein worked at Roche’s Budapest office for a duration of 10 months. He first joined Roche in 2011, leaving IBM after 13 years. Kikstein replaces Eve Bader, who left the company in December.

“It feels like I’m coming home to Budapest, but at the same time I’m aware of how high my predecessor has set the bar, for which she and the entire Hungarian team deserves recognition,” Kikstein says.

Martin Kikstein Under the leadership of Bader, who was appointed in 2017, the company has undergone significant changes, with the number of Roche employees in Budapest growing from 900 to 1,200 people. In addition, last year, the company moved its headquarters in Hungary to the recently completed Nordic Light Trio office building. Bader was named the manager of the year in 2020 by the Hungarian Investment Promotion Agency.

She joins Richard Lock, Iván Sólyom, and Ádám Máttyus, the partners leading the firm's corporate/M&A group.

Viktória Szilágyi Lock, the partner heading the Corporate/M&A practice, says, “We remain busy in our Corporate/M&A practice and this expansion reflects the current position, potential, and ambitions of the firm in this area. Among the areas in which Viktória will help the development of our practice is through her active role in the IBA, which plays an important role in our relationships with law firms around the world.”

Szilágyi adds. “I am pleased and excited to be joining what is widely seen as the leading corporate/M&A team in Hungary. LKT’s profile as an independent internationally focused firm gives me a great platform to develop my practice and I look forward to working with my new colleagues.”

Rencz Picked as Head of EY’s Central European Group EY Hungary country managing partner Botond Rencz has been appointed to lead the Big Four consultancy firm’s Central European group, which encompasses eight countries.

Mátyás Dobó Becomes Vodafone Hungary’s Business Unit Director

Mátyás Dobó has become the new director of Vodafone Hungary’s business unit, having taken over from István Király on February 1.

Király became the director of the telco company’s business unit in 2014. He will leave Vodafone altogether on March 31.

Lakatos, Köves & Partners Appoints Corporate Counsel Law firm Lakatos, Köves & Partners (LKT) has announced that experienced corporate/M&A lawyer Viktória Szilágyi has joined its corporate team.

Szilágyi joins LKT from Hungarian independent law firm Nagy & Trócsányi, where she worked as a partner of the corporate/M&A practice. She is chair of the CEE Sub-Regional Group of the International Bar Association’s European Regional Forum, while also being a consultant on corporate law matters at the Lawyer’s Academy organized by the Budapest Bar Association, and a member of the Professional Committee of the Hungarian Bar Association.

Business brand, formerly known as 800 staff. Under his leadership, it has Ready Business, which supports the won 19 international awards from the digitalization of businesses. Király also prestigious tax magazine International played a key role in the Vodafone-UPC Tax Review, including Tax Firm of the integration, and Vodafone introduced Year (nine times) and Transfer Pricing its 5G private network and NB-IoT Firm of the Year (10 times). technologies under his leadership.

Dobó was previously responsible for Szecskay Attorneys at Law Apple’s CEE B2B business unit before Introduces Fresh Partners joining Vodafone on November 30, 2020.

Szecskay Attorneys at Law has He has more than 16 years of announced the appointment of György experience in the digital technology Wellmann and Bence Sz. Molnár as field, having started his career by partners, effective from January 1. building his own startup company, before joining Magyar Telekom in 2013.

He later worked for Deutsche Telekom, Invitech, and Apple, gaining expertise in sales, marketing, and business development management.

The specialist is proficient in the introduction and implementation of design-based and agile methodologies in large corporate environments, alongside with the management of person- and customer-focused teams. He has a special interest and experience in the field of IoT solutions and in the strategic development and implementation of digital transformation.

György Wellmann

Mátyás Dobó During the more than six years he spent at Vodafone, Király worked on projects such as setting up the structure of the firm’s fixed-line communications portfolio for corporate customers, the deployment of the ever-spreading business IoT services nationwide, and the launch of the Vodafone

Botond Rencz He assumed his new position on January 1, 2021. As regional head, he is now responsible for EY’s offices in Bosnia and Herzegovina, Croatia, the Czech Republic, Montenegro, Serbia, Slovakia, and Slovenia. In addition, he continues to serve as the company’s country managing partner in Hungary.

“EY has been growing dynamically in Hungary for years. As the leader of the group, I also consider it a personal mission to provide our current and future clients with the highest possible level of advice from the best professionals in each country in the region. In the current difficult circumstances, this is especially necessary in order to allow companies to survive this transition period as strongly as possible,” stressed Rencz.

He has been the head of EY Hungary since 2015, leading the company’s tax advisory division in Central Europe and Hungary. EY Hungary has grown steadily in recent years, and now has more than

Wellmann will head the provision of legal services to domestic and foreign clients in public procurement proceedings and in the enforcement of related claims. At the same time, he will continue to play a key role in the firm’s dispute resolution team.

Molnár will lead the firm’s legal technology and digital commercial form activities in order to further drive digitalization in its commercial contracting practice. Besides his corporate responsibilities, he will continue to coordinate the merger cases in strong support of the firm’s competition law practice group, as well as playing a key role in the M&A team. Additionally, he has a lead role in developing the firm’s private client practice in landmark inheritance and trust cases.

“Bence Molnár and György Wellmann are extremely capable and highly regarded members of our firm. They are particularly known for delivering focused legal advice,” says András Szecskay, founder and managing partner. “Professional excellence delivered with a human touch is something that makes our firm unique; it is something that both of our new partners deliver within our highly digitalized framework.”

Bence Sz. Molnár

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Budapest Business Journal | February 26 – March 11, 2021

Special Report Hungarian Tools Help tax Morale, With Leeway for Improvement

Photo by Andrei_R / Shutterstock.com

Taxes & Accountancy 12

Will KATA Changes Whiten Economy or Prompt More Creative Bookkeeping? 13 Competitive tax System may Need Tweaks to Mitigate Pandemic

14

Tax Policy: Cutting Burdens, Digital Transformation the Priorities

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How might new tax systems impact the economy and central state coffers, and what needs looking at again?

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Special Report

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Budapest Business Journal | February 26 – March 11, 2021

Hungarian Tools Help tax Morale, With Leeway for Improvement While Hungary’s tax morale has significantly improved in the past two decades, there is room for improvement to better incentivize taxpayer willingness.

Finding the right balance is a tricky task, however, given the many factors that come into play.

at

27%.

“This fact could lead to tax avoidance since the respective saving for not declaring the VAT can be significant.

As an alternative solution, Hungary should consider moderating the VAT rate to a more acceptable level or to make the tax collection more effective in order to reduce tax avoidance,” Bagdi suggests.

CHRISTIAN KESZTHELYI

Economic and psychological research suggests that tax behavior is formed by both compulsory and voluntary motivations. A country with better tax morale will see coercion as holding a less important role in its society; indeed, excessive sanctioning has been shown to worsen tax morale, just as much as too little punishment of tax evaders does.

A fine balance must thus be found between underdoing and overdoing sanctions or else taxpayers will feel the system is unfair. The tax system itself is, therefore, a major factor in affecting the tax morale of a nation, and the tax authority’s behavior should feel fair to taxpayers while maintaining the highest levels of transparency possible. Individual characteristics, such as belonging to a group and social support traditions all weigh in on forming tax morale.

The tax morale in Hungary, the willingness of its citizens to pay into the system, is seen to have made improvements lately.

“As a general statement, the tax morale in Hungary has significantly improved in recent years, especially due to the moderate corporate income tax and personal income tax rate (at 9%

and

15%,

respectively),” Lajos Bagdi, head of tax advisory services at Niveus Consulting, tells the Budapest Business Journal.

“Also, the so-called ‘tax-wedge’ for VAT has considerably decreased (currently at 6.6%), based on which Hungary is one of the best performers in the EU. As a result, the amount of taxes collected by the Hungarian tax office is

office is further elevated, which boosts taxpayers’ willingness to pay their dues. So, what else can be done to boost matters here?

Social security and local business taxes are still seen as a significant burden. If these contributions were reduced, the tax morale would further improve.

“Hidden-employment could be whitened if social taxes were reduced.

Also, as the local business tax is a significant and special tax type in Hungary, the simplification of the tax system could be improved if the local business tax would be cancelled permanently and, for example, the current 9% corporate tax rate was increased a bit,” Bagdi said.

While the corporate income tax rate of Hungary is at an attractive level (for more detail on this, see “Competitive tax System may Need Tweaks to Mitigate Pandemic” on page 14), the general Hungarian VAT rate is still the highest in the European Union

Lajos Bagdi

Hungary’s considerable improvement in tax morale since the late 1990s has led to clear gains. “As a result, more taxes can be collected than earlier and the hidden economy is continuously shrinking,” he continues.

“However, there is still a problem in using alternative tax methods such as KATA [the simplified tax system intended for small businesses and the self-employed] for a contractual relationship instead of employment to pay salaries to individuals,” Bagdi adds.

These alternative tax methods are exploited by some companies that contract their staffers instead of employing them to avoid paying certain other payroll levies.

“The government identified the problem and set certain restrictions as from 2021 in order to reduce the tax avoidance regarding KATA taxation; for example,

Hungary has introduced, and is still introducing, various tools to combat the black economy. These include the introduction of real-time reporting obligations, such as online cash registers; the usage of transportation control systems, such as EKÁER; and the launch of the universal online invoice reporting system. The government is planning to introduce more real-time obligations to restrict potential tax avoidance. With these tools in action, hiding revenues and income becomes harder. But there are downside, too.

“Companies treat these tools as a significant administrative burden; however, they should accept and adapt.

One can argue that Hungary is one of the strictest countries within the European Union in respect of its tools introduced: EKÁER is a Hungarikum and online invoicing is also very rare within the EU,” Bagdi explains.

While these tools have a real positive impact on the economy, the disproportionately increased administrative burden may dent tax morale in some cases.

tax is now applicable for a total yearly amount above HUF 3 million paid by one service recipient,” the tax expert explains.

Improving tax morale is a selfgenerating cycle. In an improved tax morale environment, more taxes can be collected and the reputation of the tax

higher than in the previous years. Based on the recent statements from politicians, further tax reduction can be foreseen, for social taxes especially,” Bagdi says.

Tax Gains

40% extra

Further Boost?

“Hidden-employment could be whitened if social taxes were reduced. Also, as the local business tax is a significant and special tax type in Hungary, the simplification of the tax system could be improved if the local business tax would be cancelled permanently and, for example, the current 9% corporate tax rate was increased a bit.”

As the COVID-19 pandemic shook Hungary, the government introduced measures such as remitted or postponed contributions for certain industries and a general reduction of the local business tax for SMEs as of 2021. This approach may not only help businesses to survive, but could also help improve tax moral.

“The current intention of the government is to save the companies in particular sectors. Although these measures could lead to the loss of certain tax revenues for Hungary, if the companies are still alive and no massive liquidations happen, more taxes can be collected in the future,” Bagdi concludes.

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Budapest Business Journal | February 26 – March 11, 2021

Will KATA Changes Whiten Economy or Prompt More Creative Bookkeeping?

Changes in the small taxpayers’ flat-rate tax (KATA) may fail to achieve the lawmakers’ original goal, tax experts warn.

Detailed Legislation

“Unfortunately, practice shows that many business have already decided not to pay the extra 40%; they either don’t contract the enterprise/individual with KATA, chose a party whose offer is more favorable for them from a taxation viewpoint or pay a fee that is lower to avoid the payment.”

As of January 2021, a 40% tax is payable when crossing the annual income limit of HUF 12 million in cases where the sum of the amounts invoiced by a KATA taxpayer to an (unaffiliated) business partner exceeds HUF 3 million. The tax also applies to transactions between affiliates, regardless of the amount.

For domestic parties, the excess tax would be payable not by the taxpayer subject to KATA, but instead by the business partner receiving the invoice.

If a KATA taxpayer receives income from a foreign affiliate or from a foreign customer where the income exceeds HUF 3 mln, the 40% tax will be payable by the KATA taxpayer. In this case, however, the tax base will be equal to 71.42% of the portion of the income that is in excess of HUF 3 mln.

Those who issue invoice to individuals, or who do not invoice an affiliate or those who do not invoice

HUF 3 mln

to a partner (who is not an individual) a year will continue to benefit from KATA as per the pre-January changes.

Unfortunately, practice shows that many business have already decided not to pay the extra 40%; they either don’t contract the enterprise/individual with KATA, chose a party whose offer is more favorable for them from a taxation viewpoint or pay a fee that is lower to avoid the payment.

This latter option is a compromise some experts also mention as a possibility to people to prevent them from losing their job/commission altogether. All the taxpayer need to do is to calculate the amount in a way that it forgoes the 40% extra to the receiver.

That is, above the HUF 3 million limit they provide a 28.5% discount to the entity who pays them.

Legal Question

Whether this option is legally valid is a question debated by lawyers and has yet to be tested, but some experts/websites on tax have displayed examples of agreements where such terms were stated.

so-called concealed employment, where a company paid what was to all intents and purposes an employee through KATA rather than via a regular salary to avoid payroll costs.

But it may simply mean many will, as a result, lose their jobs, although only time will reveal the true extent of this. At this point, the fears of many associations that have fought against the modification appear to be coming true: The government makes a livelihood impossible for those who have never been employed but do provide service to larger entities.

The fact is that many associations claim that currently employment and business commissions cannot be truly separated unless there is detailed legislation controlling both.

ZSÓFIA VÉGH

more than

Special Report | 13

Might the new KATA regulations lead to an uptick in at least some cash-in-hand payments?

Photo by Janos L. Virag / Shutterstock.com

“From a budgetary viewpoint, KATA’s effect is not that significant. The 2020 budget revenue allocation from KATA was HUF 192.6 billion but the final figure of HUF 158.2 bln fell well short of that, according to data from the Central Statistical Office.”

Further loopholes include not issuing an invoice above the limit and simply paying the extra in cash, or creating more unaffiliated enterprises to receive the invoice until the limit. These are obviously not the most transparent solutions, but are a possibility

according to experts. When it comes large corporations, these “options” are ruled out: they either commission the taxpayer or not.

Those who find that KATA is no longer a viable (or perhaps more accurately a profitable) solution for them have several options to choose from. They can decide to pay a flat tax rate, or specific taxes as an individual entrepreneur.

They could also switch to other entity forms, such as a limited liability company or small business tax (KIVA).

Depending on the tax base, all will leave less in the taxpayer’s pocket than the original KATA scheme, but compared to the new KATA rules, some may end up being more favorable. There are numerous free calculators on the internet that describe in detail the amounts to be paid in each case.

It is too soon to tell what solutions taxpayers and receivers will favor in the long run. The government’s stated aim with the modification was to eliminate

When it comes to paying taxes, there is hardly an ideal solution; certain parties will always be hurt. There are approximately 400,000 taxpayers subject to KATA in Hungary. This change is supposed to protect hundreds of thousands of taxpayers while it will inherently risk the livelihood of thousands (or tens of thousands.)

From a budgetary viewpoint, KATA’s effect is not that significant. The 2020 budget revenue allocation from KATA was HUF 192.6 billion but the final figure of HUF 158.2 bln fell well short of that, according to data from the Central Statistical Office.

The new KATA rules could certainly add some additional tens of billions of forints to central budget coffers, but compared to the tax revenues from value added tax (HUF 4.699 trillion) or excise duty

at

HUF 1.196 tln,

it is marginal.

Overall, experts warn, the very original idea of KATA, simplifying taxation and drawing people into the system, therefore reducing tax avoidance and “black” employment, will largely be lost due to the modification.

The key to a more “disciplined” tax payment, not just for this type, but in any segment, would be more scrutiny, they claim.

14 | 3

Special Report

www.bbj.hu

Budapest Business Journal | February 26 – March 11, 2021

Competitive tax System may Need Tweaks to Mitigate Pandemic Hungary’s corporate income tax (CIT) rate is the lowest in the EU and among the lowest worldwide.

While this boosts Hungary’s international competitiveness, as the effects of COVID-19 unfold, further changes to the taxation system may be necessary.

CHRISTIAN KESZTHELYI

Although the cut of the nominal corporate tax rate from the progressive 10-19% scale to a flat 9% from January 1, 2017 mainly benefitted mediumand large-sized Hungarian companies, the reduced tax rate established, together with various tax incentives, a competitive, business-friendly

system in terms of the Hungarian profit taxation.

“The fact that this low flat CIT rate is achievable for any type of income and Hungary combines that low CIT rate with competitive international tax rules (for example no withholding tax on payments to foreign legal entities, an extensive treaty network, tax exemption on capital gains and dividend income with conditions that are relatively easy to fulfil), alongside EU membership, puts the country on the shortlist of jurisdictions that are usually reviewed by foreign investors when they plan their new investments,” Ferenc Póczak, partner of the tax and legal unit at Deloitte Hungary, tells the Budapest Business Journal.

“Since the reduction of the Hungarian corporate tax rate, the country’s competitiveness in attracting new businesses and investments has increased significantly, even if foreign investors consider more than the taxation related aspects when choosing their final destination for a planned investment project,” Boglarka Herczeg, senior consultant for tax and legal services at PwC Hungary, tells the BBJ. When combined with other favorable market conditions, the corporate tax rate has helped to create thousands of new jobs by boosting the investment perks in Hungary.

“The restructuring of the Hungarian tax regime to levy higher taxes on consumption instead of taxing the capital and work-related income also increased Hungary’s potential to be considered as a favorable investment location within the EU,” Herczeg adds.

“I do not think that Hungary should [seek to] compete with the rate as this is a race Hungary cannot win,” he tells the BBJ.

However, the big picture, as always, is more complex than that. “We believe that it would be a mistake to decide on a country’s tax competitiveness and business friendliness from a tax perspective exclusively based on its corporate tax rate. Even if we look at the direct taxes, besides CIT, the local business tax (LBT) and the innovation contribution implications should always be considered when reviewing the tax burden of investments or transactions,” Póczak agrees.

Balázs Kántor, head of the tax department and a tax advisor at law firm Lakatos, Köves and Partners share this line of thought.

“The low rate seems good for business at first glance; however, it is only one part of the equation. […] There are other taxes that make Hungarian investments costly, such as the taxes on payroll and the archaic local business tax.”

Tax Equation

“The low rate seems good for business at first glance; however, it is only one part of the equation. At this rate, many companies consider the corporate tax negligible, some of the biggest ones almost pay nothing at all. However, there are other taxes that make Hungarian investments costly, such as the taxes on payroll and the archaic local business tax, or as it is known in Hungarian, helyi iparűzési adó)” Kántor elaborates.

Nevertheless, Kántor explains that the low corporate income tax rate, together with the lack of withholding taxes, is very favorable for those who are seeking a base for their intra-group financial center or financial holding.

Hungary has the 14th most competitive taxation system among the

37

member

Boglarka Herczeg

countries of the Organization for Economic Cooperation and Development, and is placed ninth among EU member countries, according to the 2020 tax competitiveness index of the Tax Foundation.

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Budapest Business Journal | February 26 – March 11, 2021

“We believe that, due to the low portion of the CIT liability in the total tax liabilities of the companies, CIT-related measures play a small role in fostering investments and employment during and after the post-pandemic economic landscape,” he adds.

“As a future step what might be worth considering is to allow taxpayers to make additional deductions from their corporate tax base for their costs and expenditures occurred in relation to the protection against the COVID-19 pandemic,” Herczeg agrees.

“However, going forward, as the corporate tax regime was originally set up in a rather simplified and taxpayer-friendly way, I believe that the main focus will be on optimizing the employment-related tax burden, rather than making significant changes in the corporate tax system,” she says.

Business Tax

Balázs Kántor As economies wrestle with the repercussions of COVID-19, the need for immediate action, as well as the willingness to improve the market, have come into focus.

“The tax measures introduced [by the government] during the COVID19 outbreak in order to ease the tax burden of Hungarian companies helped in optimizing the cash flow and profit positions of the taxpayers when it was needed the most,” PwC’s Herczeg points out.

“We believe that the corporate taxation-related measures (for example the reduction of the LBT for small- and medium-sized enterprises, or easier tax advance payment reduction processes) introduced by the Hungarian government are appropriate to address the issues generated by the COVID-19 pandemic,” Póczak agrees.

“Considering that those companies that were hit hardest by the effects of the pandemic expected to generate losses, these companies will not have CIT liabilities; therefore, changing the CIT rules would not decrease their total tax costs,” he says.

But is there room for further improvement, especially as the future negative effects of the pandemic on economies are still hard to pin down?

“One additional step could be for the government to abolish the limits of the utilization of tax losses generated in the period when there were significant restrictions on economic activities,” Póczak suggests.

The LBT also needs addressing, as some companies pay tax liabilities on their profits, while for others it is purely a turnover-based tax.

“Therefore, in order to make this tax regime more predictable and less discriminative, the way of calculating the local business tax liability should be more harmonized with profitbased taxes. This could increase the competitiveness of Hungary even more on the international markets,” Herczeg believes.

Economic measures taken to address the pandemic have, inevitably, placed severe pressure on the government’s central budget, as both the personal income tax and value-added tax income of the budget is materially lower than the projected.

Ferenc Póczak “To counter the negative effects of downward cycles of the economy and the unforeseen crises, the government should incentivize that investors retain the profit in the company with a view for long-term solvency and support of the employees, avoiding mass layoffs,” to Kántor suggests.

INSIDE VIEW

Obligation to Report Certain Cross-border Arrangements Goes Live János Pásztor

Bence Kálmán

Senior Associate

Associate

WOLF THEISS BUDAPEST

WOLF THEISS BUDAPEST

The grace period, extended due to the COVID-19 pandemic, having drawn to an end, the obligation to report certain cross-border arrangements provided for in the Hungarian legislation implementing the DAC6 Directive of the European Union application has gone live and we are already past the first filing deadline concerning arrangements, which was January 31, 2021.

Hungary has implemented the disclosure rules only for cross-border arrangements; therefore, purely domestic ones are not subject to disclosure.

The first step in assessing whether there is an obligation to file a report to the tax authority is to identify whether there is an arrangement as defined in the legislation.

According to the recently issued explanatory guidance from the Ministry of Finance, this should be construed widely; consequently, even the incorporation of a company, taking out a loan or organizing board meetings at a given location may be deemed as such. However, the mere lapse of time as a condition for benefitting from the participation exemption, as a general rule, would not be considered as such.

Once an arrangement has been identified, it should be analysed whether it concerns at least one Member State and a third country or two Member States by reason of at least one participant being connected to these states by its residence or activity.

According to the ministry guidance, this latter aspect could be fulfilled even where a participant is not a tax resident in any jurisdiction. Moreover, insofar as the arrangement has a possible impact on the automatic exchange of information or the identification of beneficial ownership, it is sufficient for at least one participant to be connected to one Member State.

It is notable that, in the interpretation of the ministry, a participant is any person or entity actively involved in the arrangement (other than intermediaries) and, inter alia, a parent company may qualify as such if its consent as a shareholder is required for its subsidiary to enter into an arrangement with a third party.

If the conclusion of the above analysis is affirmative, regard should be had to the hallmarks specified in the legislation, which are characteristics considered as potentially being indicative of aggressive tax planning strategies.

A cross-border arrangement may end up being reportable if certain hallmarks are fulfilled, while there are other hallmarks that do not render an arrangement reportable, unless the main benefit test is fulfilled as well. This latter would be fulfilled where at least one of the main benefits that may reasonably be expected to derive from an arrangement is the obtaining of a tax advantage, irrespective of any intent underlying the arrangement.

The definition of “tax advantage” is to be given a wide meaning, including claiming a tax refund, exemption, deferral, avoiding to incur a tax liability or the obligation to repay funds to the state.

The disclosure of the prescribed data on a reportable arrangement lies, as a main rule, with the intermediary. This category covers service providers, which, in the least, could be reasonably expected to be aware of their having assisted with designing, marketing, organizing, making available for implementation or managing the implementation of a reportable arrangement.

However, the obligation to report may be shifted over to the person to whom the reportable arrangement is made available for implementation, or who is ready to implement it or has implemented the first step thereof, where the intermediary is located outside the EU or is bound to professional secrecy by law.

The disclosure should be made within 30 days from the earlier arrangement being made available or being ready for implementation, or the first step of its implementation having been made.

The tax authority may sanction failure to comply with the rules on disclosure by levying a default penalty. Although the maximum amount of the penalty is not too hefty, the omission may be interpreted by the tax authority as indicating having something to hide and could result in a tax audit conducted with heightened scrutiny for the participants of the arrangement.

www.wolftheiss.com

NOTE: ALL ARTICLES MARKED INSIDE VIEW ARE PAID PROMOTIONAL CONTENT FOR WHICH THE BUDAPEST BUSINESS JOURNAL DOES NOT TAKE RESPONSIBILITY

A further breakdown of the rankings shows that Hungary has the fourth most competitive tax system in terms of corporate tax and international tax rules, but only the 35th in terms of consumption taxes.

“Therefore, this index reflects the tax policy followed by the Hungarian government, i.e. to apply a higher level of consumption taxes and lower level of taxes on income,” Póczak of Deloitte says.

Special Report | 15

16 | 3

Special Report

www.bbj.hu

Budapest Business Journal | February 26 – March 11, 2021

Tax Policy: Cutting Burdens, Digital Transformation the Priorities Measures to reduce the administrative burdens of taxation, digital transition and the easing of contributions are the major goals set by the government in the next one-to-two years.

ZSÓFIA VÉGH

The government says it will continue to streamline the Hungarian tax system, the transformation of which has already brought about tangible results, for example, more transparency. One of the major aims is to facilitate the switch to digital while, at the same tie, simplifying tax-related red tape and easing the general burden.

The change has already started: the tax policy measures of recent years; reductions in the tax burden on the employee, the employer and entrepreneurs has surely contributed to the growth of employment and the reduction of unemployment.

As a result, Hungary has been at the forefront of reducing tax burdens in the European Union. With a tax burden proportional to 1.6% of GDP, after the United States, the tax burden decreased most in Hungary from 2018 to 2019, said Minister of Finance Mihály Varga at a conference late last year, citing data by the Organization for Economic Cooperation and Development (OECD).

The tax policy has also supported the reduction of the state deficit and debt, at least prior to the state interventions demanded by the COVID pandemic, he said. Overall, the Hungarian system has become more attractive in the EU. “We should not stop here if we want to be among the leaders of digital taxation as well,” Varga added.

Three-step Process

The digitization of the existing system is a three-step process, the first of which, the administration of private individuals, is already being handled by the tax authority.

The second step, scheduled to debut in the second half of this year, is aimed at supporting roughly half a million entrepreneurs (for example by helping them fill in VAT returns).

The third step will see the end of the era of paper tax returns and with that will start the age of digital tax bases. The system will debut with

Mihály Varga, Minister of Finance (center), with Russian Deputy Minister of Finance Timur Maksimov (left) and Nikolai Kosovo, chairman of the board of the International Investment Bank (right) at the official transfer of the Lánchíd Palace, the IIB’s new headquarters in Budapest, on February 19. Photo by MTI / Zoltán Balogh employment-related administration.

The Ministry of Finance says it is already working on a digital database that will contain all the information that needs to be sent central authorities.

There are several benefits to online taxation and administration. It does not only make the process smoother and more convenient, but also saves time and paper. Online invoicing now allows for parties to send invoices to one another without having to print them.

Other online tools, such as EKÁER, the Electronic Trade and Transport Control System, or online cash registers, improve traceability.

a problem and could take action right away without waiting for statistics and surveys, Varga pointed out.

Doing tax returns online will help pinpoint when there is a discrepancy between the declaration and the tax authorities’ records. Digital tools allow for more frequent checks and the time to make good any formal irregularities is also shortened.

Beyond that, with the data collected, taxpayers have a source to reach out to when they need specific information. The popularity of electronic payment is also on the rise, and now people are able to buy bonds online as well.

Digital Progress

“About 60% of enterprises in Hungary have already significantly digitized tax administration processes, the proportion of those working mostly on paper is small, while 40% of enterprises outsource part of the tax administration, most of them completely.”

They also give a better insight into performance. As a result, the government was able to follow more accurately the economic performance of the hospitality sector during the first wave of the coronavirus. Based on the data coming from online cash registers, the finance ministry could see there was

“About 60% of enterprises in Hungary have already significantly digitized tax administration processes, the proportion of those working mostly on paper is small, while 40% of enterprises outsource part of the tax administration, most of them completely,” said Norbert Izer, State Secretary for Tax Affairs at the Ministry of Finance last fall in a presentation about the digitization of taxation.

“Based on this, although strengthening the digitalization of processes further seems a promising direction, in order to make the benefits tangible to businesses, the range of services provided directly by the tax authorities needs to be increased,” he added.

However, the proliferation of electronic declaration channels has not directly led to a reduction in administrative burdens.

For that to decrease, the logic of data collection should be changed.

This means the consolidation of data requirements by the state authorities

(which would eventually require companies to submit less data) and also to request transaction information generated by businesses in the course of their natural business processes.

“We should not stop here if we want to be among the leaders of digital taxation as well.”

Transitioning to such a model requires a great deal of preparation as what circle of information will be required that meets the needs of all the authorities needs to be decided, and it must be done in a way that simultaneously complies with the data protection and data management rules and provides a solution that is reliable, flexible, and capable of connecting to the existing systems of the state administration.

The National Tax and Customs Administration (NAV) says it has already launched developments that can be implemented in the shorterterm to reduce administration and minimize erroneous data provision, both on the side of the client and the authority.

Beyond that, the development of NAV’s digital capabilities in the coming years is a priority, Izer noted.

In doing so, the renewal of customer relations interfaces and the expansion of services will be the two main directions of travel, he added.

3

www.bbj.hu

Budapest Business Journal | February 26 – March 11, 2021

Special Report | 17

Accounting Firms no. oF Full-time employees on jAn. 1, 2021 yeAR estAblisHed

oWneRsHip (%) HungARiAn non-HungARiAn

top loCAl exeCutive CFo mARketing diReCtoR

✓

1134 Budapest, Váci út 33.

(1) 451-7100 info-hu@ps-bpo.com

–

210 1994

– TMF Group B.V. (100)

eloi malta-bey, mehmet sengonul Daniel Proychev Igor Dakic

1138 Budapest, Népfürdő utca 22.

Duna Tower (1) 461-8100 business.hungary@ tmf-group.com

✓ ✓ ✓ ✓ ✓ ✓ ✓ ✓

105 1990

Péter Bergmann (50), Péterné Bergmann (50) –

péter bergmann, péterné bergmann Sándor Soltész Krisztina Bergmann

1138 Budapest, Váci út 186.

(1) 238-9000 bergmann@bergmann.hu

HR Consulting

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pRepARAtion oF montHly And AnnuAl RepoRts

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jános babos, Andrew majlath, András szalai – –

m&A

pRepARAtion oF iFRs RepoRts And FinAnCiAl stAtements

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Audit

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tAx Consulting

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A

CHALLENGES AND RESPONSES TO COVID-19 CRISIS — PROCESS SOLUTIONS’ EXPERIENCE

The No.1 Accounting Firm in Hungary since 2006 Ranked by BBJ

András Szalai

Managing Partner, PS

Process Solutions (“PS”) as a regional accounting and payroll outsourcing service provider of several multinational companies, has made significant effort to sustain its rapid adaptation capability. This is how we can keep up our effective client service and support our team in reducing the impact of the crisis.

To maintain business continuity, the number one competence has been to take quick decisions in situations never seen before.

The challenge is that in an unknown field of the crisis, in a constantly changing health, legal, economic and labour market environment, we have to keep operating our “previous” business processes while gradually developing new ones, without knowing under what conditions we will ultimately operate in the “next normal” world during or even after the pandemic.

According to our experience without completeness and prioritization the following areas are certainly worth monitoring if a company has set the objective of not just surviving but gaining strength through a period like this. These issues need to be resolved, whether it is about client service or internal human resources management:

• Improving the effectiveness of the decisionmaking and risk management processes

• Digitalizing business (front office) processes to achieve the real “paperless office”

• Rethinking the digitalization and supportive role of back office functions including HR processes

• Extending “home office” as an employment solu-

tion and the various questions arising from it, both in terms of employees’ and employers’ aspects • Making the office environment safer even from epidemiological point of view, to protect our team and business partners • Enhancing IT systems further, especially data and information security solutions • Identifying and exploiting new business opportunities in a changed environment According to experts from some of the PS regional offices the pandemic has accelerated the digital transformation and resulted in revolutionary development not just in B2B communication and data exchange, but in certain countries also in the areas of state administration, tax and labour office filings.

To share our opinion and experience gained during the COVID-19 crisis, we launched a series of blog posts in order to help our followers to get through the crisis stronger and with positive outlook for this year and beyond:

www.ps-bpo.com/blog

–

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✓ ✓ ✓

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1139 Budapest, Váci út 99–105.

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1062 Budapest, Aradi utca 16.

II. emelet 2.

(1) 345-0092 finacont@finacont.com

–

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1143 Budapest, Stefánia út 101–103.

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www.bbj.hu

Budapest Business Journal | February 26 – March 11, 2021

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18 | 3

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Wts klient könyvelő kFt.

806

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51 2007

István Nemecz (30) ACCACE BPO Holding (70)

istván nemecz Katalin Berényi Nemeczné Norbert Nagy

1132 Budapest, Váci út 30.

(1) 412-3530 hungary@accace.com

– LeitnerLeitner Österreich Wirtschaftsprüfungs GmbH (55), LeitnerLeitner International GmbH (45)

márta siklós, nóra tünde Rácz – –

1027 Budapest, Kapás utca 6–12.

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41 1995

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Alessandro Farina – –

1054 Budapest, Váci utca 81.

(1) 269-5679 info@itlgroup.hu

–

✓ ✓ ✓

50 2017

Individuals (A) Individuals (A)

tamás kovács, judit gudman – –

1139 Budapest, Váci út 99.

(70) 679-0279 hello@bpion.com

1994

itl gRoup kFt. www.itlgroup.hu 10

–

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✓ ✓ ✓

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54 1991

Attila Kollár (100) –

Attila kollár, András virág István Plájer –

1117 Budapest, Szerémi út 7/A (1) 464-4340 info@econoserve.eu

–

–

66 1989

Kálmán Faur (100) –

kálmán Faur Zoltán Komora Katalin Sáfár

1113 Budapest, Karolina út 65.

(1) 460-7400 mlx@memolux.hu

Gyöngyi Ferencz (A), Erik Thurn (A), Andrea Kuntner (A) –

Andrea kuntner – Krisztina Csákics

1134 Budapest, Váci út 33.

(1) 225-7575 vgd.budapest@vgd.hu

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–

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33 2001

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14 1992

Andrea Butkovics (50), Tünde Gulyás (50) –

Andrea butkovics – Melinda Németh

1134 Budapest, Váci út 49.

(1) 452-6900 office@colling.hu

–

–

–

–

18 2010

Tibor Kmeczó (100) –

tibor kmeczó Tibor Kmeczó Tibor Kmeczó

1087 Budapest, Könyves Kálmán körút 76.

(1) 219-0991 info@perscriptor.hu

–

7 1995

Zsolt Ruszin (50), Veronika Antal Ruszinné (50) –

zsolt Ruszin – –

1097 Budapest, Könyves Kálmán körút 12–14.

(1) 238-8023 fairconto@fairconto.hu

259

579

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–

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A

✓ ✓ ✓ ✓

Colling könyvelő és tAnáCsAdó kFt.

165

165

–

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–

–

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A

✓

16

peRsCRiptoR könyvelőiRodA kFt.

158

193

–

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–

–

✓

A

✓ ✓ ✓ ✓

17

FAiRConto zRt.

13

15

–

www.colling.hu

www.precizkonyveles.hu www.accountantbudapest.com

www.fairconto.hu

151

218

–

✓

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–

–

✓

A

✓ ✓ ✓

–

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–

–

3

www.bbj.hu

Budapest Business Journal | February 26 – March 11, 2021

pRepARAtion oF ACCounting poliCy

ACCounting Consulting

ACCounting tRAining

pRepARAtion oF iFRs RepoRts And FinAnCiAl stAtements

pRepARAtion oF montHly And AnnuAl RepoRts

mAnAgement Consulting

m&A

tRAnsFeR pRiCing

HR Consulting

no. oF Full-time employees on jAn. 1, 2021 yeAR estAblisHed

oWneRsHip (%) HungARiAn non-HungARiAn

Audit

top loCAl exeCutive CFo mARketing diReCtoR

AiRon Consulting kFt.

115

115

–

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–

✓

✓

A

✓ ✓ ✓

–

–

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–

–

10 2003

Eszter DankuSzigecsán (100) –

tamás danku – –

1011 Budapest, Szilágyi Dezső tér 1.

(1) 700-4141 hello@airon.hu

19

eCoCReAtive zRt.

112

112

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–

✓

A

✓ ✓ ✓ ✓ ✓

–

–

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3 2007

Individuals (100) –

Csaba szikra-mezei Tibor Papp –

1116 Budapest, Fegyvernek utca 8.

(30) 238-1302 iroda@ecocreative.hu

20

ÍRisz oFFiCe zRt.

102

129

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–

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A

✓ ✓ ✓ ✓ ✓

–

–

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4 2000

Individuals (100) –

tibor papp – –

1114 Budapest, Bartók Béla út 29.

(1) 550-0510 iroda@iriszoffice.hu

21

Audit-lAbteCH könyvelőiRodA kFt.

–

–

–

–

8 2007

Beáta Kincs (100) –

beáta kincs – –

4026 Debrecen, Bem tér 14.

(1) 279-1722 office@audit.labtech.hu

www.airon.hu

www.ecocreative.hu

www.iriszoffice.hu

80

80

–

✓

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–

✓

✓

Optimit Hungária Kft, Őrmester Vagyonvédelmi Nyrt, VB2MW Kft, Gammo Europe Kft, Gyulai Kft.

54

58

–

–

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–

✓

A

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–

–

–

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7 1990

Csaba Benedek (100) –

benedek Csaba – –

1033 Budapest, Laktanya utca 35.

(1) 439-2300 csaba@benedek.hu

49

50

–

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–

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A

✓ ✓ ✓ ✓ ✓

–

–

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2 2014

Individuals (100) –

tibor papp – –

1114 Budapest, Bartók Béla út 29.

(1) 550-0510 hyper@hypercortex.hu

✓

FCB Hungary Kft, Videopress Kft, Max Vip Kft, Gaut Bt, Manta Digitál Kft

–

5 1994

Individuals (100) –

péterné bónácz Anikó Vargáné Bónácz István László Varga

1224 Budapest, III. utca 13.

(1) 362-4748 info@caldera.hu

ARK INVEST Magyarország Kft. (87), individuals (13) –

zsolt ilyés, krisztina garas kovácsné Krisztina Garas Kovácsné –

1064 Budapest, Izabella utca 66.

(70) 380-3970 garas.krisztina@ arkconsulting.hu

Company Care Solutions Kft. (100) –

Adrienn szentpétery – –

1113 Budapest, Bocskai út 77–79.

(1) 209-6448 balance@balancekft.hu

(100) –

zoltán gerendy – –

1103 Budapest, Kőér utca 2/A (1) 235-3010 office@bdo.hu

SASK Gazdasági Tanácsadó Kft. (100) –

Csaba molnár – –

2900 Komárom, Erdélyi utca 4.

(34) 540-770 bilance@bilance.hu

(100) –

szilvia sarkadi-nagy, ildikó miszori, lászló killik – –

1146 Budapest, Zichy Géza utca 5.

(1) 422-1339 info@bpokft.hu

Éva Komonyi (100) –

éva komonyi – –

1139 Budapest, Váci út 95.

(1) 788-7920 consider@consider.hu

Individuals (100) –

Ferenc kölber – –

1124 Budapest, Jagelló út 14.

(1) 225-3490 info@crowe.hu

Individuals (3) Mazars S.A. (97)

philippe michalak budzan, zoltán lászló benedek – –

1123 Budapest, Nagyenyed utca 8–14.

(1) 429-3010 mazars@mazars.hu

– Rödl International GmbH (100)

Roland Felkai – –

1062 Budapest, Andrássy út 121.

(1) 814-9800 budapest@roedl.com

www.audit.labtech.hu

22

AdószAbászAt könyvelő, béRszámFejtő, és AdótAnáCsAdó kFt.

tAx Consulting

RevieW oF bookkeeping WoRk peRFoRmed by A gRoup entity AbRoAd (ssC)

18

FinAnCiAl Consulting

totAl net Revenue in 2020 (HuF mln)

AddRess pHone emAil

mAjoR Clients in 2020

pAyRoll ACCounting

CompAny Website

net Revenue FRom ACCounting in 2020 (HuF mln)

otHeR seRviCes

RAnk

speCiAl ACCounting seRviCes

Special Report | 19

✓ ✓ ✓ ✓

–

✓

–

www.adoszabaszat.hu

23

HypeRCoRtex zRt.

24

CAldeRA számviteli, pénzügyi és tAnáCsAdó kFt.

www.hypercortex.hu

39

45

✓

✓

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–

–

www.caldera.hu

ARkConsulting kFt. NR

–

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–

–

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–

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bAlAnCe Adó- és ügyviteli kFt.

A

A

–

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–

–

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A

✓ ✓

–

bdo mAgyARoRszág (könyvelés, béRszámFejtés)

A

A

–

–

–

–

–

–

A

–

–

bilAnCe AdótAnáCsAdó és könyvelő kFt.

A

A

–

✓

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–

–

✓

A

✓

–

www.arkconsulting.hu

NR

✓ ✓ ✓

www.balancekft.hu

NR

www.bdo.hu

NR

www.bilance.hu

bpo Audit tAx NR

A

–

✓

✓

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✓

A

✓ ✓ ✓ ✓ ✓ ✓ ✓

ConsideR könyvelő iRodA kFt.

A

A

–

✓

✓

–

–

✓

A

✓ ✓ ✓ ✓

–

–

–

–

CRoWe Fst Consulting kFt.

A

A

–

✓

✓

–

✓

✓

A

✓ ✓ ✓

–

–

–

✓

–

www.mgi-bpo.hu

NR

–

A

www.consider.hu

NR

www.crowe.hu

mAzARs könyvszAkéRtő és NR tAnáCsAdói kFt.

A

A

–

–

✓

–

✓

✓

A

✓ ✓ ✓

–

✓

–

✓

–

A

1,729

✓

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–

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A

✓ ✓ ✓ ✓ ✓

–

✓

–

www.mazars.hu

NR

Rödl & pARtneR mAgyARoRszág www.roedl.hu

A

2006

A

1990

A

1989

A

1990

A

2001

A

2008

A

2002

A

1991

A

1991

20 | 3

Special Report

www.bbj.hu

Budapest Business Journal | February 26 – March 11, 2021

Tax Consultants audiTing

aCCounTing

payRoll aCCounTing

finanCial ConsulTing

HR ConsulTing

Real esTaTe ConsulTing

oWneRsHip (%) HungaRian non-HungaRian

Top loCal exeCuTive Cfo maRkeTing diReCToR

addRess pHone email

exCise Tax

A

adveRTising Tax

683

indusTRy oR speCial Taxes

2,692

Tax and finanCial due dilligenCe

1,255

TRansfeR pRiCing

1,317

CoRpoRaTe Tax

1,314

oTHeR seRviCes

piT and soCial seCuRiTy

28,745

Tax ConsulTing RelaTed seRviCes

vaT

15,514(1)

yeaR esTablisHed no. of full-Time employees on Jan. 1, 2020

ToTal neT Revenue in 2020 (Huf mln)

Company WebsiTe

neT Revenue fRom Tax ConsulTing in 2020 (Huf mln)

Rank

Ranked by net revenue from tax consulting in 2020 (HUF mln)

✓

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Rezső Rózsai (A), István Henye (A) –

Rezső Rózsai, gábor beer William Curley Gabriella Liptay

1134 Budapest, Váci út 31.

(1) 887-7100 info@kpmg.hu

2009 47

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–

–

–

–

–

–

Individuals (100) –

károly Radnai – Attila Götz

1124 Budapest, Csörsz utca 43.

(1) 920-6800 info@hu.Andersen.com

2001 128

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–

(100) –

zsolt kalocsai Klára Vaitz Szilvia Morvay

1139 Budapest, Váci út 99–105.

(1) 886-3700 info@rsm.hu

✓

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–

–

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– LeitnerLeitner International GmbH (100)

Judit Jancsa-pék, nóra Tünde Rácz – –

1027 Budapest, Kapás utca 6–12.

(1) 279-2930 budapest.office@ leitnerleitner.com

levente Torma, ákos istván Csajbók Ákos István Csajbók Gabriella Takács-Jenei

1124 Budapest, Csörsz utca 49-51.

(1) 510-1100 taxconsulting@ dlapiper.com

kpmg magyaRoRszág www.kpmg.hu 1

1989 A

andeRsen adóTanáCsadó zRT. https://hu.andersen.com 2

3

Rsm HungaRy zRT.

4

leiTneR + leiTneR Tax kfT.

www.rsm.hu

www.leitnerleitner.com

5

dla pipeR adóTanáCsadó kfT.

6

WTs klienT adóTanáCsadó kfT.

–

2006 A

2010

–

–

–

–

–

DLA Piper Posztl, Nemescsói, Györfi-Tóth és Társai Ügyvédi Iroda (100) –

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–

1998 25

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–

–

–

–

–

–

Individuals (100) –

zoltán lambert, Tamás gyányi Andrea Pásztor Esther Lausek

1143 Budapest, Stefánia út 101–103.

(1) 887-3700 info@wtsklient.hu

762

1959 54

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–

–

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–

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–

Individuals (100) –

ákos balogh Enikő Kovács Dániel Burján

1135 Budapest, Mór utca 2–4.

(1) 237-9800 saldo@saldo.hu

324

324

2012 6

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–

–

Tamás Verbai (67), individuals (33) –

Tamás verbai Péter Juhász –

1139 Budapest, Hajdú utca 27.

(1) 700-1470 info@hidadoszakerto.hu

210

275

1996 6

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–

–

–

–

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–

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–

István Nemecz (30) ACCACE Holding BPO (70)

istván nemecz Katalin Berényi Nemeczné Norbert Nagy

1132 Budapest, Váci út 30.

(1) 412-3530 nagy.norbert@accace.com

579

2001 33

✓

Gyöngyi Ferencz (A), Erik Thurn (A), Andrea Kuntner (A) –

andrea kuntner – Krisztina Csákics

1134 Budapest, Váci út 33.

(1) 225-7575 vgd.budapest@vgd.hu

–

Péter Bergmann (50), Péterné Bergmann (50) –

péter bergmann József Tamás Kiss, Sándor Soltész Mónika Tóth-Balog

1138 Budapest, Váci út 186.

(20) 745-7100 bergmann@bergmann.hu

–

Finacont Holding Befektetési Kft. (100) –

györgy pintér, ádám menich, gábor Jankó, gábor kis, brigitta T. burián – –

1062 Budapest, Aradi utca 16.

II. emelet 2.

(1) 345-0092 finacont@finacont.com

651

651

508

534

471

www.wtsklient.hu

A

saldo pénzügyi TanáCsadó és infoRmaTikai zRT. 7

www.saldo.hu

Híd adószakéRTő és pénzügyi TanáCsadó zRT. www.hidadoszakerto.hu 8

9

aCCaCe HungaRy kfT. www.accace.com

vgd HungaRy kfT. www.vgd.hu

209

10

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–

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beRgmann könyvszakéRTő és adóTanáCsadó kfT. www.bergmann.hu

103

11

223

1995 A

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–

–

–

–

finaConT szolgálTaTó és TanáCsadó kfT. www.finacont.com 12

102

1,061

2002 114

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–

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3

www.bbj.hu

yeaR esTablisHed no. of full-Time employees on Jan. 1, 2020

piT and soCial seCuRiTy

CoRpoRaTe Tax

TRansfeR pRiCing

Tax and finanCial due dilligenCe

indusTRy oR speCial Taxes

adveRTising Tax

exCise Tax

audiTing

aCCounTing

payRoll aCCounTing

finanCial ConsulTing

HR ConsulTing

Real esTaTe ConsulTing

oWneRsHip (%) HungaRian non-HungaRian

Top loCal exeCuTive Cfo maRkeTing diReCToR

addRess pHone email

vaT

pmx ConsulTing gRoup magyaRoRszág adóTanáCsadó kfT.

oTHeR seRviCes

ToTal neT Revenue in 2020 (Huf mln)

13

Company WebsiTe

Tax ConsulTing RelaTed seRviCes

Special Report | 21

neT Revenue fRom Tax ConsulTing in 2020 (Huf mln)

Rank

Budapest Business Journal | February 26 – March 11, 2021

90

90

1994 5

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–

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–

–

–

–

–

–

–

–

Individuals (100) –

János szalai – –

1066 Budapest, Mozsár utca 16.

(1) 272-7885 info@pmxconsulting.hu

85

851

1998 68

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✓

Individuals (100) –

Julianna varga – –

1023 Budapest, Bécsi út 3-5.

(96) 525-030 mbgyor@molnar-banyai.hu

–

Libra Szoftver Zrt. (98.60), Andrea Radocza Weszelovszkyné (1.40) –

györgy kozma Andrea Darázs István Rajkai

1113 Budapest, Karolina út 65.

(1) 460-7401 m-audit@m-audit.hu

–

Zsolt Ruszin (50), Veronika Antal Ruszinné (50) –

zsolt Ruszin – –

1097 Budapest, Könyves Kálmán körút 12–14.

(1) 238-8023 fairconto@fairconto.hu

–

József Láng (A),ABT Treuhand Vagyonkezelő Zrt. (A) ABT Finanzgesellschaft AG (A)

József láng – –

1037 Budapest, Montevideo utca 3/A (1) 430-3400 abt@abt.hu

zsolt ilyés, krisztina garas kovácsné Krisztina Garas Kovácsné –

1064 Budapest, Izabella utca 66.

(70) 380-3970 garas.krisztina@ arkconsulting.hu

www.pmxconsulting.hu

14

15

molnáR és bányai kfT. www.molnar-banyai.hu

m-audiT könyvvizsgáló, feJleszTő és szolgálTaTó kfT.

65

92

1990 6

218

1995 7

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–

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–

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–

–

–

–

www.m-audit.hu

16

NR

faiRConTo zRT. www.fairconto.hu

abT HungáRia TanáCsadó kfT. www.abt.hu

34

A

A

aRkConsulTing kfT. NR

A

A

bdo magyaRoRszág (adóTanáCsadás)

A

A

A

A

Colling könyvelő és TanáCsadó kfT.

A

165

NR

CRoWe fsT ConsulTing kfT.

A

A

NR

deloiTTe magyaRoRszág

A

A

NR

ey magyaRoRszág

A

A

NR

foRbis adóTanáCsadó kfT.

A

A

www.arkconsulting.hu

NR

www.bdo.hu

bpo audiT Tax NR www.mgi-bpo.hu

NR

www.colling.hu

www.crowe.hu

www.deloitte.hu

www.ey.com/hu_hu

www.forbis.hu

NR

gRanT THoRnTon HungaRy

A

2,060

NR

mazaRs könyvszakéRTő és TanáCsadói kfT.

A

A

A

A

A

1,729

www.grantthornton.hu

www.mazars.hu

1993 A

2006 A

1989 A

2001

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A

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A

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A

–

A

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A

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A

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A

–

A

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–

–

–

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–

–

–

–

–

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–

–

ARK INVEST Magyarország Kft. (87), individuals (13) –

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(100) –

zoltán gerendy, ilona orbók – –

1103 Budapest, Kőér utca 2/A (1) 235-3010 office@bdo.hu

szilvia sarkadi-nagy, ildikó miszori, lászló killik – –

1146 Budapest, Zichy Géza utca 5.

(1) 422-1339 info@bpokft.hu

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–

–

–

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–

–

(100) –

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–

–

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–

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–

Andrea Butkovics (50), Tünde Gulyás (50) –

andrea butkovics – Melinda Németh

1134 Budapest, Váci út 49.

(1) 452-6900 office@colling.hu

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–

–

–

–

✓

✓

✓

–

–

Individuals (100) –

ferenc kölber – –

1124 Budapest, Jagelló út 14.

(1) 225-3490 info@crowe.hu

1990(2) 785

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✓

✓

✓

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✓

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–

–

✓

✓

–

– (100)

andrás fülöp Gerard Lucey Csanád Bánhegyi

1068 Budapest, Dózsa György út 84/C (1) 428-6800 deloitteinhungary@ deloittece.com

1989 745

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✓

✓

✓

✓

✓

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✓

✓

– Ernst & Young Center Cluster Limited (100)

botond Rencz Attila Győri Ágnes Pellion

1132 Budapest, Váci út 20.

(1) 451-8100 mailbox.ey@hu.ey.com

✓

–

–

–

–

–

–

–

–

–

–

–

–

–

Individuals (100) –

gábor dénes – –

1119 Budapest, Pajkos utca 24.

(1) 382-0106 tax@forbis.hu

Waltraud körbler, ágoston Jakab, Judit gittinger, gábor szarka – Mónika Marczin

1134 Budapest, Dévai utca 26–28.

(1) 455-2000 office@hu.gt.com

A

1992 14

2002 A

2005 A

1991 100

1991 A

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✓

✓

AAH Management Kft. (A), SmartCorpFin Pénzügyi Tanácsadó Kft. (A) IB Interbilanz Holding Wirtschaftsprüfung GmbH (A)

✓

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✓

–

–

Individuals (3) Mazars S.A. (97)

philippe michalak budzan, zoltán lászló benedek – –

1123 Budapest, Nagyenyed utca 8–14.

(1) 429-3010 mazars@mazars.hu

✓

✓

✓

✓

✓

✓

✓

✓

✓

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– PwC CEE (100)

Tamás lőcsei, lászló deák Tamás Pál Borbála Palotai

1055 Budapest, Bajcsy-Zsilinszky út 78.

(1) 461-9100 info@hu.pwc.com

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– Rödl International GmbH (100)

Roland felkai – –

1062 Budapest, Andrássy út 121.

(1) 814-9800 budapest@roedl.com

pWC magyaRoRszág www.pwc.hu

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Rödl & paRTneR magyaRoRszág www.roedl.hu

1989 A

1991 A

noTes (1) Including KPMG Global Services Hungary Kft. (KGSH) data. (2) Establishment year of Deloitte Üzletviteli és Vezetési Tanácsadó Zrt.

4

www.bbj.hu

Budapest Business Journal | February 26 – March 11, 2021

Socialite Introducing 3 Secretly Influential Hungarians Spend enough time in this country and Hungarian pride in famous people with Magyar origins begins to rub off on you. I’ve gone way beyond being satisfied by announcing that Albert Szent-Györgyi, who discovered ascorbic acid or vitamin C, did so in Szeged in the 1930s, or that Drew Barrymore’s mother was Hungarian, as was Goldie Hawn’s.

DAVID HOLZER

Recently, I’ve made three deeply satisfying discoveries concerning the Hungarian origins of the unlikeliest of characters: American painter Georgia O’Keeffe, writer Alexander Lenard and architect Antti Lovag, only the last of whom has a hint of the Hungarian in that name. Each of these influenced their chosen art form in a surprising way.

O’Keeffe is best known for her paintings of giant flowers, landscapes of New Mexico where she lived for many years and New York skyscrapers. She was born in Canada in 1887, one of seven children. Her father was of Irish descent (hence the surname), but her grandfather was George Victor Totto, a Hungarian count who arrived in America in 1848.

I could find out nothing about Totto of any great interest other than the fact that he was born in 1820, the year an 80-ton sperm whale attacked and sunk a whaling ship from Nantucket, Massachusetts 2,000 miles off the cost of South America. This story partly inspired Herman Melville’s classic novel Moby-Dick. Melville, however, had no Magyar blood.

Although she lived to be almost 100, O’Keeffe was a legendary figure and inspiration to women as early as the 1920s. This was as much for her free spirit as it was for art, which embraced abstraction along with the flower paintings and landscapes. An

Architectural detail of the Palais Bulles with its Mediterranean panorama close to Theoule-sur-Mer, France. Photo by Juergen Wackenhut / Shutterstock.com exhibition of photographs of O’Keeffe by her lover (and future husband) photographer Alfred Stieglitz in 1921 caused a sensation because many of the photographs were nudes.

One of the portraits of O’Keeffe by Stieglitz shows her gazing into the camera. Her eyes are intelligent and slightly hooded. Her nose is heroic.

She looks Hungarian.

No Choice

In the foreword to Lenard’s The Valley of the Latin Bear, one of the books that followed the translation of Winnie The Pooh, the poet and author Robert Graves described Lenard as “like most educated Hungarians of his generation, a polyglot; writes a very lucid, unaffected English, speaks it without any discernible accent.

He has a well-knit body, a quiet laugh, an iron-gray curly beard, and two dedicated professions: medicine and poetry.”

While Georgia O’Keeffe’s grandfather Eclectic Hint had sailed to America to seek his fortune, I was alerted to my last discovery by my Hungarian partner whose Instagram Alexander Lenard, born in Budapest feed is extraordinarily eclectic. She in 1910, had no choice but to leave found out that the architect of the Hungary. He was studying medicine “Palais Bulles” or “Bubble Palace,” Pierre in Vienna in 1938 when the German Cardin’s home in the south of France Anschluss forced him to leave Austria for Italy. Lenard was Jewish and heading which, after his death on December 29 last year, went on the market priced back to Budapest wasn’t an option. at around USD 390 million, was In Italy, Lenard traded his medical Hungarian architect Antti Lovag, born knowledge in exchange for food and in Budapest in 1920. shelter while spending his time in the Lovag, known for his organic Vatican library in Rome reading Latin. architecture, arrived in France in the late He read so much that Latin became 1940s. Working with Jacques Couëlle second nature to him. in the 1960s, he was exposed to organic In 1951, Lenard emigrated to Brazil architecture. He took this to extraordinary with his Italian wife and settled in the heights with Maison Bernard (later Dona Irma valley, in the municipality of renamed Palais Bulles) in Théole sur Mer, Santa Catarina. The daughter of a local on the south French coast, built for the resident who Lenard was tutoring in Latin complained that she had nothing to industrialist Pierre Bernard.

The mansion, begun by Lovag in read, spurring Lenard to translate Winnie 1975, took 14 years to build. According The Pooh into Latin. Lenard worked on to Wikipedia, it was sold it to Pierre his translation for seven years. Unable Cardin in 1991, two years after to find a publisher, he printed his book completion, following Bernard’s death. privately. Its reputation spread by word Cardin himself never lived in the house, of mouth until it became a bestseller.

preferring a residence nearby, but he did use it for entertaining.

Quoted in “Architectural Digest,” Hugh Wade-Jones, managing director of Enness Global Mortgages, says that Palais Bulles faces an uncertain future.

“The Palais Bulles is undoubtedly an iconic piece of real estate; however, the predominant opinion is that the property is a bit of a white elephant,” he said. “It’s architecturally incredible, but largely impractical for residential living and would require a huge amount of work to remedy that.”

Lovag himself didn’t appear to care about the practicalities of designing homes for clients. He said, “I have three conditions I’m obliged to respect: I don’t know what it’s going to look like, I don’t know when it’s going to be finished, and I don’t know how much it’s going to cost.”

Despite the almost absurd use of bubble shapes at Palais Bulles, Lovag was deadly serious. He was trying to overturn the tyranny of the cube in architecture, arguing that “the circle structures the way human life is carried out.”

I began this article as a celebration of the simple fact that O’Keeffe, Lenard and Lovag were Hungarian and made their mark on the world beyond this country’s borders. Thinking about it more deeply, I realize that all three were true artists whose work was more about artistic expression than anything else. This adds up to a certain kind of search for purity and freedom from material constraints that, for me, is an essential part of the Hungarian émigré spirit.

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www.bbj.hu

Budapest Business Journal | February 26 – March 11, 2021

Socialite | 23

Onward and Upward for the Rejuvenated Olaszrizling The second month of the year on the local wine scene is usually notable for the Furmint February tasting held in Budapest, and Olaszrizling Szerintünk, down in Csopak, on the northern shores of Lake Balaton. Two small blind “tribute” tastings held by the Bormedence Borklub suggests that “ordinary” Olaszrizling and “fancy” Furmint could be a lot closer in terms of quality than many might think.

ROBERT SMYTH

Known in Hungary only for its ability to make vin ordinaire until relatively recently, Olaszrizling is proving itself to be a fine articulator of terroir, producing rich and complex wines that exude a strong sense of place.

The top five of the Olaszrizling blind tasting revealed some stunners worthy of taking their place on the same table as fine Furmints, with more Olaszrizlings gaining higher points than the similarly priced Furmints in its tasting.

The number one ranked wine in the Olaszrizling tasting was something of a museum piece; Csörnyeföld Olaszrizling 2007 from the Bussay Pince in Zala in southwest Hungary, close to the Croatian and Slovenian borders.

Despite its considerable age, it still revealed a youthful light color and surprising vitality, with complex aromas and intense flavors of nutmeg, vanilla and honey, with the oak very well integrated, and the acidity still sufficiently angular to cut through the richness.

This full-bodied wine, which speaks of its warm southern birthplace, showed the kind of longevity that most Furmint’s can only dream about, but it is unfortunately no longer on the market. This one was

was from the barely known Fekete Pince, a bijou operation that makes big wines.

Close to Csopak, Balatonfüred’s Figula winery deserves a nod for its work with Olaszrizling, although its wines were not included in this blind tasting.

The entry-level Olaszrizling from Figula (HUF 2,090 from Bortársaság) is a fine and bargain introduction to the grape, before setting off to sip the more intense single vineyard offerings that can show striking differences.

For example, you can experience the warmth of Lake Balaton in Sáfrán (HUF 4,350 for the 2019) from the Sáfránkert vineyard, just a couple of hundred meters from the lake (between Csopak and Paloznak) with all its reflected heat; and then the cool, floral, airy character in the most northern Sóskút (HUF 3,750 for the 2018) vineyard bottling.

made by the late László Bussay, an influential winemaker-cum-doctor.

The wines are now made by his eldest daughter, Dóra Bussay, in tandem with her husband, the highly talented Somló vintner Tamás Kis, who makes his own wines under the name of Somló Vándor.

Side-by-side

The second placed wine was from the volcanic basalt of Somló, Hungary’s smallest wine region, where Olaszrizling and Furmint have long grown side by side, with the former every bit the equal of the latter.

Imre Györgykovács Nagy-Somlói Olaszrizling 2018 beautifully captures the essence of the hot 2018 vintage, with exotic notes of eastern spices, medicinal herbs, juicy pineapple and a honeyed, oily palate.

It contrasted nicely with the more restrained but also very impressive 2017, which took fifth place and exuded

A Grape of Many Names

a salty, briny minerality. Both appear have sold out from Bortársaság’s website, although there are still a few examples available in its shops; the 2017 from the Budagyöngye and the 2018 from the Pozsonyi utca stores.

Numbers three and four came from Csopak, a source of consistent and concentrated Olaszrizlings. Number three, Lőczedombi Olaszrizling 2018 (HUF 4,750 from Bortársaság) was from the well-known Jásdi Pince, a pioneer of single-vineyard Olaszrizling.

The Lőczedomb vineyard is rich in Csopak’s trademark red Permian sandstone. István Jásdi’s early claim that Olaszrizling can convey the characteristics of places of growth as well as Furmint once appeared a little lofty, but no one is laughing now.

The number four, Ötsoros Olaszrizling 2017 (HUF 3,690 from demijohn.hu),

Czech Republic and Slovakia it’s Ryzlink vlašský. It also pops up in The grape most likely originates Romania as Riesling Italian. from northern Italy (Olasz meaning Perhaps confusingly, Olaszrizling Italian in Hungarian), where it can is not related to the German Riesling be found as Riesling Italico. The grape (which is known as Rajnai grape sometimes keeps its Austrian rizling in Hungarian), although moniker of Welschriesling in Alto the two often feature together in Adige (Südtirol or South Tyrol). blends around Lake Balaton, such This essentially pan-Central as in Gilvesy Pincészet’s light but European grape also makes some fine great value Bohém (the 2019 is HUF wines in northern Croatia as Graševina, 1,950 from Bortársaság) and the and is that country’s most planted more concentrated, organic and grape variety. I thought Krauthaker’s spontaneously fermented St. George entry-level Graševina 2019 from (which also includes some Furmint), Kutyevo showed nice varietal notes both from Szent György Hill. of crunchy apple and pear, with The latter wine I have yet to try, linear acidity, at the Olaszrizling but I was recently bowled over by tasting, though was somewhat the cellar’s Rajnai rizling 2019 (HUF underwhelming for other participants. 2,550 from Bortársaság), which is In Slovenia, Olaszrizling goes by also organic, and follows up the the name Laški Rizling, while in the promise of the fruity and floral nose

The Lőczedomb vineyard is rich in Csopak’s trademark red Permian sandstone.

István Jásdi’s early claim that Olaszrizling can convey the characteristics of places of growth as well as Furmint once appeared a little lofty, but no one is laughing now.

Olaszrizling is a highly versatile grape that can make not only dry still wine that ranges from the light, fresh and zesty to the rich and concentrated, but is also a key component in botrytized sweet wine, such as the TBA (Trockenbeerenauslese) wines of Austria’s Burgenland, which rival Tokaj Aszú.

In Austria, where the Olaszrizling grape is called Welschriesling, it is used to make sparkling wine in the Weinviertel. It is also used in Brazil to make sparkling wine.

on the similarly substantial palate.

It is both varietally pure and quite rich for a wine made only in the tank, and was part spontaneously fermented and part fermented with organic yeast. It comes from eight different Riesling clones from the Váradi vineyard, which lies at the foot of Szent György Hill and is composed of weathered basalt.

It is from this southeast-facing vineyard that the number two Furmint came at the Bormedence blind tasting; Váradi Fumint 2018 (HUF 4,450) saw off quite a few renowned names from Tokaj and was surpassed only by a fine 2016 Furmint from the virtually unknown Rudnok Pincészet, from the Tokaj enclave of Olaszliska, which has sadly since sold out (not surprising, as it was a bargain at HUF 1,200 a bottle.)

, T R A T S H S E R F

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