Budapest Business Journal 3104

After 7 Years’ Service, Dutcham Elects new Chair

Katinka Zinnemers has became the new  chair of the Netherlands-Hungarian Chamber of Commerce, succeeding Lóránt Varga, who held the post for seven years. The pair reflect on the past and offer insights into plans for the coming years.  7

Birthrate Rising, but Demographics Look bad for Hungary

Aging is just one of the deteriorating demographic elements in Hungary. Combined with a slow recovery, it results in significant changes in Hungarian society and working habits.  9

SOCIALITE

Müpa at the Heart of Culture in Budapest

Landing on the Müpa Budapest website, David Holzer was struck by how many of the events were sold out, particularly as we’re talking pretty high culture. He interviews Janina Szomolányi, director of festival operations at what was once called the Palace of Arts.  21

Fewer Taxes and More Digitization

Hungary Slips into Technical Recession

Hungary’s economic performance in Q4 of 2022 diminished by 0.4% compared to the previous three months, marking the second quarter of negative growth, the financial dictionary definition of a technical recession. For the whole year, GDP growth was 4.6%  3

Leading actors from the tax and accountancy field such as András Szalai of Process Solutions (pictured) give us their take on the things to watch for in 2023, the trends likely to shape the future, and what they wish to see changed 10

Vodafone Takeover Boosts 2022 M&A Deal Value in Hungary

to USD 3.2 bln

Against the global trend, the value of M&A deals in Hungary and in Central and Eastern Europe held firm in 2022, although increasing regulatory requirements are likely to dampen potential growth.

EDITOR-IN-CHIEF: Robin Marshall

EDITORIAL CONTRIBUTORS: Balázs Barabás, Zsófia Czifra, Kester Eddy, Bence Gaál, Gergely Herpai, David Holzer, Christian Keszthelyi, Gary J. Morrell, Nicholas Pongratz, Robert Smyth.

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The Budapest Business Journal, HU ISSN 1216-7304, is published bi-weekly on Friday, registration No. 0109069462. It is distributed by HungaroPress. Reproduction or use without permission of editorial or graphic content in any manner is prohibited. ©2017 BUSINESS MEDIA SERVICES LLC with all rights reserved.

LEARNING THE LANGUAGE OF BUSINESS

There are many issues piling up in the average CEO’s intray, whether it is the energy crisis, supply chain bottlenecks, rampant inflation, or the war next door. You could add digitization and decarbonization to the mix and know there were still more challenges to come. I have never been a CEO, so I can’t say I have hands-on experience with the particular skillsets needed to keep multiple plates spinning while plotting a pathway to a net-zero future whilst also pleasing the various stakeholders and their disparate demands and expectations. Chapeau, as the French might say.

One concern I have not yet mentioned, but which C-suiters bring up repeatedly, is sourcing workforce. Hungary enjoys a welcome dilemma in having near full employment. It never openly says so, but I imagine one reason the government has switched focus from the quantity of jobs investors create to the quality of those positions is that it worries about numbers. For all the talk of reserves in the labor market, from getting young mothers back to work, to upgrading those on public work schemes, to overcoming mobility issues, I find it hard to credit that these will be workers with the right skill sets, at least in big enough numbers to make a difference.

Perhaps that is why so many companies have decided to get involved with the upcoming generations, whether as part of the German dual-education system or forging direct links with universities nationwide. I was struck by how many of the players we interviewed for our Market Talk piece in this issue complained about the lack of language skills.

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• Independence. The BBJ’s journalism is dedicated to reporting fact, not politics, and isn’t reliant on advertising from the government of the day, whoever that might be.

• Community Building. Whether it is the Budapest Business Journal itself, the Expat CEO award, the Expat CEO gala, the Top Expat CEOs in Hungary publication, or the new Expat CEO Boardroom meeting, we are serious about doing our part to bind this community together.

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There is a discordance at play here. So many business service centers list language ability as one of the reasons for choosing Hungary as a location. In Budapest especially, it is not hard to find graduates with excellent language skills. And yet, market-leading education portal eduline.hu ran a piece at the beginning of this

month, citing data from the Language Examination Accreditation Department of the Education Office, stating that fewer than 83,000 people took a language exam last year, and only 60,000 obtained a certificate. According to eduline, between 2013 and 2019, 120,000-135,000 people took a language exam every year. By 2020, that number had dropped to just over 86,000. During COVID, the government ordered a language exam amnesty for 2021 and 2022, so even those who did not obtain the necessary language exam certificate received their diplomas (previously, those who passed their university exams but not the language requirement were not awarded a graduation certificate). However, the number of language exam takers has not returned to its previous level. In 2021, 85,504 passed, and only 82,836 in 2022. Our Market Talk panelists were not dismissive of the Hungarian education system. One talked of “excellent theoretical knowledge,” but the language deficit is one they have to expend their own resources on fixing. Aldi International IT Services Kft., which provides IT support to more than 4,000 Aldi stores and 55 warehouses and offices in Europe from its bases in Budapest and Pécs, has established the Aldi Talent Campus to give applicants the proper language and IT training. It is perhaps not the best guide to what is happening today because it is so backward-looking, but this month Eurostat, the EU’s statistical body, released a comparative study of language skills among the member states in 2016. Some 57.6% of the adult workingage population of Hungary reported that they did not know any foreign language. Only Romania (64.2%) and the United Kingdom (65.4%) were worse. Concerns around the language skills of Hungarian graduates are not new, but they surely need addressing.

Robin Marshall Editor-in-chief

Artist Judit Hamerli in the recently restored former cultural center in Veszprém (115 km southwest of Budapest). As part of the framework of the Veszprém-Balaton 2023 European Capital of Culture program for 2023, 26 rooms were renovated in the 1,100 sqm of the institution’s office wing, creating a creative space for musicians and visual artists. The black and white image shows painter Tivadar Zemplényi (1864-1917), known for his realism, in 1914 in Hungary.

Photo by MTI / Tibor Illyés

Photo by Fortepan / Lechner heritage

1News • macroscope

Hungary Slips into Technical Recession

Economic performance in the fourth quarter of 2022 diminished by 0.4% compared to the previous three months, marking the second quarter of negative growth, the financial dictionary definition of a technical recession. For the whole year, however, Hungary’s gross domestic product growth was a relatively high 4.6%.

Hungary’s GDP increased by 0.4% according to raw data and by 0.9% according to seasonally and calendaradjusted and reconciled data in the fourth quarter of 2022 compared to the corresponding period of the previous year, the latest data published by the Central Statistical Office (KSH) shows.

Compared to Q3 2022, the economic performance diminished by 0.4% according to seasonally and calendar-adjusted and reconciled data. For the full year of

2022,

the volume of GDP grew by 4.6%. While many economic sectors contributed to the year-on-year increase, industry and market services did the most part. There was significant growth compared to a year earlier, especially in the manufacturing of motor vehicles, trailers, and semi-trailers, as well as electrical equipment, within industry. Among market services, the expansion was predominately in real estate activities, as well as transportation and storage. A considerable downturn in agriculture slowed the overall increase.

Last year’s high data can be attributed to three significant factors: the vigorous recovery from the coronavirus crisis and the strong election spending in the first half of the year persisted; also, the Hungarian economy started 2022 with a higher output level than the average performance of 2021 (the so-called statistical carry-over effect). These two driving forces were restrained in the second half of the year by the ever more potent effects of the energy crisis and the disappearance of the impact of the government’s pre-election spending.

Below Average

Compared to the European Union, Hungary’s GDP growth was below the EU average in the fourth quarter of the last year. Indeed, for that period, the Hungarian economy was the fifth worst-performing in the EU, according to the latest data from Eurostat. However low down the league table it was, though, it still performed much better than the two worst-performing countries (Lithuania, with minus 1.7, and Poland at a minus 2.4 “growth rate” in Q4).

Compared to the same period of the previous year, Hungarian growth was the sixth worst.

While the performance of the economy is decreasing again, the extent and intensity of the contraction cannot be compared with the pandemic period (in 2020, the economy

shrank by 4.8% on an annual basis). Nevertheless, the country is thus entering a technical recession for the second time in three years.

The outlook is not so shiny either, according to some analysts. Fitch Solutions (part of Fitch Ratings Inc.) expects a decline of 1%

for the whole year in 2023. The rationale for this negative assumption is that while the growth in 2022, especially in the first half, was boosted by the massive expansion of monetary and fiscal incentives, this year, a significant reduction in government spending is likely. Especially since, in its opinion, Hungary’s EU subsidies will continue to be withheld by the European Commission. While Fitch paints a rather dark picture, others are more optimistic. S&P Global Ratings (previously Standard & Poor’s) predicts 0.3% annual GDP growth. The European Commission expects a 0.6% increase for 2023, as stated in its winter forecast. The Hungarian government is the most bullish and foresees a 1.5 expansion.

Grounds for Optimism

As a result of the current relatively lower energy prices (which have fallen significantly compared to last year), sectors that are proving to be more resilient than expected,

the better-than-expected European outlook, the recovery of supply chains, and the reopening of the Chinese economy after the abandonment of its zero-COVID policy, the turning point in growth may occur sooner than previously thought. Thus, the slowdown in the economy may also be milder than current expectations, according to Magyar Bankholding’s senior analyst Gergely Suppan.

It is questionable whether the domestic economy can leave the technical recession behind as quickly as by the end of the first quarter, but it may significantly accelerate from the second quarter on due to “hibernating” businesses reopening following the end of the heating season, he says.

In the second half of the year, real wages are expected to rise again as a result of falling inflation. From the end of the year, investments could pick up again due to the expected falling interest rates. That and the new industrial capacities that will be created during the year could also support growth.

“According to our estimates, this year, the economy must deal with a -0.5% carryover effect. Nevertheless, the 0.7% full-year growth can be achieved. Currently, we see a realistic chance that GDP will shrink on a quarterly basis in the first quarter of 2023 on domestic demand, after which the economic recovery and catch-up to the pre-crisis GDP level can begin.”

Next year’s growth can also be supported if the extreme drought of 2022 is not repeated, meaning agriculture could also make a significant contribution.

“Due to the improved outlook, we can slightly improve our growth forecast to

0.8%

this year,” Suppan says. ING Bank is in similar territory with its own analysis.

“As we have no high-frequency data releases yet for early 2023, we maintain our 0.7% GDP forecast for 2023 unchanged,” says analyst Péter Virovácz. “But to achieve that, the Hungarian economy must produce significant growth within the year,” he cautions.

“According to our estimates, this year, the economy must deal with a -0.5% carry-over effect. Nevertheless, the 0.7% full-year growth can be achieved. Currently, we see a realistic chance that GDP will shrink on a quarterly basis in the first quarter of 2023 on domestic demand, after which the economic recovery and catch-up to the pre-crisis GDP level can begin,” Virovácz adds.

ZSÓFIA CZIFRA

War, Inflation Make 2023 ‘Most Dangerous Year’

(known to Hungarians as Beregszász), Transcarpathia, from which donations went to every region of the country.

Commitment Reaffirmed

Since Hungary lacks the means to end the war outright, which Orbán said would be most desirable, he argued the best way to protect the country is to stay out of the war. However, the PM claimed this would be difficult, given Hungary’s membership in NATO and the European Union, both of which he said are intent on remaining belligerent. Despite its commitments to these supranational bodies, which unconditionally support Ukraine’s war effort, Orbán insisted that the conflict is not Hungary’s but rather “between the troops of two Slavic countries.”

But within this context, Orbán acknowledged “Ukraine’s right to

self-defense, to fight against external aggression,” which Russia instigated with the invasion it launched one year ago today. Although the Prime Minister reiterated that Hungary would not deliver weapons to its beleaguered neighbor, it had supported Ukraine “with the largest humanitarian aid operation in our country’s history.”

In addition to Hungary taking in over one million refugees from Ukraine, the Hungarian Interchurch Aid organization has delivered more than HUF 6 billion worth of aid to the country over the past year, according to László Lehel, the president and director of the organization. At a roundtable discussion on February 21, organized to mark the upcoming one-year anniversary of

BUDAPEST LNG SUMMIT

REGION’S LEADING GAS CONFERENCE

the outbreak of the war, Lehel said that the aid, about half of which was government support, had assisted more than 245,000 people.

Although the organization could only deliver food via the back of trucks during the first phase of the war, Lehel recalled that it soon established a warehouse in Berehove

Earlier, Orbán had reaffirmed Hungary’s commitment to providing Ukraine with humanitarian aid during a European Union summit in Brussels on February 9, in which his Greek, Croatian and Slovenian counterparts, along with the Austrian Chancellor and the Bulgarian and Cypriot presidents, met with Ukraine’s President Volodymyr Zelensky.

“Hearing the Ukrainian president, it’s obvious this war is dragging on; we can’t count on it ending soon,” Orbán said. “As it drags on, we Hungarians will continue to help the Ukrainians with humanitarian means.”

Meanwhile, the Hungarian Parliament is scheduled to discuss the prospective accession of Sweden and Finland into NATO on the third day of its spring session starting next week, according to the business weekly HVG. The two historically neutral countries applied for membership in May last year following Russia’s invasion of Ukraine, adding that they want to join “hand in hand.” Joining the alliance, however, requires the unanimous approval of its members, of whom Turkey and Hungary alone have not yet acceded.

Applications Open for Rubik Garage CEE Accelerator

Founders of early-stage startups or at minimum viable product level who want to expand into a new CEE market, raise investment, or reach a recurring monthly revenue of EUR 2,000 are invited to join the Rubik Garage accelerator in Romania. The accelerator grants access to advantages and benefits worth more than EUR 150,000, including discounts and benefits offered by tech partners such as Notion, AWS, and Twillio Segment; access to the House of Startups (a free co-working space) for two years; accommodation grants; opportunities to participate in international conferences; as well as access to Jobs in Startups, a platform for finding employees or co-founders.

The program is free but requires a total involvement commitment from

the selected founders in each phase of the program. Registration is open until March 5.

Teams with the most significant potential to raise investment in the next 6-12 months will be selected in the follow-on Investment Readiness Program. They will attend workshops focused on critical aspects of fundraising, including methods for evaluating an early-stage startup, strategies and crucial metrics to watch for when raising investment, investor management strategies, and preparing a successful pitch. Founders will also benefit from match-making and introductions to investors.

“We believe that the coming years have great potential for the development and growth of startups in Romania and CEE,” says Valentin Iulian Ţoc, the coordinator of the accelerator.

NICHOLAS PONGRATZ

Following the “most difficult year” since the fall of Communism, Prime Minister Viktor Orbán said that 2023 would be the “most dangerous” due to the dual threats of war and inflation during a state of the nation address delivered on February 18.

BENCE GAÁL

Ukraine

László Lehel, president and director of Hungarian Interchurch Aid, speaks at a round table discussion in the Mathias Corvinus Collegium (MCC) building on February 20, 2023. Photo by Lajos Soós / MTI.

Skanska Completes Phase 1 of H 2Offices

Skanska has completed the first 27,000 sqm phase of its 67,000 sqm H 2Offices project in the Váci Corridor. The development is located on a plot once occupied by the nowdemolished former headquarters of Budapest Waterworks.

“The first phase offers nearly 27,000 sqm of leasable space on eight above-ground floors. The demand for future-proof energyefficient prime offices remains solid, and five tenants have already decided to lease office space in the building,” Skanska says.

The company hopes to have the complex, its

10th

office project in Budapest, more than 50% let within weeks and 90% leased by the beginning of next year, based on current market signings. Already secured tenants include the serviced offices provider DBH and the logistics company Orbico Hungary.

Skanska says it aims to obtain Leed “Platinum,” Well “Platinum,” Well Health & Safety certifications, and Access4You accessibility certification for the building, as is the developer’s policy across its portfolio.

The Copenhagen-headquartered Arrow Architects created the architectural design concept, with general design work developed by Studio IN-EX and landscape design by Lépték-Terv.

Most Advanced

“Skanska has consistently implemented sustainable development goals for years. The company intends to

reduce its carbon dioxide emissions by 70% by 2030, and, according to measurements, we are right on track to achieve this goal,” says Aurelia Luca, executive vice president of operations of Skanska’s commercial development business unit in Hungary and Romania. “H 2 Offices will be the developer’s most advanced building in Hungary in this regard as well.”

“Skanska has consistently implemented sustainable development goals for years. The company intends to reduce its carbon dioxide emissions by 70% by 2030, and, according to measurements, we are right on track to achieve this goal.”

András Ábrahám, project director of Skanska’s commercial development business unit in Hungary, says sustainability is at the core of the project.

“The H 2 Offices complex was designed in accordance with ESG principles, taking into consideration the environment and the well-being

of the community from the planning to its final implementation,” he explains.

“The building has a number of features that reduce its environmental impact. One example is the use of façade elements made from recycled materials. H 2 Offices is characterized by energy efficiency in lighting (37% less energy use), temperature control, and smart water management use (resulting in

40% savings); in this way, it also supports optimization of maintenance costs,” Ábrahám comments.

“The well-being of the people working here is ensured by large green areas, maximized daylight, excellent air quality, natural materials, healthy dining options around, and the running track on the roof of the building. The company also supports the spread of alternative forms of transportation with a large bicycle storage area equipped with showers, lockers, and charging options for e-cars and e-bikes,” the project director says, ticking off the amenities.

Health and Safety

“Maintaining health and ensuring the safety of those using the building is also assisted by touchless solutions and the smart building system,” Ábrahám adds.

Construction has already started on the second 22,000 sqm phase, which is due to be delivered in 2025. The EUR 65 million project will be completed with the 18,000 sqm phase III, due to be finished in 2026/2027.

“All the investments of Skanska Hungary will undergo Leed, Well Core & Shell, and Well Health-Safety Rating certification processes, confirming their compliance with the principles of sustainable development, optimal energy consumption, as well as a safe and superior work environment,” Skanska concludes. Over the years, the company says it has built approximately

284,000 sqm of commercial space.

The office pipeline in the Hungarian capital remains healthy. Total supply in the Budapest office market has reached 4.26 million sqm, according to the Budapest Research Forum, consisting of CBRE, Colliers International, Cushman & Wakefield, Eston International, JLL, and Robertson Hungary.

The overall vacancy rate for Budapest has increased to 11%, with Colliers estimating around 238,000 sqm of space will be delivered this year. CBRE sees an office pipeline of 217,000 sqm for 2023. Cushman & Wakefield has traced a new office supply of 320,000 sqm due to be completed in 2023 and 2024.

GARY J. MORRELL

Interior layout of Skanska’s H2Offices.

2Business

Vodafone Takeover Boosts 2022 M&A Deal Value in Hungary to USD 3.2 bln

Attila Kőmíves, counsel and antitrust specialist at Allen & Overy Budapest, said: “Since 2020, we have seen unprecedented levels of change to foreign investment screening regimes, particularly in Western markets. For example, Hungary has two such regimes that apply in parallel, but 19 out of the 27 EU member states and altogether more than 100 countries globally operate foreign investment screening regimes.”

Political Interference

While the general regulatory requirements in Hungary are no more complicated than most other member states in the European Union, the special powers granted to the government because of the seemingly continuous “state of emergency” in recent years means political interference in deals has become more of an issue.

Another issue is that authorities lack the procedural framework to enable them to engage in discussions with the parties and address any national security concerns.

In one cross-border deal involving an unnamed Hungarian target company, there was “chaos” after one ministry gave the green light to the transaction, only for a second ministry to later block the deal on [the] grounds of national security, Kőmíves said.

Although the transaction went ahead, thanks to the determination of all parties involved, it nonetheless meant a delay of some five to six months before the deal could be passed off.

The total value of the merger and acquisitions in Hungary last year surged to USD 3.24 billion, up 52% on the USD 2.13 bln total of 2021, the Budapest arm of international law firm Allen & Overy told the press on the release of its Global M&A Insights Report on February 9.

However, the Hungarian numbers were boosted by a single, very large deal: the sale of telecommunications company Vodafone Hungary to Antenna Hungária Zrt. (a subsidiary of 4iG), and Corvinus International Investment, in a transaction driven by the government’s goal of acquiring majority stakes in “strategic sectors.”

Highlighted by Balázs Sahin-Tóth, counsel at Allen & Overy Budapest, as the “largest non-Polish deal of the year” within CEE, this transaction was worth USD 1.78 bln and made up

55%

of the total M&A market in Hungary last year. It also helped ensure that the combined value of M&A within the region largely held onto the gains made in 2021, in sharp contrast to the prevailing global trends.

M&A within CEE in 2022 amounted to a fraction under USD 30 bln from 1,273 transactions versus USD 30.4 bln in 2021 from 1,383 deals. This means the average deal size within CEE last year rose to USD 23.6 million, up from USD 22 mln in 2021.

Again, lifted by the impact of the Vodafone sale, with just 84 transactions in 2022, the average deal size in Hungary jumped to USD 38.6 mln, compared to USD 21.3 mln in 2021.

Poland on Top

Not surprisingly, within CEE, Poland again proved the most valuable market, at just over USD 19.47 bln from 471 deals, followed by Hungary, its USD 3.24 bln pushing Romania into third place with almost USD 2.4 bln from 166 deals.

“Amid the global downturn, Poland reinforced its position as CEE’s leading market,” Sahin-Tóth said, pointing to the almost USD 9.3 bln merger (as the company’s website terms it) of gas company PGNiG with energy group PKN Orlen along with PKN Orlen’s near USD 3.7 bln

merger

with oil company Grupa Lotos.

However, like the largest Hungarian deal, these two transactions mainly involved statecontrolled or state-influenced players. Nevertheless, as noted above, all

these dealings took place in the greater global context of a sharp downturn in M&A across most markets.

Sahin-Tóth pointed to the war in Ukraine, concerns over inflation, rising energy prices, and lingering supply chain issues arising from the COVID-19 pandemic as reasons behind the weaker M&A performance globally.

“Private equity and financial investors, meanwhile, were constrained in their efforts to put their substantial capital reserves to work by an increasing shortage of deal leverage.

To summarize, geo-political tensions all left their mark, particularly in the second half of the year,” he said. (See separate box.)

The report also notes that a seemingly ever-increasing regulatory burden has further complicated deals, especially large transactions and those viewed as strategic or national security risks in the country of the acquisition target.

“We had to restructure the whole deal. We had to do it twice,” Sahin-Tóth told the Budapest Business Journal.

In general, the various and often changing regulations pertaining to FDI make M&A processes less predictable and can easily add an additional three months to a nine-month deal.

“Such delays could be much shorter if the ministries were empowered to engage in a dialogue on how to resolve their concerns instead of simply issuing a blocking decision,” he said.

As for the likely direction for M&A in Hungary in the immediate future, SahinTóth pointed to energy deals as one “likely hotspot,” while the insurance, retail, and telecommunications sectors could attract further interest from investors.

“Some IT-driven start-ups may expand beyond Hungary, and international investors may be involved too,” he added.

Asked in the press conference to comment on the possible sale of Dunaferr, the long-troubled Hungarian steelmaker, Sahin-Tóth declined to comment.

Global M&A Value Shrinks by 38% in 2022 as Uncertainties Rise

According to Allen & Overy’s M&A global report, citing data from Refinitiv, worldwide M&A transactions tumbled from a record high of almost USD 5.8 trillion in 2021 to just over USD 3.6 tln last year, a contraction of some 38%. Similarly, the number of M&A deals slumped from just over 66,000 in 2021 to almost 56,000 last year, with all three major markets,

the United States, Europe, and Asia Pacific, seeing sharp downturns. Total M&A deal value in the Americas during 2022 fell to almost USD 1.75 tln, against USD 2.78 tln in 2021. Europe, meanwhile, slipped back from 2021’s total of just under USD 1.4 tln from 21,140 deals to USD 852 billion. Technology deals were especially hit by the new market conditions, partly because private equity funds could

not obtain affordable credit to finance acquisitions. In contrast, energy and infrastructure M&A outstripped all other sectors in the second half of last year as global energy demand reacted to the Russian sanctions. This strong run of energy and infrastructure deals is expected to continue. Globally, other potentially strong sectors this year include consumer, life sciences, mining and metals.

Against the global trend, the value of M&A deals in Central and Eastern Europe held firm in 2022, although increasing regulatory requirements are likely to dampen potential growth.

Balázs Sahin-Tóth, counsel at Allen & Overy Budapest

After 7 Years’ Service, Dutcham Elects new Chair

On February 16, Katinka Zinnemers (managing director at Abacus Medicine

A/S) became the new chair of the NetherlandsHungarian Chamber of Commerce (Dutcham), succeeding Lóránt Varga (country manager of CBRE Hungary), who held the post for seven years, in the position. Here, the pair reflect on the past and offer insights into plans for the coming years.

BBJ: How do you evaluate the past seven years as chairman of Dutcham?

Lóránt Varga: As a founding member of Dutcham, it was a privilege to become chairman seven years ago. As a board, we have made the chamber a more professional organization and created one of the most open and approachable meeting places for Dutch and Hungarian businesses. We have shown resilience during the pandemic by organizing many online events for our members.

I am also proud that we have strengthened our relationship with the Netherlands Embassy.

BBJ: What activities would you consider as highlights?

LV: I could mention a lot, but a special one was our gala event to celebrate the 20th anniversary of Dutcham last year: 215 guests attended this culinary event.

BBJ: You have been a member of the Dutcham board since its establishment; where do you see the most progress over the years?

LV: We have created a stronger brand. The relationships between members are much more solid than in the past,

and we created an excellent working relationship with the Netherlands Embassy. I would like to say a special thank you to our Ambassador Desirée Bonis and the Deputy Head of Mission Andreou Efstathios for supporting the chamber, the board, and myself in this privileged role.

BBJ: Turning to your successor, what were your main motivations for applying for the chairmanship?

Katinka Zinnemers: Being connected to the chamber for seven years has brought me many good experiences, and, for sure, my ambition is to continue my membership and contributions in the following years. Honestly, I had not been actively striving for the role of chair. But from the moment we heard that Lóránt was planning to step down as chairman, I started to think about making an application. I expect that, as chair, I will be able to meet representatives of companies, authorities, embassies, and many other groups even more than before to share our networks and to learn from each other’s experiences, successes, and challenges. Lóránt is an excellent example to follow. As the new chair, I hope to continue the leadership of a dedicated group of businesspeople who all voluntarily spend their efforts and

“As a founding member of Dutcham, it was a privilege to become chairman seven years ago. As a board, we have made the chamber a more professional organization and created one of the most open and approachable meeting places for Dutch and Hungarian businesses.”

time on the board and contribute to bringing people together for interesting exchanges.

BBJ: Where do you see the most growth potential of the chamber?

KZ: I would like to share two things regarding this question. Everything the chamber stands for is connected to growth: Growth as a human being, growth of our knowledge, networks, and experiences. At the end of the day, the chamber is only able to work for its members with enough financial support. Dutcham is

dependent on membership fees and the sponsorship of member companies. Although we are grateful for the longlasting support of our members and very kind partners and sponsors, I still see considerable potential here. We will actively try to connect to new members and make them part of our journey to bring business and people together.

BBJ: What is your biggest source of inspiration?

KZ: It always makes me happy to represent something that makes me proud and to enjoy the pride of others, members of Dutcham, or others we meet at events. Being a Dutch national, working for a successful Danish company, and being chair of Dutcham brings all this together, especially in moments where I can combine my nationality, my work, and my role in Dutcham.

I am looking forward to meeting many inspiring people and continuing to organize inspirational gatherings. We hope to see you at one soon!

Editor’s note: For plenty more news from Budapest’s international chambers of commerce, see our Chamber of Commerce Corner on page 23.

New Dutcham chair Katinka Zinnemers and her predecessor, Lóránt Varga.

Central Bank Digital Currencies: The Greatest Threat to Freedom?

Finance Matters

A monthly look at financial issues in Hungary and the region

A CBDC is a digital banknote issued by a central bank. Instead of holding physical bills in your physical wallet, your digital wallet (in other words, your smartphone) would hold digital currency units. CBDCs, similar to bitcoin, would be based on blockchain technology.

But whereas bitcoin is the ultimate decentralized payment system and independent of central banks, CBDCs are the ultimate in centralization. The amount of transactional information flowing into central banks would be staggering. And they might be here sooner than you think:

114 countries

are actively exploring or rolling out CBDCs.

There are several undeniable advantages to CBDCs. It is more efficient than cash (no printing costs) and presumably more difficult to forge. CBDCs would give governments greater power to affect economic cycles. For example, they could dig us out of an economic recession by zapping helicopter money into everyone’s account. It might even be programmed with an expiry date, thereby forcing people to spend and stimulating growth.

Despite a robust economic efficiency argument, the disadvantages are overwhelming. There is a privacy argument: the government would

see your every transaction and may be tempted to spy on you to prevent tax evasion.

But what solidifies my anti-CBDC position is the degree of control given to the government. As mentioned, CBDCs would be programmable by a central authority. Every transaction could be monitored in real-time, tracking all activities and movement of individuals. Individuals deemed as threats (or not to the government’s liking) could be targeted, especially significant in countries with poor human rights records.

Frozen Assets

To go even further, CBDCs would make it easy for governments to freeze anyone’s wallet, making it impossible to send or receive money. You may think this will never happen in an “advanced,” democratic society, but it already has, and in a country that is supposedly one of the most liberal and democratic on earth: Canada.

You may recall a strike in

2022

in which thousands of truckers were demonstrating against COVID restrictions. The government enacted emergency legislation that enabled it to freeze the bank accounts and cancel the credit cards of hundreds of people who contributed to the “Freedom Convoy” campaign.

Granted, these were bank and credit card accounts, not CBDC accounts, but freezing the latter would be much easier, as these would be held directly with central banks rather than the government having to work through third-party private banks. Anyone deemed undesirable could easily be deprived of mainstream financial services.

CBDCs will also make it easier for governments to implement negative

interest rates and financial repression. In other words, CBDCs will not just make putting money into your account easier but will also facilitate taking it out of your account (negative interest rate or wealth tax).

“The introduction of a CBDC in China, for example, likely will allow the Chinese government to closely monitor the economic activity of its citizens. Should the Federal Reserve create a CBDC for the same reason?

CBDCs create disintermediation: if private wallet holders hold accounts directly with central banks, main street banks are cut out of the loop. In other words, the power that resided with banks will be transferred to central banks, one of the least transparent and accountable organs of government. CBDCs represent a massive power grab by central banks at the expense of the banking sector and individuals.

Perhaps it is unsurprising that China is one of the countries leading the charge in implementing CBDCs.

Perhaps the only realistic way governments worldwide can escape national debt spirals is financial repression: ensuring interest rates are lower than inflation for the coming years and even pushing interest rates into negative territory if necessary.

Sore Temptation

Although financial repression has been successfully implemented in the past without CBDCs, in the late 1940s, for example, today’s debt levels are much higher than at any previous time, and capital is more internationally mobile; hence, governments will be sorely tempted to introduce CBDCs.

And while they will no doubt try to reassure us that CBDCs will not be abused, once introduced, there is no way to curtail the government’s use of them. Every emergency will justify yet another encroachment.

According to Federal Reserve board member Christopher Waller, “CBDC accounts could give the Federal Reserve access to a vast amount of information regarding the financial transactions and trading patterns of CBDC accountholders […]. The introduction of a CBDC in China, for example, likely will allow the Chinese government to closely monitor the economic activity of its citizens. Should the Federal Reserve create a CBDC for the same reason?

I, for one, do not think so.”

This will be the most important monetary policy debate of the coming decade. The outcome will fundamentally determine in what kind of society we live.

Les Nemethy is CEO of EuroPhoenix Financial Advisers Ltd. (www.europhoenix.com), a Central European corporate finance firm. He is a former World Banker, author of Business Exit Planning (www. businessexitplanningbook.com), and a previous president of the American Chamber of Commerce in Hungary.

Corporate finance columnist Les Nemethy has concluded that Central Bank Digital Currencies are one of, perhaps even the greatest, threats to personal freedom today. Before we get to that, however, we ought to start with a definition of CBDCs.

I, for one, do not think so.”

Birthrate Rising, but Demographics Continue to Look bad for Hungary HR Matters

A monthly look at human resource issues in Hungary and the region

Trenkwalder Mobility Index 2022: 53%

After an 11-year gap, the Central Statistical Office conducted a new census last year. According to the preliminary count, the Hungarian population decreased significantly in the last decade by 334,000. During the decade between 2001 and 2011, the rate was slower at “only” 261,000.

While in 1980, the population was well above 10 million, by 2022, it had shrunk to just 9.6 million. The figure would have been worse had it not been for the 131,000 immigrants, mostly from neighboring countries.

The age composition has also deteriorated: between 2011 and 2022, the percentage of the population aged 65 or older

grew by 19%,

while those aged 15-64, that is, the active working population, saw significant shrinkage. The good news is that the birthrate has started gathering pace, with 0-14-year-olds now at 15% of the total population.

With a growing economy and a narrowing labor force market, the logical assumption is that the active population is in an increasingly better bargaining position when negotiating jobs and salaries. But surveys do not confirm this assumption. K&H Bank has published the K&H Youth Index for eight years, the latest released in December 2022.

According to this, marginally less than one-third (32%) of those in the young

age category said they were satisfied with their life now, while those optimistic about the future were significantly more, at 60%. Looking at salaries, the current situation does not seem very bright: on average, the majority of those aged between 19-29 earn HUF 143,000 per month, about EUR 366. Only 11% said their revenues exceed HUF 300,000, around EUR 770.

Sharp Difference

Labor force services provider

Trenkwalder surveyed an even younger age group, those in high schools. The data shows a sharp difference between those who wish to pursue higher education abroad and those who want to work beyond the borders.

While a mere 5% of those attending secondary school said they plan to continue higher education abroad, a much higher percentage, 37%, said they are looking at working abroad after finishing their studies. Slightly less, 35%, plan to work in Hungary. Those aiming for foreign opportunities indicated better living conditions as the main reason (56%) and better working conditions (24%).

Trenkwalder also measured the willingness to relocate among adults last year. Based upon the answers provided by 3,000

Hungarian employees, more than half are open to moving from their current location. This level is significantly higher than last year when only 35% of the respondents were considering mobility.

Not surprisingly, the highest levels, 64-65%, were measured in the least developed areas, in the northeast and the southwest. Here, the respondents would relocate domestically, while in Vas county, in the more developed area close to the Austrian border, people are looking for jobs abroad.

A vast majority, 69%, say they would move elsewhere for better living conditions, a more stable future (33%), or more work opportunities (32%). Two-thirds of respondents think that these can be achieved domestically.

As for where exactly, Trenkwalder compiled a satisfaction index. Overall, this year Hungary scored 5.9 points on a scale of 0-10, 0.5 points below the level measured last year. By region, satisfaction is highest in the areas neighboring Austria, with figures ranging from 6.4 to 7.1, compared to 4.6-5.5 in the east.

Employer Plans

But what are employers’ plans for this year? In the first quarter, one-third of companies plan to reduce their workforce, while only 22% envisage hiring more, according to a survey conducted among 500 companies in Hungary by ManpowerGroup. However, no massive layoffs are expected in the labor market.

The recession outlook is inducing caution among employers and employees, who prefer to wait instead of searching for new opportunities.

According to ManpowerGroup, the highest chances of layoffs are within the communication services and the manufacturing industry.

The next question is how families prepare for the worst while hoping for the best. A European survey conducted by Intrum shows that the average European consumer saves relatively little, less than 20% of his income.

In Hungary, one-third of the respondents said they could not save every month. Most can save 10%

at most, and only 10% of the respondents can save more than 20% of their monthly income. The 31.4% of those unable to save at all is high compared to other countries; in Poland, it is 27%, in Romania 24%, in Slovakia 20%, while in the Czech Republic, 14% said they have nothing left to save at the end of the month.

As for the purpose of saving, the vast majority of Hungarians (42%) said they were preparing for unexpected expenses, some 2% more compared to the previous year. An even higher surge, from 4% in 2021 to 10% in 2022, are “preparing for the recession.”

Finally, regarding how long the savings can last, 35% said they have less than the equivalent of one month’s income. Somewhat less, 29%, said their savings would be sufficient for a month, while 19% said their savings would cover a maximum of three months, according to Intrum.

Aging is just one of the elements of the continuously deteriorating demographics in Hungary. This, combined with a slow recovery in the economy, results in significant changes in Hungarian society and working habits; the younger age categories earn more, and geographic mobility starts to gain speed.

BALÁZS BARABÁS

3 Special Report

Taxes & Accounting

Market Talk: Wanted, Better Language Skills, More Digitization, Fewer Taxes

system (such as the focus on indirect tax revenues in the budget and low corporate tax and personal income tax rates) that provide a certain level of predictability. There are several principles based on EU guidelines, which could also be viewed as instruments enhancing the stability and predictability of our tax regulations.

BBJ: Is Hungary’s tax and accountancy regime reasonably stable, or have there been significant changes for 2023?

István Nemecz: The 2023 tax package sets out new important transfer pricing rules, forcing the synchronization of year-end tasks. A completely

new requirement is the introduction of a data reporting obligation as part of the corporate income tax returns, which is applicable for filings in 2023. There are no significant changes on the accounting side in 2023; the Act on Accounting has been a stable law, albeit with continuously increasing signs of IFRS harmonization.

György Boár: In the past few years, the significant changes

wts-bbj-pr-252x158-202302:Layout 1 2/17/23 11:17 AM Page 1

People you can rely on

2022 was anything but easy: war in the region, extremely challenging energy prices, and increasing inflation. But instead of slipping into depression, we can look back on 2022 at the successes we achieved.

New majority shareholder

in the Hungarian accounting regulations were related to the introduction of IFRS and, in parallel, a slight shift in Hungarian accounting principles towards IFRS in certain areas. Otherwise, accounting regulations were stable, and changes were generally easy to follow.

As regards tax regulations, some principles and concepts seem to be cornerstones in the Hungarian tax

Hungary, however, has a long history of changing tax regulations; it was rather usual that tax laws were changing at least once, if not twice, a year. The recent years’ economic (and budgetary) challenges increased the turbulence of tax law changes and, for 2022 and 2023, made the changes in areas like the “extra profit” surtaxes hard to predict. OECD and EU initiatives like reporting systems and obligations, or anti-tax avoidance directives, add another layer of complexity to regulations and would bring fundamental changes to tax systems at a fast pace.

Zoltán Lambert Managing Partner WTS Klient

In short, we cannot complain: for us, 2022 was explosive, in the positive sense of the word, of course. So much has happened to us that it could easily fill this entire edition of the Budapest Business Journal. In the spring, the Prague-based financial investor ARX Equity Partners joined the company as a new investor, after which we injected some real momentum into rejuvenating the company. Alongside the senior partner and division partner appointments, the addition of Robert Stöllinger as the new chairman of the WTS Klient Supervisory Board ensured the group’s uninterrupted organic growth.

We followed three main paths: the digital and technological upgrading of our office and work processes, the optimisation of our HR processes, and employer branding all took priority. It would take a long time to list all the things we have automated, and the many programmes created to ensure a more attractive workplace for our staff.

One brand – one company

And what about our plans for the near future? Perhaps the most significant change, yet the one with the smallest impact on our daily work, is that from 1 January 2023, the members of our group – which have been operating together so far under the WTS Klient brand name – merged and officially became one company under the name of WTS Klient Business Advisory Ltd. This completed our rebirth in 2022, and in 2023 we will continue down the road we have set out on. In the wake of this renaissance we will continue to rejuvenate our operations in every way, revamping the WTS Klient brand and further developing our digital capabilities.

Forward in numbers and in technology

Our accounting firm was established in 1998 by Hungarian individuals, we set up our tax consulting division in 2012, and a year later we joined WTS Global, one of the world’s leading tax and financial advisory networks. Almost a quarter of a century later, our sales revenue exceeded HUF 2 billion in 2022 with an increase of more than 15% compared to the previous year, and the number of employees rose to 130. As part of our strategic goal of technological innovation and the rapid deployment of state-of-the-art IT solutions, we developed automated IT solutions for VAT and personal income tax returns, also implementing automatic invoice reading for

the bookkeeping system, and in cooperation with WTS Global, we developed a completely IT-driven online platform for joint proposals to network member firms, often covering more than 60 countries.

Last year, the company’s HR strategy was also revamped. Our work organisation takes account of the challenges of the post-COVID era with appropriate IT solutions, we offer our employees competitive compensation packages with increased fringe benefits, unlimited free medical examinations and personalised training support.

In times of such momentous change, the slogan of our company cannot remain unchanged either, so we have replaced it with: “People you can rely on”. A more fitting and accurate description of our company you simply will not find…

Some of the leading actors from the tax and accountancy fields give us their take on the things to watch for in 2023, the trends likely to shape the future, and what they would like to see change.

Péter Hajnal: We see the regime as stable and very attractive for foreign investors. Hungary is a good location for foreign companies and foreign private persons from a taxation point of view.

at 13%, and CIT at 9%) remain unchanged, but this was possible as a result of introducing windfall taxes in specific sectors (energy, retail, banking, etc.) and increasing the rates of some extraordinary taxes. A significant part of these changes hit multinationals, and the question remains, how long do we have to plan with them? The 2023 tax and accounting changes were not fundamental, but companies must still review the effect of smaller tax law changes on their business.

Gyöngyi Ferencz: The most significant change was the introduction of the new extra profit taxes announced last summer and levied on companies for the business years 2022-2023, which are primarily aimed at ensuring budgetary equilibrium and providing resources to back up the utility cost reduction, similarly to the special taxes introduced in the 2010 crisis. We have a positive outlook regarding the regulatory changes for the coming years and do not expect to have to deal with any additional burdens that would discourage companies from investing.

Lajos Bagdi: The accounting regulations are reasonably stable; however, significant tax changes occurred for FY23. For example, transfer pricing regulations have been considerably amended; there is a new reporting obligation in the corporation tax return. In the coming months, we do not expect significant changes (except the introduction of the global minimum tax rules).

András Szalai: The accountancy regime is stable, with no significant changes for 2023. There were more changes in taxation, though still without significant impact or changes in the trend. The Hungarian concept continues focusing on higher taxes on consumption with lower taxes on income (corporate or individual). That is despite international trends aiming to increase income taxes, such as the global minimum tax and various global regulations on income data exchange. Highlights of the most critical tax changes include the extra profit taxes and the new transfer pricing data provision regulation.

Gábor Fajcsák: Hungary’s tax and accountancy regime can be considered reasonably stable. Among the tax changes applicable in 2023, the so-called “extraprofit taxes” should be highlighted, which are supposed to stay with us until the end of 2023. These measures are exceptional, as they were implemented under emergency legislation following the COVID19 pandemic and the war in Ukraine. However, the Hungarian government has guaranteed that these provisions will be abolished at the end of the current year.

Zoltán Lambert: The general tax rates (PIT at 15%, social security

Crucial Importance of Cooperation Between Taxation and Audit

BBJ: What are the crucial trends you expect to dominate this year and in the immediate future?

IN: A substantial part of taxrelated procedures (tax returns, communication, audit, and selection for audit) are digitalized, data-driven, and automated. We expect that the focus will remain on specific IT improvements.

Niveus, the 1-stop Shop

The dedicated team of Niveus Consulting Group is constantly working to provide all the benefits and more for its clients. Although we started operations more than 15 years ago as a small boutique advisory firm, we now employ more than 50 professionals and have over 500 clients. We have gradually extended our offering to cover different types of services (for example, accounting and payroll, tax advisory, transfer pricing, M&A advisory, and legal) and we can now provide audit services to our clients as well.

Niveus is part of DFK International, an association of independent audit, accounting, tax, and legal service providers present in more than 100 countries across the world. Thanks to this membership, we can also provide our clients with onestop-shop services for cross-border challenges, winning complex audit tenders as a result.

The Importance of Audit

Audit plays a significant role in the economy, and its emergence was driven by market interests. Audit activity has come to the fore in recent years for several reasons: the changed legal environment may raise the question of efficiency in auditing in a regulated market, on the one hand, and the financial scandals seen in recent years have highlighted its importance, on the other.

contact multiple service providers (of course, independence rules should be considered).

Cooperation Between Tax and Audit

There are several advantages to cooperation between tax and audit services. As mentioned earlier, tax firms have the comprehensive knowledge to analyze tax structures in detail and, as a result, are liable to any tax consequences possibly set by the tax office.

We also often encounter the so-called materiality threshold in auditing. This refers to the effect on the user of the financial statements of omissions or misstatements of information in a company’s financial statements. In planning the audit, the auditor decides what the level of materiality should be. As a result, tax consequences can occur below the materiality threshold, irrespective of the fact that the auditor has been reviewing the company’s books.

Good Examples

Transfer pricing is one of the hot topics in tax practices. In most cases, auditors review the existence of the transfer pricing documentation to prove that the transactions were conducted at arm’s length price. In this context, the transfer pricing experts and auditors should work closely together to ensure the appropriate transfer pricing management of the company.

GB: Implementation of Pillar 2 (the Global Minimum Tax) and Pillar 1 frameworks will likely reshape the global taxation system and require local regulations to be amended accordingly.

PH: Using foreign currencies (EUR, USD) more extensively in accounting, taxation, and labor fields could become crucial to avoid

Continued on page 12 ›››

In most cases, companies cooperate with tax experts alongside their chosen auditor. Commonly, the auditor is contracted for an annual audit, which typically does not include advisory services. The auditor reviews taxes; however, due to audit materiality, not all taxes may be included in the audit’s scope. Therefore, the auditor is not responsible for any legal consequences of possible tax deficiencies. In other words, it is not liable to compensate the company for tax shortages or any default penalties.

In many cases, one-stop-shop firms can provide clients with accounting, tax, legal, and also audit services within one organization without requiring the client to

Another good example is company restructuring. During the transformation, merger, or division, both the projected and the final balance sheet must be audited by an independent auditor. There could be numerous tax consequences during such a transformation that should also be verified with tax advisors. By cooperating on the audit and tax work, significant tax savings can be achieved, and the client will be more satisfied with the transformation results.

Niveus Consulting Group

Niveus Consulting Group

Lajos Bagdi Sándor Bodó Partner Partner

György Boár

István Nemecz

How to Comply Effectively With the new Transfer Pricing Obligations

Therefore, businesses that have not yet paid enough attention to transfer pricing must identify each related party transaction from 2022 and should know their details, their arm’s length price, and the exact result of the reconciliation. Determining all these is certainly not easy. There is also an increasing expectation that transfer pricing transactions should be supported by segmented accounting data specific to each transaction.

In addition, the range of transactions affected by the data reporting is more expansive than those subject to transfer pricing documentation, as certain exempted transactions will also have to be reported, such as those covered by an AdvancedPricing Agreements (APA) decision, contracts with a private individual who is not a sole proprietor, intra-group cost recharges, and free transfers of funds.

Continued from page 11 ›››

unnecessary financial risks. This is an expected trend by foreign investors. LB: The tax inspectors receive more information regarding taxpayers due to the digital developments, which can highly support their focus on issues to be examined (and thus levy penalties). Therefore, companies should attach great importance to their taxation and accounting processes. Furthermore, numerous legal conditions may be applied solely until the end of the state of emergency (currently June 27, 2023), after which, if the legislators want to keep them, these should also be changed. ASz: There seems to be an increased focus by the tax office on leveraging information technology, collecting online data, building databases, and using digitalization and big data to gather information about taxpayers. Hopefully, this will help reduce the administrative burden on taxpayers.

Although transfer pricing has long been a focal point of all comprehensive tax audits in Hungary, significant legislative changes were introduced last year. With the new transfer pricing data reporting in corporate income tax declarations, the authority will not only be able to select “risky” taxpayers but will also be able to carry out audits much more efficiently than before. This provision may mean an invisible audit extension for the tax authority since they may already have gathered much important information in the risk assessment phase about the affiliated companies, even before an officially announced audit begins.

Although transfer pricing documents do not have to be submitted automatically to the tax authorities, theoretically, they had to be prepared by the submission date of the corporate income tax return. Furthermore, from now on, affiliated companies must provide data about their related party transactions and transfer pricing practices as part of the corporate income tax return by FY2022.

Affiliated companies must provide data within the CIT reporting period, which is five months from the end of the financial year, in other words, by the end of May 2023, for a financial year that matches the calendar year.

As part of such transfer pricing, reporting is required about every related transaction: information on the associated entities participating, the magnitude and type of the transaction, the yearly transaction value per related party, the method of determining the arm’s length price, the indicators used, the arm’s length price or price range, the actual applied price, and any adjustments compared to the above.

The increasing penalties will also put more pressure on businesses to prepare transfer pricing reports within the deadline, by the corporate income tax return date. The fine for omission or failure to compile a transfer pricing document has more than doubled to HUF 5 million (approximately EUR 12,500) per transaction, and in the case of repeated infringements, to HUF 10 million (roughly EUR 25,000).

In addition to the rule tightening presented above, the obligation of the “interquartile range” will be compulsorily applied during the analysis based on the database in the tax year that started in 2022. If the consideration in the examined related transaction is outside the arm’s length range, the transfer pricing adjustment must be made to the “median.”

These new requirements are opening up even more accurate and rigorous transfer pricing controls. As a result, many more businesses could face increased default penalties and corporate tax base adjustments in the coming years. So, it is recommended that companies seek the help of a transfer pricing specialist as early as it is possible and consider claiming an APA-agreement with the tax authority, providing greater security, for the most critical or complex transactions that saves the need to prepare the transfer pricing documentations for years.

LeitnerLeitner is one of the most influential tax consulting companies in Central Europe, with worldwide coverage through the Taxand network. You may rely on our specialized full-scope transfer pricing service package: documentation, benchmark studies, database searches, representation in legal disputes, MAP and APA processes.

ZL: Changes to transfer pricing rules will affect many companies. For those with a business year matching the calendar year, time is running out to prepare proper transfer pricing documentation by the end of May and report information connected to transfer prices in their corporate income tax returns. The new legislation will increase administration, although the threshold of HUF 50 million, under which no TP documentation is needed, has been increased to HUF 100 mln.

the financial regulations of most European countries. A new element in the corporate tax returns for 2022 is the data reporting and return obligation regarding transfer pricing. This is a significant change for a broader range of companies operating in affiliated structures that must devote the necessary attention in due time, well before the tax return filing date in May.

BBJ: Are there specific areas where you would like legislation changed in Hungary? Do you see any hope this might happen?

IN: Some provisions still make certain tax procedures lengthy or inflexible and should be simplified in the future. It would be helpful if Hungarian accounting could be brought closer to IFRS rules, thus freeing international companies from difficulties.

PH: Reducing the administrative burden has been a focus for years, although we still see lots of space for further action here. The initiative to negotiate with professional experts is a good direction, but these contributions should be built into the legislation faster. Automation and digitalization are key areas and highly supported by the government but, in parallel, we need to reduce the administrative burdens as well.

GyF: The uniform taxation of large international corporations is becoming an increasingly important question in Europe and worldwide. The OECD has been working on developing global minimum corporate tax regulations since 2019, which most European countries, including Hungary, signed up to last year. The question of transfer pricing is also being given an ever more significant emphasis in

LB: The potential remaining hidden employment could be whitened more if social taxes were further reduced. Also, as the local business tax is a significant and particular tax type in Hungary, the simplification of the system would be improved if it were canceled permanently and, for example, the current 9% corporate tax rate was increased a bit (but we do not think it will change soon). Generally, it would be favorable if the government would consult more with practical experts and consider their views. Furthermore, in numerous cases,

Undoubtedly, 2023 will be a great challenge again for multinational companies, not least because of the latest adjustments to transfer pricing rules. The new obligations are known in detail and effective now; thus, affected companies must apply them as soon as possible.

LeitnerLeitner

Judit Jancsa-Pék Partner, Tax advisor

Péter Hajnal

Lajos Bagdi

the new regulations are quite complex to interpret and must be applied quickly.

ASz: It is difficult to select any particular area. Generally, longer preparation time before implementing changes and more communication would be welcome. We would also be happy to see a more up-todate accounting law that follows business and technology changes more frequently.

GF: There are several topics on our wish list. Following the end of the commenting phase of an audit carried out by the Hungarian National Tax and Customs Administration (NAV), taxpayers no longer have the opportunity to submit any new supporting evidence or facts. Consequently, the current regulation is incompatible with the right to a fair trial.

NAV classifies taxpayers into three categories: “risky,” “general,” and “reliable.” Penalties are assessed by the authority based on this. We believe this should be amended; sanctions should not be established based on criteria established by NAV but rather on the actual circumstances of each specific case that led to the imposition of a penalty. With the current practice, even a minor administrative error could lead to “risky taxpayer” status and thus might result in an unfair fine.

Fiscal representations are crucial in ensuring that the taxes levied on foreign companies not established in Hungary are incorporated into the Hungarian budget. We think the rules are partly outdated and incomplete, thus open to abuse. That could lower the inflow of revenues to the budget and also significantly complicates the operation of financial representatives acting as intermediaries between the related foreign businesses and the Hungarian public finances.

Department of Taxation and Customs Administration. We hope the legislators will consider and adopt our constructive and forwardlooking suggestions.

ZL: The number of tax types in Hungary is still very high compared to other countries. There is still room the reduce or aggregate specific tax types. A major improvement would be a complete change of the local business tax system by adding more tax basedecreasing items (labor or investment costs) or building this burden into CIT.

How to Keep the Shares of a Family and its Business Together

Wealth Management Foundation

make the operation of a family business impossible. If the owners and managers of the company cannot work together, the firm will soon suffer. Problems between the stakeholders of family companies are often even more challenging to solve due to emotional relationships.

Due to the format and complexity of wealth (asset) management foundations, which have existed for a relatively short time in Hungary, this is primarily recommended for families with high value (HUF 600 million plus), diversified assets, many family members and a long-term asset management plan of up to 50 years. Such a foundation can be an excellent basis for the asset management of a diversified “dynasty” in terms of assets and relationships.

Private Holding Structures

The holding structure is probably known to all entrepreneurs and used by many. It s a good solution for families where the next generation is also an experienced owner and/or manager who is not unused to making complex business decisions and where there is inter-generational experience of working together effectively without significant conflicts.

Family Constitution

This is not something we expect to happen in the near future. Additionally, we would be happy to see a decrease in the number of tax types that cannot be categorized simply as direct or indirect taxes, as some Hungarian special taxes are based on turnover rather than profit. The classification of such tax types is also problematic in crossborder transactions involving doubletax treaties.

GyF: Hungary is at the forefront of developing digital tax administration processes. This can generate significant savings in resources and money. VGD Hungary’s team of tax experts was involved in developing and piloting these digital solutions. As an auditor, I can honestly say that reducing the financial administration of companies represents a very positive direction for Hungarian legislation, and companies react positively to all such changes. I trust that the coming years will also see many new developments and simplifications.

BBJ: Are the tax and accountancy fields still attractive to young graduates? Are you able to source the workforce you need and retain it?

Business owners must look at a company’s operations from a different perspective than company managers or employees. The responsibility of ownership is no less than the responsibility of management, which must be learned in the same way as the professions required for specific jobs in the company. Therefore, the responsibility associated with company ownership should be passed on to the next generation when they are experienced enough to exercise ownership rights. In addition to the professional field, the owner’s experience may also help with financial, legal and management knowledge.

How to Transfer?

Many family companies are structured by their owners so that the next generation also has a stake in the business. Typically, these shares are given to the younger generation as a gift and have the same ownership rights in the company as the founders. The ownership role comes with difficult decisions (downsizing, restructuring, liquidation, etc.), which are difficult even for an experienced entrepreneur but can be even more burdensome for a young person at the beginning of their career.

The family constitution is a somewhat euphemistic name for a “family regulation” in which the first generation lays down the basic principles of the family’s functioning. This is not a solid, unchangeable “law,” but rather a guideline from the older generation covering family, business, social and cultural relationships. Over the years, the experiences of the following generations are integrated into it, continuously improving it. The family constitution can be given an enforceable legal framework, but it is more about writing down the common family values, which the family members claim as their own.

Fiduciary Asset Management (Trust)

Fiduciary asset management is a tool that can be used when someone wants help regarding the succession of the family business or estate and succession planning. Hungarian fiduciary asset management is a type of contract that can be applied flexibly locally but also holds its own in international contexts.

We have already sent our proposals for amending legislation on the abovementioned issues to the Ministry of Finance’s

IN: Modern tax and accounting solutions, such as automation and system integration, make the profession more attractive, but accountants must be more prepared to analyze data. The overall problem

Owners running a family firm have a particularly difficult job if the next generation is not interested in the business. Most Hungarian businesses are not self-operating companies but the workplaces of their owners, who cannot be excluded from the activity. Therefore, if you want to involve the next generation in the ownership of your business, you should do so only if they are interested in active participation in the company’s life.

Each of the following four solutions is well suited to maintaining control over a family business, passing on the experiences of the older generations and sharing ownership responsibility.

If the main goal is to “keep” a family business together, it also provides a very effective solution for families in several circumstances. These include when the next generation is a minor, if there is a large age difference between generations, when the next generation will not continue the family business operating as a company, if the foundation generation has also built significant private wealth from the income extracted from the firm, or there are also beneficiaries with special care / educational needs who require lifelong care, and so on.

Internal feuding can

Tamás Danku, TEP Managing Director

Gábor Fajcsák

Gyöngyi Ferencz

is that even fresh graduates have no proper level of English knowledge. Our company invests considerable resources into language training for employees.

no exceptions. However, the expected fundamental changes in this industry (digitalization, reshaping tax systems) could still make these areas attractive to young people and offer exciting career opportunities.

PH: This has been the most challenging area in our business life in previous years. The tax and accountancy fields are changing, and this transformation should be presented in a more attractive way to young graduates. The borders between different professions (accounting, controlling, taxation) are fading, and a more complex approach and attitude are necessary. These could also be selling points for graduates since they seek interesting and challenging positions. Companies need to recognize that the new generation should be managed and motivated in a totally new way.

ASz: Yes, although the competition in the labor market to source and retain talent remains intense despite the recent economic slowdown.

BBJ: Is there anything else you would like to add?

IN: In the tax and accounting field, there are many challenges due to the increasingly demanding requirements for efficient data services (online invoices, online cash register, online communication, etc.) This implies there is, or will be, significant IT development in our sector.

GB: Finding new talents is a common issue in consultancy, and tax and accountancy are

LB: These fields are still quite attractive. Regarding accounting, we can source the necessary workforce (however, the fluctuation rate is relatively high, and the work experience may be troublesome). However, finding employees specifically for the taxation and audit field is quite challenging. The government is keen to help by introducing a PIT-free status for young employees under 25.

Our Market Talk Panel:

• István Nemecz, managing director, Accace Hungary

• György Boár, partner, Andersen Tax

• Péter Hajnal, partner and managing director, Moore Hungary

• Lajos Bagdi, partner, Niveus Consulting Group

GF: Generally speaking, although it is also specifically relevant to the financial sector, the biggest issue is the need to improve our education system. More well-trained graduates are required with English knowledge. We would like to see more attention and financial resources provided to improve education. PRESENTED

• András Szalai, partner and managing director, Process Solutions Kft.

• Gábor Fajcsák, partner and head of tax service, RSM Hungary

• Zoltán Lambert, managing partner, WTS Klient Business Advisory Ltd.

• Gyöngyi Ferencz, partner, VGD

Andersen Says it is Well Ahead of its Growth Plans

The sales revenue of Andersen Adótanácsadó Zrt., a member of Andersen Hungary, reached HUF 2.1 billion in 2022, almost 37% up on the previous year. That considerably exceeds the annual growth rate of 10-15% envisaged by the management. The Budapest-based company has further reinforced its position in the market of tax advisory services.

Despite the adverse economic trends, Andersen Adótanácsadó Zrt. improved its growth rates substantially in 2022 over previous years.

“There is considerable progress in all our business lines and service areas. With an overall 37% growth in sales revenues, we are well above the market average. The last time we were able to jump this much was in 2016 when our

base was just a third of the current size,” says CEO Károly Radnai of last year.

Several service areas performed above the 37% average, with the tax allowances and state subsidies business line topping the list. This area practically doubled its sales revenues compared to 2021. Andersen has made no secret of its ambition to break the dominance of the Big Four consultancies in this area and provide the highest level of service in Hungary.

There was also massive growth in the areas of indirect tax (VAT, customs, green tax) and M&A advisory (restructuring, acquisitions, and transaction tax planning), with the former generating 63% and the latter around 73%

more sales revenues compared to the previous year, the company says.

Andersen’s tax services for the film industry also deserve special attention, as they reported growth of almost 50%. This business line has always been one of the best performing for the company, and the 2022 figures mean Andersen has further reinforced its position as the market leader in tax advisory services to the film industry in Hungary.

Positive Feedback

Alongside its business results, professional feedback and recognition also show a very positive picture of the quality of Andersen’s work and its services, the firm says. Prestigious tax magazine International Tax Review again assessed Andersen Adótanácsadó Zrt. as the top-performing Hungarian tax advisor in 2022. It means that, for the second year in a row, the company

has earned the highest professional accolade of the year while also collecting the Indirect Tax Firm of the Year award.

Opening up to Far East markets has emerged as a new strategic element of Andersen’s medium-term plans.

“The goal is first to approach those Asian businesses and large corporations which have operating investments, sites, manufacturing capacities or subsidiaries in Hungary, or are laying the groundwork for such investments,” Radnai explains.

“In this regard, we do not only intend to provide special services for our Far Eastern clients but are also continuously developing our professional team towards the needs of this market,” he adds.

Law firm Szabó, Kelemen & Partners Andersen Attorneys and Andersen Adótanácsadó Zrt. collectively makeup Andersen Hungary. The Budapestbased tax consultancy and legal outfit is currently the fifth largest player in the Hungarian market after the Big Four companies. Andersen Hungary has more than

100 employees

at its clients’ disposal. To maintain the growth rate outlined in the business plan and satisfy client needs, the firm says that Andersen Adótanácsadó Zrt. will continue expanding its professional team in 2023.

The Anderson Hungary management team.

András Szalai

Zoltán Lambert

Opposition MP: Hungary Offered CATL EUR 800 mln in Grants, Tax Breaks

It has been suggested that Hungary offered EUR 800 million in grants, tax breaks, and infrastructural support to the EUR 7.4 bln greenfield investment by the world’s largest EV battery maker CATL, which is building its second European production facility in the Hungarian industrial hub of Debrecen (225 km east of Budapest). The figure was alleged by an opposition MP, citing Chinese media, according to intellinews. com. If true, the size of the government subsidy demonstrates Hungary’s aggressive strategy for luring FDI over the past few years, particularly in Asia and the battery sector, which the government sees as strategic. Hungary has the world’s fourth-biggest electric battery production capacity after China, the United States and Germany. The Hungarian government has sought to attract the world’s leading EV battery producers and suppliers to diversify dependence on traditional vehicle manufacturing.

Gov’t Covering Dunaferr Payroll Tax

The government has decided to cover payroll for troubled steel maker Dunaferr for six months, Prime Minister Viktor Orbán said in a video message posted on Facebook. The expenditure will come to more than HUF 16 billion, Orbán said. “Dunaferr has been ruined by its former owners and management, and finally Brussels’ sanctions,” he added. He said work would be done in the coming months to ensure a “dependable, reliable owner” can take over the steelworks when the six-month period ends. Dunaferr was ordered under liquidation in mid-December. Dunaferr pleaded for government support in September after shutting down its blast furnaces. Low steel prices paired with the rise in energy prices, supply chain issues, and

Are

the war in Ukraine put the company in a situation with which it is “unable to cope alone,” Dunaferr said at the time.

OXO Adopts IFRS, Accounting in EUR

Listed OXO Technologies Holding switched from Hungarian Accounting Standards to International Financial Reporting Standards at the start of this year and is now doing its accounting in euros, not forints, it said. It added that the currency in which OXO’s shares trade has been euros since February 15, 2023. Its board has also cleared the company to start looking for a new headquarters elsewhere in the European Union that provides its targeted investors “with a more familiar operating environment,” according to an announcement on the website of the Budapest Stock Exchange. OXO has begun establishing ties with investors in Western Europe and Asia and is expanding its staff abroad. The change of HQ does “not impact in any manner” the trade of OXO shares on the Budapest Stock Exchange, OXO said.

NAV Donates Protective Masks to Charity

The Hungarian National Tax and Customs Administration (NAV) has offered hundreds of thousands of seized protective masks for charity, according to profitline.hu. Some 400,000 FFP2 protective masks had arrived at the Budapest Ferenc Liszt International Airport from the Far East. Since the customer did not pay the duty and VAT imposed by customs clearance, NAV confiscated the goods. The customs office stated that the masks would have been destroyed if not given to charities.

MTel Wins Deloitte’s ‘Green Frog’ Award

This year’s Green Frog Award was won by Magyar Telekom, according to profitline.hu. For the 22nd time, Deloitte Hungary has announced the initiative to

recognize companies with outstanding performance in non-financial reporting. At this year’s tender, Budapest Airport won the award in the first sustainability report category, and the Bátor Tábor Foundation also received recognition.

NAV Consulting Users on GitHub

The National Tax and Customs Administration (NAV) is asking for users’ opinions on the XSD schema drafts of the machine-to-machine connection of the eVAT system on the GitHub online development platform, writes novekedes. hu [Growth]. NAV says it considers it essential to incorporate practical user suggestions into the concepts, which is why it is making the draft accessible to everyone on the best-known development platform, GitHub. The purpose of the VAT return via machine-to-machine connection is that taxpayers can import data that can be used to prepare the return into their own administrative systems. That return can be submitted with a machine-to-machine link, which can also be used for VAT analytics by taxpayers and NAV. This would make it easier for businesses and accountants to fill out and check the VAT return, and there would be less administration.

Provisions of Double Taxation Treaty with U.S. to Cease in 2024

The provisions of a double taxation avoidance agreement between Hungary and the United States will cease to apply from January 1, 2024, the National Tax and Customs Administration (NAV) said

on its website. NAV noted that the States informed Hungary through diplomatic channels on July 8, 2022, of the unilateral termination of the agreement. The deal ceases to have effect with respect to taxes withheld at source on January 1, 2024, and concerning taxable periods beginning on or after January 1, 2024, for other taxes, it added. Minister of Foreign Affairs and Trade Péter Szijjártó said days after Hungary was informed of the termination of the treaty that America took the step because of Hungary’s opposition to the introduction of the global minimum corporate tax rate and the resulting tax increases. The double taxation treaty was signed in 1979.

Despite ‘Extreme High Taxes,’ MOL Earnings Rise

Hungarian oil and gas group MOL posted a surge in full-year EBITDA for 2022 at USD 4.7 billion, up from USD 3.5 bln in 2021, supported by strong upstream and downstream contributions, news wire Reuters reported. The company outperformed its EBITDA target of USD 4.1 bln to USD 4.4 bln. “The robust EBITDA in 2022, even with the extreme high taxes, price caps and regulatory measures in place, gives the possibility to continue our transformational and development journey,” CEO Zsolt Hernadi said. MOL, which operates refineries in Hungary, Slovakia, and Croatia, reported a net profit of USD 1.66 bln in 2022, down from USD 1.75 bln in 2021. The company posted a quarterly net loss of USD 106 million, down from USD 351.2 mln in the fourth quarter of 2021. The quarterly upstream EBITDA grew by 8% to USD 492 mln year-on-year.

you interested in saving time and reducing your risks with professional solutions? The experts of VGD Hungary will be pleased to assist you!

Tax Consultants

(A), ARX Equity Partners

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

Individuals (100) –

kalocsai Klára Vaitz Szilvia Morvay

Judit Jancsa-pék, nóra Tünde Rácz ––

Zoltán lambert, Tamás gyányi, andrás szadai Andrea Pásztor Esther Lausek

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

andrás sarkadi-nagy Enikő Kovács Gábor Takács

Tamás verbai, Jenő szarvák ––

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

Tibor Kovács, Lea Kovács-Kneitner (100) –

Individuals (100)

andrea kuntner –Krisztina Csákics

Tibor kovács, lea kovács-kneitner Lea Kovács-Kneitner –

János girászin, lajos bagdi

1139 Budapest, Váci út 99–105. (1) 886-3700 info@rsm.hu

1027 Budapest, Kapás utca 6–12. (1) 279-2930 budapest.office@ leitnerleitner.com

1143 Budapest, Stefánia út 101–103. (1) 887-3700 info@wtsklient.hu

1124 Budapest, Csörsz utca 49-51. (1) 510-1100 taxconsulting@ dlapiper.com

1135 Budapest, Mór utca 2–4. (1) 237-9800 sales@saldo.hu

1138 Budapest, Népfürdő utca 22. (1) 700-1470 verbai.tamas@hcg.hu

1134 Budapest, Váci út 33. (1) 225-7575 vgd.budapest@vgd.hu

2318 Szigetszentmárton, Ifjúság útja 9. (30) 635-5022 info@tilea.hu

1023 Budapest, Bécsi út 3–5. (30) 863-7778 lajos.bagdi@niveus.hu

István Nemecz (30) ACCACE Holding BPO (70)

Finacont Holding Befektetési Kft. (100)

istván nemecz Katalin Berényi Nemeczné Norbert Nagy

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

1134 Budapest, Váci út 45. (1) 412-3530 hungary@accace.com

1062 Budapest, Aradi utca 16. II. emelet 2. (1) 345-0092 finacont@finacont.com

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

péter bergmann Kiss József, Hegedűs László, Soltész Sándor –

–

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

ABT Treuhand Vagyonkezelő Zrt. (100)

ARK INVEST Magyarország Kft. (87), individuals

Julianna varga –Dóra Pődör-Molnár

györgy kozma Andrea Darázs István Rajkai

József láng ––

Zsolt ilyés, krisztina garas kovácsné ––

Zoltán gerendy, ilona gerendy-orbók ––

bíró Sándor Laczka Marcell Nagy

Ernst & Young Center Cluster Limited (100)

botond Rencz Attila Győri Ágnes Pellion

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

Rezső Rózsai (A), István Henye (A) KPMG CEE Partnership Trust (CZ) (A)

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

Rezső Rózsai, gábor beer Krisztina Nagy Gabriella Liptay

philippe michalak budzan, Zoltán lászló benedek ––

1066 Budapest, Mozsár utca 16. (30) 740-7477 info@pmxconsulting.hu

1138 Budapest, Váci út 186. (1) 238-9000 bergmann@bergmann.hu

9022 Győr, Liszt Ferenc utca 35. (96) 525-030 gyor@molnar-partners.hu

1113 Budapest, Karolina út 65. (1) 460-7401 m-audit@m-audit.hu

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

1064 Budapest, Izabella utca 66. (70) 380-3970 garas.krisztina@ arkconsulting.hu

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

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

1132 Budapest, Váci út 20. (1) 451-8100 mailbox.ey@hu.ey.com

1134 Budapest, Dévai utca 26–28. (1) 455-2000 office@hu.gt.com

1134 Budapest, Váci út 31. (1) 887-7100 info@kpmg.hu

1139 Budapest, Fiastyúk utca 4–8. (1) 429-3010 mazars@mazars.hu

1138 Budapest, Váci út 144–150. (70) 323-7787 office@mooreglobal.hu

Accounting Firms

orsolya ignácz Ágnes Bartha Norbert Szabó

péter

1134 Budapest, Váci út 33. (1) 451-7100 info-hu@ps-bpo.com

1138 Budapest, Népfürdő utca 22. Duna

péterné bergmann Kiss

Hegedűs László, Soltész Sándor –

1138 Budapest, Váci út 186. (1) 238-9000 bergmann@ bergmann.hu

1139 Budapest, Váci út 99–105. (1) 886-3700 info@rsm.hu

notes: (1) The figure includes Finacont Kft.’s total net revenue in 2022 and Finacon-T 3GA Kft.’s relevant professional revenue in 2022. (2) Revenue of WTS Klient Kft. in 2022.

Ruszin (50), Veronika Antal Ruszinné (50)

veronika Antal Ruszinné Zsolt Ruszin Zsolt Ruszin

1097 Budapest, Könyves Kálmán körút 12–14. (1) 238-8023 fairconto@fairconto.hu

(100)

–IB Interbilanz Holding Wirtschaftsprüfung GmbH (100)

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

–

papp Tibor Papp Tibor Papp

zsolt ilyés, krisztina garas kovácsné ––

zoltán gerendy, ilona gerendyorbók –

Waltraud körbler, ágoston jakab, judit gittinger, gábor szarka ––

philippe michalak budzan, zoltán lászló benedek

1114 Budapest, Bartók Béla út 29. (1) 550-0510 hyper@hypercortex.hu

1114 Budapest, Bartók Béla út 29. (1) 550-0510 iroda@iriszoffice.hu

1121 Budapest, Zugligeti út 6. (1) 391-4130 office@consbp.hu

1116 Budapest, Fegyvernek utca 8. (1) 550-0510 iroda@ecocreative.hu

1064 Budapest, Izabella utca 66. (70) 380-3970 garas.krisztina@ arkconsulting.hu

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

1134 Budapest, Dévai utca 26–28. (1) 455-2000 office@hu.gt.com

1139 Budapest, Fiastyúk utca 4–8. (1) 429-3010 mazars@mazars.hu

Rödl International GmbH (100)

Roland Felkai ––

1062 Budapest, Andrássy út 121. (1) 814-9800 budapest@roedl.com

4 Socialite

Müpa at the Heart of Culture in Budapest

Idly looking around online for things of a cultural bent to do in the capital, I landed on the Müpa Budapest website and was struck by how many of the events were sold out, particularly as we’re talking pretty high culture. To find out why, I arranged to interview Janina Szomolányi, director of festival operations at what was once called the Palace of Arts.

Come the appointed day, I hopped on the number two tram that runs along the Danube, offering terrific views of the monumental buildings on the Buda side, and stops just outside Müpa. Arriving at the impressive waterfront building, I could see why it’s regarded as one of Hungary’s best-known cultural institutions.

Opened in 2005, Müpa Budapest proudly claims, “As a conglomeration of cultural venues, the building has no precedent in 20th-century Hungarian architecture and has no peers in the whole of Central Europe.”

Its builders wanted to create a new European “cultural citadel” as part of the Millennium City Center Complex on the UNESCO World Heritage-listed Danube waterfront. Their ambition was rewarded when, in 2006, the building won the FIABCI Prix d’Excellence in

2006

and the FIABCI audience award in 2007.

The building has two main performance halls (the Béla Bartók National Concert Hall, with a 1,650seat auditorium, and the Festival Theater, with a capacity of 450-seats) and is also home to the Ludwig Museum of contemporary art. Müpa can host

performances in any genre at nearly any scale. The pipe organ in the Béla Bartók National Concert Hall is the largest concert hall instrument of its type in mainland Europe.

From the beginning, Müpa’s brief was to offer classical, contemporary, popular, and world music as well as jazz and opera. It also presents contemporary circus, dance, literature, film, and children’s programs.

Its role is to “introduce new artistic trends and directions – while respecting Hungarian and European artistic traditions – and to relay them in a clearly understandable way that creates rich and rewarding experiences to be enjoyed by both the connoisseur and the person on the street.”

Festival Highlights

Its program highlights include the Early Music Festival, running now, the Bartók Spring International Arts Weeks, starting on March 31, Budapest Wagner Days in June, and the Liszt Fest International Cultural Festival, which happens in October.

The Bartók and Liszt festivals are Szomolányi’s babies. A Budapest native, she began her career with a cultural company founded by the Budapest city government and cut her teeth working on the city’s spring and fall festivals which Müpa’s Bartók and Liszt festivals superseded.

“These two festivals are important to the city for a few reasons,” Szomolányi tells me. “They make it possible for other cultural venues in Budapest besides Müpa, such as the Liszt Academy or the House of Music, to bring world-famous stars on their stages. They also enable Hungarian artists to perform with other

international artists and orchestras. For example, Hungarian classical violinist Kristóf Baráti is playing as a soloist with the Philharmonia Orchestra at the closing event of this year’s Bartók Spring Festival,” she explains.

“With the Bartók Spring Festival, it’s also important to remember that it’s not just about classical music. The festival covers world music, jazz, pop, visual arts, and dance performed by Hungarian and international artists,” Szomolányi says.

“We also offer free citywide events that create a nice vibe in the city. This year, as part of Bartók Spring, there will be an open-air stage at Erzsébet tér (Elizabeth Square), near Szent István-bazilika (St. Stephen’s Basilica) in the center of the city, which will be more dancing and fun-oriented. The festivals are also valuable when it comes to international tourism. Before COVID-19, around

20%

of visitors to the festivals were foreigners. Now, of course, we have to start all over again,” the director adds.

On the Müpa website, you can buy t-shirts that reproduce a New York Times quote: “No tickets for Bayreuth? Budapest has a Wagner Festival, too.” This, not too subtly, promotes the fact that Müpa’s Wagner Days are second only to the acknowledged mecca for devotees of the towering German composer.

Why Wagner?

When I asked why Wagner, Szomolányi explained that the Budapest Wagner Days were the brainchild of Hungarian

conductor Ádám Fischer, “who realized, when Müpa’s concert hall was planned, that this would be an acoustically perfect setting to perform Wagner operas, staged and semi-staged.”

Fischer was clearly correct. On its website, Müpa includes this quote from a nameless bowled-over critic: “Not all Wagner performances may have the power to change people, not all of them may leave a persistent effect on the human soul, but the Wagner Days directed by Ádám Fischer do have this power.”

This year’s Wagner Days will run from June 15 to 18. Of the performances, there are currently only tickets available for the performance of “Siegfried.”

Apart from the Met HD Live program that offers New York Metropolitan Opera productions on film and this year includes seven new shows, Müpa also has a hugely popular Film Club.

“These two festivals are important to the city for a few reasons. They make it possible for other cultural venues in Budapest besides Müpa, such as the Liszt Academy or the House of Music, to bring world-famous stars on their stages. They also enable Hungarian artists to perform with other international artists and orchestras.”

A recent Film Club program focused on the work of Italian director Federico Fellini. Beginning on February 27, the Film Club will explore the strange and dark world of New German Cinema from the early

1970s

to the late ’80s. It includes classic movies “The Enigma of Kaspar Hauser” and “The Tin Drum.” Tickets are currently still available for most of the films.

There’s no doubt, then, that Müpa offers a rich and varied set of cultural programs and events. But it has to be said that it’s located in a part of Budapest that’s not exactly brimful with restaurants and bars to patronize before or after a night at the opera, the movies, or whatever.

Fortunately, Müpa has the P’Art Café and Bistro and Boheme Restaurant, and, as Szomolányi reminds me, you’re still only 15 minutes away from Budapest city center.

DAVID HOLZER

Photo by Tamás Réthey-Prikkel / Müpa

Taking an Off-season Trip Down to Hungary’s South

While Hungary’s big cities have plenty of amenities to offer all year round, it can be harder to find a more rural setting during the offseason where one can leave urban life behind without running the risk of running out of programs to follow or places to visit by the time the night falls. Villány is an exception.

With its hilly landscape, excellent wines, and quality gastronomical offerings, Villány, which gives its name to one of the country’s most significant (predominately red) wine regions, is a two-hour, 225 km drive south of Budapest.

Thankfully, the M6 is perhaps one of the least traffic-dense motorways in the country, where the main risk is posed not by other drivers but by the temptation to shave a few minutes of travel time off by putting your foot to the floor, seeing the empty road.

The small town of Villány is a special place near the Croatian border with its own warm, sub-Mediterranean microclimate that makes it possible to successfully grow figs, for example, as well as all those grapes. The settlement itself boasts little more than

2,000 inhabitants, but it is a lot livelier, even at night, than a typical Hungarian village of this size.

Prominent Hungarian winemakers such as Gere, Günczer, and Bock have guesthouses where you can try wine specialties, not to mention the smaller, local vintners. Baross Gábor utca, acting as the main arterial vein of Villány, is lined with several establishments offering rooms, wine-tasting programs, as well as food. Very few of them close before 10 p.m., even in February.

Fine Dining and Local Specialties

There are many different kinds of restaurants in the vicinity, with some oriented towards fine dining, such as Sauska 48, mentioned in the Michelin Guide. But it is also worth trying some local specialties inspired by the region’s Danube-Swabian traditions.

One popular local item on most menus is “Stifolder,” a kind of sausage named for the group of Germans who settled in the area around Mohács and Pécs in the 18th

century.

Most of those people who arrived in Baranya County called themselves “Stiffoller,” as they came from Hesse, specifically the region of the Abbey of Fulda (Stiftsfuldaer in German).

The original seasoning of the sausage has changed over time, and with the addition of Magyar paprika, it became an interesting, cold-smoked delicacy combining German and Hungarian characteristics. It is excellent with freshly-baked bread and does a stellar job of mopping up the alcohol in the local, full-bodied red wines.

The surrounding region is excellent for hiking. Without even having to leave the town, tourists can gain access to a panoramic sight by climbing Templom Hill and checking out the lookout tower. The supporting columns and terraces of the wooden building, inaugurated in 2011, are decorated with carvings by woodcarver and sculptor Győző Szatyor.

Below the tower is an abandoned quarry pit, through which the Ammonites nature trail leads. The former quarry has been protected since 1989, and in it, you can find a unique collection of ammonite specimens from the Jurassic period and PliocenePleistocene vertebrate remains.

One popular local item on most menus is “Stifolder,” a kind of sausage named for the Germans who settled in the area around Mohács and Pécs in the 18th century. Most […] called themselves “Stiffoller,” as they came from Hesse, specifically the region of the Abbey of Fulda (Stiftsfuldaer in German). The original seasoning of the sausage has changed over time, and with the addition of Magyar paprika has become an interesting, cold-smoked delicacy combining German and Hungarian characteristics.

The nearby rustic town of Villánykövesd is just a 40-minute walk and offers an opportunity to discover smaller local vintners and take a look at the old rows of cellars. In the other direction, but still near Villány, there is a unique sculpture park to intrigue art lovers.

Free From Ideology

In the abandoned quarry on Szársomlyó Hill, artists whose experimental ideas were unusually creative for the time began to work in 1967. The pieces here are free of the ideology of the socialist system of art direction. They deal

exclusively with aesthetic and artistic questions, giving a picture of the real art of the period.

In the early years, purely domestic artists worked here, but later foreign artists from Norway, Italy, and Japan joined them. Most of the sculptures are made of local grey limestone from Nagyharsány and Beremend.

After a long hike, few things are more pleasurable than submerging one’s aching limbs in hot thermal water. Roughly a 20 minute drive away, the small town of Harkány offers an opportunity to do so with its thermal baths.

The water of the Harkány Thermal Spa, which offers a range of open-air and covered pools, saunas, and more, is quite unique, even on the global scale, as it contains dissolved sulfide ions, which has a healing effect on joint problems, rheumatic diseases, and even skin problems like psoriasis. According to the spa’s website, there are only two other natural sources in the world that can be visited by people suffering from psoriasis; the nearest one is the Dead Sea.

The bath is open even during the winter, and thanks to the hot thermal water, you barely feel the cold even when bathing in the open-air section. The complex is also home to an aquapark for the kids, and a variety of massage treatments are on offer.

Villány and its surroundings might not be the first destination that comes to mind for people visiting Hungary, but it can offer a very different experience to a city break. Its uniqueness lies not only in the quality of its wines and the picturesque views but also in the fact that it can be visited any month of the year without facing closed restaurants and bars or empty streets.

BENCE GAÁL

Some of the little wine bars lining Baross Gábor utca in Villány. Photo by berni0004 / Shutterstock.com

Chamber of Commerce Corner

German-Hungarian Chamber of Industry and Commerce

Márton Nagy: Preserving Europe’s Competitiveness

When: March 2, 6:30 p.m. • Venue: Kempinski Hotel Corvinus, Erzsébet tér 7-8, 1051 Budapest • Cost: Members HUF 19,800 + VAT/person; non-members, and guests HUF 32,900 + VAT/person

CEO Breakfast Briefing: Logistics Developments, innovation, and investment in Hungary’s logistics sector will be the focus of this “Breakfast, Insight and Networking” event of DUIHK and Budapest Business Journal Discussing the latest issues in road and air logistics networks will be: • Rene Droese, Chief Development Officer, Budapest Airport • Ádám Mészáros, Country Managing Director at DHL Express Hungary • Thoralf Wagner, CEO, Lufthansa Technik Budapest Kft. BBJ editor-in-chief Robin Marshall will moderate the English-language discussion.

At the German-Hungarian Chamber of Industry and Commerce (DUIHK) Business Breakfast on February 14, Minister of Economic Development Márton Nagy gave a detailed overview of the government’s view on prospects for the Hungarian and European economy and explained what steps he believes are necessary at national and EU level to secure Europe’s competitiveness.

The government’s perspective is impacted by global macroeconomic developments, first and foremost, the expected impact of the U.S. Inflation Reduction Act. Hungary believes Europe is currently unable to counter this with an adequate response to prevent the relocation of industrial enterprises from Europe to the United States.

Regarding the situation in Hungary, DUIHK chairman András Sávos emphasized that companies here, not only German ones, face multiple challenges. Inflation, the shortage of skilled workers, and structural and technological upheavals in many sectors are giving companies a hard time. In addition, there are concerns about individual government measures such as price freezes, special taxes, or the practice of granting subsidies.

A large part of the event was devoted to the topic of energy.

Nagy emphasized that expanding renewable energies requires enormous investments, especially into EU transmission grids. Among other things, the lack of grids and balancing production capacities slows down the expansion of solar energy in Hungary.

EVENTS

Jour Fixe: Celebrating our 30-year members!

At the next DUIHK “Jour Fixe 30” event, the spotlight will be on the founding members of the chamber and the companies that have been members since 1993. The venue, the Hotel Kempinski Corvinus Budapest, was the location of the founding meeting in 1993. In English and Hungarian.

When: March 7, 8 a.m. • Venue: Anantara New York Palace Hotel, Erzsébet krt. 9-11, 1073 Budapest

• Cost: HUF 14,900 + VAT/person

Female Business Leaders Conference on International Women’s Day

On International Women’s Day, female business leaders will discuss how women think about sustainable business and supply chains and whether the crisis will strengthen female leadership. In cooperation with Dialog Ungarn. In English and Hungarian with simultaneous translation.

When: March 8, 2 p.m. • Venue: UniCredit Bank Hungary Zrt., Szabadság tér 5-6, 1054 Budapest

French-Hungarian Chamber of Commerce (CCIFH)

The Future of Energy (Politics): the Energy of the Future

The French-Hungarian Chamber of Commerce (CCIFH) will host its upcoming “Hot Topic” business breakfast with Dr. Barbara Botos, Ambassadorat-large for Climate at the Ministry for Energy, on affordable energy and future energy sources.

When: March 7, 9-11:30 a.m. • Venue: Kempinski Hotel Corvinus Budapest, Erzsébet tér 7-8, 1051 Budapest •

Tickets: Members HUF 25,000 + VAT; non-members HUF 37,500 +VAT.

Inter-company CCI France International Sports Challenge.

carbon footprint. Gather your best runners, walkers, and cyclists, and let them have fun and earn points daily doing sports, engaging in missions, quizzes, and photo contests. Register your company with a team of five people before March 15; 25% of the participation fee will support The SeaCleaners, an association to clean the oceans.

When: From March 27 to April 23. • Cost: Members EUR 200 + VAT per team; non-members EUR 250 + VAT per team.

Canadian Chamber of Commerce in Hungary (CCCH)

covering how and when to introduce motivation and ensure success. What are the solutions to disciplined execution?

When: March 9, 9-11 a.m. • Venue: Kinnarps Hungary Kft., Váci út 92, 1133 Budapest. • Cost: Free for Dutcham & SCCH members; non-members HUF 9,000

British Chamber of Commerce in Hungary (BCCH)

BCCH CEO Dinner Returns

The British Chamber of Commerce in Hungary (BCCH) will hold the first of its 2023 CEO Dinners, its longest-running marquee series, with Martino Grazzi, managing director of GSK in Hungary. GSK is a firmer long-time partner of the BCCH that recently re-joined. Grazzi will discuss the current trends and challenges affecting the pharmaceutical industry locally and globally. The chamber says the event combines a three-course dinner with wine and welcome drinks with the chance to hear the views of a foremost professional on current developments.

The Canadian Chamber of Commerce in Hungary (CCCH) will cover the hot topic of where and how we work in the next session of its “Business Breakfast” series entitled “Workplace Academy.” In the last few years, many office workers were forced to work from home, leading to a paradigm shift in how we work. While remote work has been a game-changer for many people, it has its challenges. The home office routine differs from going to a central workplace, and people surely felt apprehensive about the change. Returning to the office may also come with challenges.

Yet, while remote work can be productive for some, others find they are more effective in an office setting, surrounded by their colleagues. The structured environment and lack of distractions can improve focus and productivity. This transition after remote working can require a significant adjustment, but it also provides opportunities for increased productivity. Experts will talk about workspace utilization, adaptation, the importance of social spaces and useful ways to “reactivate” the office.

Keynote speakers: • Michael P. Smithing: Real estate advisor, co-founder of Dynamic Offices • Michael Cojocar: Architect, founder of CMA Architects • Norbert Held: Workplace specialist, T Office Solutions

When: March 8, 8:30-11 a.m. • Venue: CIB Bank office building, Petrezselyem u. 2-8, 1024 Budapest. • Cost: Members HUF 21,900 (incl. VAT); non-members HUF 27,900 (incl. VAT) • events@ccch.hu

Netherlands-Hungarian Chamber of Commerce (Dutcham):

Beyond Motivation: Where (self-) discipline starts?

When: February 28, 6–8 p.m. • Venue: Párisi Udvar Hotel, Petőfi Sándor u. 2-4, 1052 Budapest • Cost: Members HUF 25,000 (incl. VAT); non-members: HUF 35,000 (incl. VAT). Only limited spaces are still available.

Swiss-Hungarian Chamber of Commerce (Swisscham Hungary)

Swisscham Networking Café

Get moving with the global French Chamber Network. Commit to CSR, support your employees’ well-being and mental health, and win cohesion. Measure and limit your company’s environmental impact and reduce your

Based on the success of a joint meet-up on motivation in 2022, the NetherlandsHungarian Chamber of Commerce (Dutcham) and the Swedish Chamber of Commerce in Hungary (SCCH) are holding their next CEO & HR forum,

The Swiss-Hungarian Chamber of Commerce (Swisscham Hungary) Networking Café was held for the second time this year, once again hosted by chamber member Párisi Udvar. Swisscham says turnout was high with, in addition to old and new members, “many not (yet) chamber members.” Chamber president István Béres and Júlia Lipovecz, its director, opened the event. Afterward, representatives of some members briefly introduced themselves before informal exchanges took place.

Upcoming Visit: Sika Hungary

If you are interested in getting to know new people and innovative companies, the next Swisscham visit will be to member company Sika Hungary, a key player in both the construction industry and construction chemistry, in Biatorbágy.

When: March 3, 9 a.m.-1:30 p.m.

• Venue: Sika Hungária Kft., Rozália Park 5-7, 2051 Biatorbágy

• Cost: Members free; non-members HUF 30 000 HUF / Person (0% VAT)