Investing_Guide_en_2012 pwc

Investing Guide Hungary 2012 State aid and incentives

Tax and legal environment

Hiring and employment

Interview with the President of HITA

Why invest in Hungary? One of Hungaryâ&#x20AC;&#x2122;s most important competitive advantages is the governmentâ&#x20AC;&#x2122;s commitment to making it easier to do business, and to help manufacturing companies achieve their best.

Investing Guide Hungary 2012

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Contents

PwC Hungary in Budapest and also in Győr. 05

What should you know

about Hungary?

05 Location and climate

06 Infrastructure in Hungary

11 Main industries

Why invest in Hungary?

19 Cash subsidies

26 Tax incentives

How does one

invest in Hungary?

29 Establishing your business

33 Hiring and employment

38 Key tax-related issues

About the Hungarian

Investment

and Trade Agency (HITA)

Interview with the

president of HITA

About PwC

Trusted business advisor

Published by PricewaterhouseCoopers Hungary Ltd. in cooperation with Hungarian Investment and Trade Agency • Publishing director: Viktor Bálint, Marketing & Communications Director, PwC • tel.: +36 1 461 9100 (PwC in Budapest) • e-mail: info@hu.pwc.com • editor: Márta Szabó • art director: Zsolt Dupka • Production manager: János Madarász • Publisher: Napi Gazdaság Kiadó Kft. © 2012 PwC. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Auditing Ltd., PricewaterhouseCoopers Hungary Ltd. and PricewaterhouseCoopers Advisory Services Ltd. which are member rms of PricewaterhouseCoopers International Limited, each member rm of which is a separate legal entity.

Investing Guide Hungary 2012

Partner letter

nvesting in Hungary continues to provide foreign investors with a number of opportunities for achieving growth and realizing their business potentials. Even in challenging times, Hungary remains a main target for expanding companies due to its many resources, including our country’s favourable geographical characteristics and Even in infrastructure as well as challenging times, its highly trained and costHungary remains effective labour force that provide a reliable pool for a main target satisfying the investors’ for expanding business needs. It is companies due to important to note that the its many recources Hungarian Government and advantages. is keen to boost and ease doing business and creating jobs in Hungary by offering a wide range of available incentives. It is my pleasure to present you the new edition of Investing Guide Hungary, a publication prepared by PwC in cooperation with the Hungarian Investment and Trade Agency year by year. Our booklet sheds light on the most important issues to consider when establishing your business, from incorporating your company through recruitment to accounting, tax and subsidy issues. I hope that our publication will provide you with invaluable insight and useful guidance. Sincerely yours,

Tamás Lőcsei Partner, PwC

What should you know about Hungary? Location and climate Hungary’s central location makes it a favourite destination for foreign investors who intend to expand their operations in Central Eastern Europe. The country’s telecommunications, transport and logistics infrastructure, and the quality of education and life have attracted large amounts of foreign investment to Hungary in recent years. The capital, Budapest, is the cen-

tre of the country’s economic activity; however, the main cities are also gaining an increasing role. The country’s favourable geographical location places it at the crossroads of main commercial routes. From Hungary, a market of some 250 million people can be reached within 600 miles (about 1,000 kilometres). EU accession in 2004 brought both commercial and regulatory advantages.

Becoming an EU Member state brought a free trade system, the free movement of goods, services and labour, as well as capital. In addition to all these advantages, another of Hungary’s strengths is its well-qualified labour force. Due to the high standards of its education system, the country has a highly-skilled and talented workforce, with professional foreign language skills and relatively low wage requirements.

The country’s favourable geographical location places it at the crossroads of main commercial routes. From Hungary, a market of some 250 million people can be reached within 600 miles (about 1,000 kilometres).

The country’s economy, mainly focussed on the manufacturing industry, was hit hard by the economic crisis. The international situation became disadvantageous and debt increased. Since 2010 the economy has been recovering, and this appears likely to continue for the next couple of years.

Investing Guide Hungary 2012

economic data and outlook1: General information Location: East-Central Europe Time zone: GMT+ 1 hour Population: 9.99 million (2011); 9.98 million (2012 forecast) Participation in international organisations: United Nations, NATO, European Union, OECD, IMF, Visegrad Group, Organization for Security and Co-operation in Europe (OSCE), Conseil Européenne pour la Recherche Nucléaire (CERN), Duna Committee, Schengen Agreement, World Meteorological Organization, Bank for International Settlements, International Atomic Energy Agency, Wassenaar Arrangement on Export Controls for Conventional Arms and Dual-Use Goods and Technologies Main industries: automotive, electronics, pharmaceuticals, ICT, food Currency: HUF (forint)2

Economic data Labour force: 4.284 million (2011) Employment: 3.82 million (2011); 3.86 million (2012 forecast) Unemployment rate: 11% (2011); 11% (2012 forecast) Gross domestic product (mil USD, PPP): 195,100 (2011) Consumer Price Index: 3.9% (2011); 4.9% (2012 forecast) FDI – Inward direct investment: USD 2 billion (2011); USD 2 billion (2012 forecast) Export growth: 9.1% (2011); 6% (2012 forecast) Current account balance (% of GDP): 1.5% (2011); 1.1% (2012 forecast)

Regions of Hungary

Infrastructure in Hungary

Road network of Hungary

Road transportation

ARA ports Hamburg, Bremerhaven

Hungary has a central location in Europe and is located at the crossroads of four main European transportation corridors, including: No. IV. from Northern Germany/North Sea to the Black Sea, No. V. from the Adriatic ports to Kiev-Moscow, No. VII. – the Danube river and Rhine-Main canal, from the North-Sea, No. X. the North-South corridor from the Baltic states to Turkey and Greece. The largest Hungarian cities – Debrecen, Nyíregyháza, Miskolc, Kecskemét, Szeged, Pécs, Győr, Székesfehérvár – are all connected to the capital city, Budapest, by motorways (motorway total: 1099 km).

Slovakia, Poland

Western Europe

Corridor IV runs from west to east, linking Berlin, Vienna, Budapest, Constanta and Istanbul, following the route of the M1 and M5 motorways in Hungary. Corridor V runs south-west to north-east, through Venice, Trieste, Ljubljana, Budapest, Uzhgorod and Lvov to Kiev, utilizing the M2 and M3 motorways in Hungary. Corridor V/B runs from Budapest to Rijeka via Zagreb. Corridor V/C runs from Budapest to Ploce via Osijek and Sarajevo.

Koper, Trieste Logistics centers Airport, with permanent public, international and commercial border crossings

Airport with temporary public, international and commercial border crossings

Ports

Airport development opportunities

Railway connections

MISKOLC

Székesfehérvár

CENTRAL HUNGARY

EGER

SLOVENIA

M70

BALATONSZÁRSZÓ

KECSKEMÉT

ROMANIA

M44

ORDACSEHI

BÉKÉSCSABA

KAPOSVÁR

M9 M6

SZEKSZÁRD

M9 M5

PÉCS

SZOLNOK

ZAMÁRDI BALATONKERESZTÚR

Pécs

Source: HITA, 2012

NAGYKEREKI

DUNAÚJVÁROS

BECSE- NAGYHELY KANIZSA

LETENYE

Source: Economist Intelligence Unit, Hungarian Central Statistical Ofﬁce, European Commission, Ministry for National Economy 2 Exchange rate used: 300 HUF/EUR.

BALATONALMÁDI

TORONYSZENTMIKLÓS

Szeged

DEBRECEN

ZALAEGERSZEG

CSENGER

M35

LEPSÉNY

SOUTHERN TRANSDANUBIA

M31

VESZPRÉM

SOUTHERN GREAT PLAIN

GÖRBEHÁZA

M3 M0

M49

SZOMBATHELY SZÉKESFEHÉRVÁR

NYÍREGYHÁZA

M25

M10 BUDAPEST

M86

M3 VÁSÁROS-NAMÉNY

GYŐR

TATABÁNYA

RÁBAFÜZES

M30

SALGÓTARJÁN

Debrecen

UKRAINE BEREGDARÓC

PARASSAPUSZTA

SOPRON

AUSTRIA

Budapest

ZÁHONY

SLOVAKIA

M15

SOPRONKŐHIDA

X/B Corridor Source: HITA, 2012

VÁC

CENTRAL TRANSDANUBIA WESTERN TRANSDANUBIA

HEGYESHALOM

NORTHERN GREAT PLAIN

Container terminal

TORNYOSNÉMETI

RAJKA

Miskolc

Győr

Corridor VII is the Danube waterway

Constanta

Highway system of Hungary NORTHERN HUNGARY

Ukraine CIS

Záhony

Slovakia, Czech Republic

MAKÓ

NAGYLAK

Existing 2012 2013 After 2013 Broadened by 2013

RÖSZKE

M60 BÓLY

CROATIA

M43 SZEGED

GYULA

Source: HITA, 2012 IVÁNDÁRDA

SERBIA 7

Investing Guide Hungary 2012

Railway line modernisation (MÁV)

ZÁHONY

A KIMLE

KOMÁROM

GYŐR

EGER TATABÁNYA

BOBA

NYÍREGYHÁZA

HATVAN RÁKOSPALOTAÚJPEST

ÉRD

PÁPA CELLDÖMÖLK

DEBRECEN

VECSÉS

SZÉKESFEHÉRVÁR

CEGLÉD

VESZPRÉM

ZALALÖVŐ BAJÁNSENYE

PILISCSABA

BUDAPEST

SZOMBATHELY

SLO

MISKOLC

SALGÓTARJÁN

SZAJOL SZOLNOK

DUNAÚJVÁROS

ZALAEGERSZEG

KECSKEMÉT

TISZATENYŐ

MEZŐTÚR

BÉKÉSCSABA

NAGYKANIZSA DOMBÓVÁR

GYÉKÉNYES

KAPOSVÁR

LŐKÖSHÁZA

SZEKSZÁRD SZEGED

PÉCS

SCG

TEN-T network Railway line modernisation (GySEV) – 2007-2013

SZOLNOK

Financed partly by Cohesion Fund, Phase I. (2005–2008) Financed partly by Cohesion Fund, Phase II. (2007–2015) Financed partly by ISPA/Cohesion Fund (2001–2007) Financed partly by Structural Funds (2005–2007) Financed partly by EIB Ioan, Project IV (2005–2009) Major railway station reconstruction

Railway transportation Due to its central location, Hungary has an extensive railway network. Rail transport carries over 20% of total freight, which is well above the EU average. Several main train lines connect Hungary with the main ports of Western Europe (e.g. Hamburg, Bremerhaven, Rotterdam)

Source: HITA, 2012

and the Adriatic (Koper, Trieste) with regular services. The total length of the Hungarian railway system is 7,729 km, of which double-track is 1,335 km (17.3%) and the electrified railway network is 2,628 km (34%).

Air transportation Hungary has a number of international airports: Budapest Liszt

Ferenc International Airport, Debrecen, and Balaton – Sármellék. There are also airports that cater for commercial and seasonal public flights in Győr and Pécs.

Water transportation Hungary has excellent waterway connections, as the Danube crosses through the whole country from North to South. The Danube-Rhine-

Main canal in Europe links the North Sea and the Black Sea.

Industrial & logistics market Hungary’s geographical advantages make it a popular logistics location. The country is already a strategic location for many international distribution centres, and offers many advantages for companies that

wish to develop their logistics centres here in the future. Due to its infrastructure and central position, large-volume development activity and transactions are concentrated in the vicinity of Budapest. Within the greater Budapest area, the majority of modern warehouse space is located in the southern and western outskirts of the capital because of their excellent road and rail connections. The

development activity currently is limited, especially in the countryside, where the NorthWestern part of the country and certain large cities used to be the most active areas. Outside the capital, most development has taken place in industrial parks.

Ofﬁce market Existing office space on the Budapest office market cur-

Investing Guide Hungary 2012

main industries

was about 25% at the end of 2010, which was the highestever figure. The vacancy rate did not change significantly in 2011. (At the end of 2007 the all-Budapest vacancy rate was around 12%.) The new supply on the market, the high vacancy rate and, of course, current market conditions have resulted in decreasing rental levels in the Budapest office market since the second half of 2008. Rents have probably reached their lowest level and are not expected to decrease further in the new developments, but landlords in older projects may have to offer even more attractive rental packages.

rently comes to around three million square metres, including owner-occupied buildings. The volume of modern owneroccupied buildings – properties built or renovated after 1989, excluding government-owned buildings – is estimated at 500,000 square metres. The modern speculatively-built office space in Budapest comes to about 2.6 million square metres. The majority of this (75%) is Class A quality. The Hungarian office market is focused predominantly on the capital, although some modern office space has been constructed in the biggest regional cities as well. The overall vacancy rate on the market of leased offices

Automotive

Hungarian Automotive Players

Mosonszolnok BOS, SMR Motherson

Miskolc

Oroszlány

Győr

Shinwa, Bosch

Borg Warner

Audi, Rába, Lear, Nemak, Dana

Környe

Bosch, SaiaBurgess

Schwarzmüller

Gödöllő

Székesfehérvár

Alcoa, Denso, General Plastics, Karsai Holding, Loranger, Videoton, Visteon

Szentendre Ford

Eger

Bosch-Rexroth, Firth Rixson, ZF

Emt, Lear, Nief Plastic

Albert Weber, Diamond Electric, Kirchoff, Suzuki

Tatabánya

NYÍREGYHÁZA

SALGÓTARJÁN EGER TATABÁNYA

GYŐR

Sopronkövesd

BUDAPEST

DEBRECEN

SZOMBATHELY VESZPRÉM

Siófok

Gyöngyös Stanley Electric

SZOLNOK SZÉKESFEHÉRVÁR

Kongsbers

LUK (Schaefﬂer Group), BPW, Delphi Packard

Szentgotthárd

Opel Szentgotthárd, Arcelor

KECSKEMÉT

ZALAEGERSZEG

Szombathely

KAPOSVÁR

SZEKSZÁRD

Kecskemét

Kiskunfélegyháza

Hajdú

Szolnok

Eagle Ottawa, Euroszol, Isringhausen, Le Bélier

Csaba Metál

Kunplast-Karsai

Kiskőrös

Kalocsa

Eckerle

Emika, Kaloplasztik

Source: HITA, 2012

Téglás

Békéscsaba PÉCS

Szekszárd

Bhg, Mmg, Pfannenschwarz

Nabi

Thyssenkrupp, Knorr-Brems, Daimler

SZEGED

Armaﬁlt, Autokut Avvc, Bíró Kft., Bosch, Eltec, Fémalk Kmgy, Michelin-Taurus Mikropakk, Porsche Hungaria, Siemens Vdo Tauril, Temic Telefunken TÜV-Nord, Webasto

Újszász

BÉKÉSCSABA

Veszprém

Bakony, Continental Teves, Valeo

Debrecen

FAG (Schaefﬂer Group)

Budapest

MISKOLC

Asahi Glass,Bridgestone, Euro-Exedy, Otto Fuchs, Wescast

Autoliv

Michelin

Hatvan

AGC

Dunaharaszti

Nyíregyháza

Szeged Autofer

Orosháza Linamar

The automotive sector is one of Hungary’s core industries and contributes almost 20% of total exports. Over 600 companies employing a total of 100,000 people are active in the sector. Three large automotive Original Equipment Manufacturers (“OEMs”) have production facilities in the country: Suzuki, Audi and GM. In 2008, Daimler AG chose Hungary for a new investment and will produce 100,000 class A and B cars in Kecskemét from 2012. Due to the fact that some large multinational companies chose Hungary to locate their investments, they have attracted a lot of equipment manufacturers and other suppliers. Small and medium-sized local automotive companies have also become stable and strategic partners of both locally-based and WesternEuropean car manufacturers. The Hungarian automotive sector’s cooperation with the local education system is strong and focuses on R&D. Numerous multinationals have set up R&D centres in Hungary, including Audi, Bosch, KnorrBremse, Magna-Steyr, ThyssenKrupp, Arvin Meritor, Denso, Continental, Visteon, WET, Draxlmaier, Edag and Temic Telefunken, ZF, etc.

The automotive sector is one of Hungary’s core industries and contributes almost 20% of total exports.

Dunavarsány Ibiden

Investing Guide Hungary 2012

Auto industry players opt for Hungary In recent years, Hungary has become a popular investment destination for auto industry companies. Mercedes’s new plant in Kecskemét will be inaugurated in March, while vehicle and parts makers that have been operating here for a longer time are expanding capacities and launching new product lines.

yőr-based Audi is planning the topping ceremony for the building that will house its new vehicle factory, expected to be held in late spring. This is a result of the decision by the German company that in the future they will not just assemble the cars from the parts brought here, but create a complete automotive production line in Hungary. According to plans, by 2013, in addition to the current engine production and assembly line, the Győr company will expand into a car factory covering the complete automotive production line: in addition to the body shop, paint shop and assembly line, a new press shop will also be built. The company is planning an overall investment of EUR 900 million in the city located on the Rába river, where Audi has spent more than EUR 4 billion on developments since the local firm was established in 1993. The plant expansion is an important element of Audi’s growth strategy and with this investment, the company ensures its international competitiveness and secures jobs for the long term, said Rupert Stadler, chairman of the board of Audi AG. As the biggest employer of the Győr region,

Investing Guide Hungary 2012

Investments by multinationals also lend suppliers momentum

the company is creating 2,100 new jobs in the long term in addition to the current 7,000. Audi Hungaria Motor Kft will provide jobs, directly or indirectly, to more than 15,000 people in the future. Audi Hungaria Motor Kft produced a total of more than 1.8 million engines in 2011, 14.3% more than in the previous year. Last year, 14 new engine variants were introduced and two anniversaries were celebrated: the 20 millionth engine was completed, and within this, the 10 millionth R4 Otto model. A total of 39,480 cars rolled off the production line, 2.4% more than one year earlier. According to Thomas Faustmann, managing director of Audi Hungaria Motor, last year’s growth is the result of the company’s innovative and attractive products, as well as the flexibility of its workers. There was great anticipation leading up to the decision of Mercedes, which eventually favored Kecskemét, where serial production is set to begin in March. The company is carrying out an EUR 800 million auto industry investment in the city located on the Great Hungarian Plain, where the successors of Mercedes’s current A and B-class models will be assembled; up to more

than 100,000 cars a year. The factory, easily accessible via the M5 motorway, is expected to provide jobs for 2,500 people initially. The supply of adequately trained workers seems to be secure; this was aided by the strategic cooperation signed with Kecskemét College and the

agreement on introducing dual vocational training that was signed by the local government of Kecskemét, the chamber of industry and commerce of Bács- Kiskun County and ten local companies. Suzuki, which was more exposed to the economic crisis,

Investors, in addition to investing significant sums in a given region, also generate further investments indirectly, through their suppliers. For example, in the case of production raw materials needed for the future Mercedes models to be produced in Kecskemét, dozens of Hungarian suppliers have won orders worth hundreds of millions of euros. Audi Hungaria Motor Kft is associated with 1,400 parts suppliers, of which some 50 are Hungarian firms. Besides them, the Győr company also does business with firms that supply not parts for production, but services or machinery needed for the company’s operations. The fact that Audi is planning to multiply its annual vehicle production within a few years presents a huge development opportunity for the company’s partners. This could lend significant momentum to the supplier industry and it is also likely that parallel to the gearing up of production, new international and domestic suppliers will appear in Hungary. The Volkswagen concern is also planning to increase the share of its Hungarian suppliers, which is among others why they set up a central supplier office in Budapest, thanks in part to which today more than 70 Hungarian companies supply various parts to the VW group.

most recently has carried out investments into the production of the Swift Sport model. The new model has been under serial production in Esztergom for a few months now. In addition to its 3,500 workers, the supplier network provides jobs to a further several thousand people. Parts manufacturers have also carried out significant investments. The capacity of Opel’s engine plant in Szentgotthárd will grow by almost 500,000 units from the current 630,000 a year as a result of a EUR 500 million investment. Production is planned to gear up gradually: the units of the first two engine families are expected

to roll off the assembly line at the end of the year, while the third is expected for 2013. The current headcount of 600 is planned to grow by a total of 800 by 2015, and a further 2,500-3,000 new jobs could be created in the supplier chain. In addition to engines, the Szentgotthárd factory currently also manufactures cylinder heads, while the plant also deals with the overhaul of Opel gear shifts and gear systems for trucks are assembled here as well. IGH

Parts manufacturers have also carried out significant investments.

Investing Guide Hungary 2012

Electronics

bosch continues unabated with investments

The electronics industry is one of the largest industrial sectors in Hungary, accounting for 25 % of total Hungarian manufacturing production. The country is the largest electronics producer in the CEE region, providing 26% of total regional production. About 3,300 companies focus on electronics-related activity, employing around 100,000 people. In addition to several prestigious OEMs, 6 out of the top 10 Electronic Manufacturing Services (“EMS”) providers in Europe are present in Hungary (Jabil, Flextronics, Foxconn, Sanmina, Zollner and Videoton). Some of the companies, such as National Instruments and Jabil, also conduct R&D activities.

he Bosch Group, which currently already has 11 Hungarian subsidiaries, has been present in the country for more than one hundred years, since 1899 precisely, and the regional trading company reestablished in 1991 has since become Hungary’s secondlargest foreign employer in industry. The group of companies operating under

Budapest

R&D centre in Budapest; in addition, the group also spent just under EUR 40 million on research and development in Hungary, which is EUR 3.33 million more than in 2009. The new automotive production hall of the Miskolc factory was built in one year from EUR 18.33 million, and the group is expanding the Bosch Engineering Center Budapest in an EUR 20 million investment in the first phase.

The Bosch group’s companies, in addition to several production sites in Budapest, operate in Szigetszentmiklós near the capital and in cities in the north-eastern part of the country: Hatvan, Miskolc and Eger. For 2011, Bosch had expected growth of more than 10% on an annual level – final data are not yet known –, and the total headcount which stood at 6,300 on January 1 last year was 8,000 this year. IGH

Hungary’s second largest foreign employer in industry

Major electronics manufacturing companies in Hungary

Source: HITA, 2012

does not include commercial activities among the group’s member companies – was EUR 430 million, which represents an increase of 8% on an annual level. The company has carried out investments totalling some EUR 75 million in Hungary, with most of this going toward expanding the production capacities of the plants in Miskolc and Hatvan, and the development of the

the aegis of Robert Bosch Kft is active, in addition to automotive technology, in the fields of industrial equipment, power tools, household appliances and heating and security systems. The trading and service network related to the production, trade and development units covers the entire country and the commercial divisions here also coordinate the operations of other countries in the Adriatic region in addition to Hungary. Bosch registered a 27% increase in revenues in Hungary in 2010 compared to the previous year, with the group’s turnover thus totalling nearly EUR 1.5 billion. The group’s Hungarian revenues – which

Investing Guide Hungary 2012

Major ICT companies in Hungary The pharmaceuticals industry has a century-old tradition in Hungary, with an international reputation for attracting and conducting clinical trials.

employing over 15 000 staff. The majority of the companies are located around four life-sciences clusters: Budapest, Debrecen, Szeged and Pécs.

ICT sector

Pharmaceuticals The pharmaceutical industry has a century-old tradition in Hungary, with an international reputation for attracting and conducting clinical trials. As one of the largest and most developed drug markets, with above average per capita spending on drugs, Hungary has the best track record in the CEE region for FDI in the pharmaceuticals sector, with all major pharmaceutical companies having an established presence in the country. Pharmaceuticals production in Hungary reached a value of USD 3 billion in 2010. Exports account for 82.6% of production, with an export value of USD 2.5 billion. There were 116 registered pharma companies in 2010,

Covering telecommunications, IT outsourcing, IT services, software and hardware production, the Hungarian ICT market has grown fast in the last couple of years and leads the region in computer assembly and communications equipment manufacturing. The ICT sector accounts for 10% of total Hungarian gross

Producers

Service providers

IBM

Samsung

Flextronics

TATA

Albacomp

Ericsson

Oracle

Nokia

SAP

Source: HITA, 2012

in Komárom, and Central Hungary, including IBM in Vác. The majority of large software companies are located in Budapest. Several IT companies operate technology service centres and many of them have relocated their R&D activities here. ICTrelated R&D drives more than a quarter of total R&D expenditure. Hungary has become a

regional incubator for software development, including process control software, game programmes and geographical information technology, focusing on car positioning (“sat-nav”) systems. Hungarian software developers have achieved international success in several fields, such as virus protection, bioinformatics, and IT security.

Food industry Although its share in the output of Hungarian industry has decreased over the past eight-to-ten years, the food processing industry still remains one of the most important sub-sectors of the economy. The food industry employed 97,400 in 2010. Its export revenues are vital to Hungary’s overall trade balance. Hungary is the only net exporter of agricultural and food products in the CEE region. The industry provides 7.3% of the country’s exports. Most food industry companies (more than 85%) are micro-enterprises that employ fewer than

10 people. The share of foreign capital in the industry is 47%. The sector is dominated by multinational companies involved in vegetable oil processing, and confectionary and snacks, for example. There are about 200 large food producers altogether, two-thirds of which are owned by investors from abroad. Large producers primarily use Hungarian raw materials. Although industrial players can be found all over the country, the abundance of raw material resources determines certain concentrations in the regions of Central Hungary, the Northern and Southern Great Plain and Central Transdanubia. IGH

The major global software developers and hardware producers are present in the country. domestic product and it employs over 100,000 people. The major global software developers and hardware producers are present in the country. Hardware production is centred in Central Transdanubia, including NOKIA

Major pharmaceutical players in Hungary Major pharmaceutical

Major pharmaceutical companies with

manufacturing companies

representative offices or distribution

Richter Gedeon Nyrt.

Bayer Hungária Ltd.

EGIS Nyrt

Lilly Hungária Kft.

TEVA Magyarország Zrt.

Bristol-Myers Squibb Zrt. (Pharmavit)

Chinoin-Sanofi Aventis Zrt.

MSD Magyarország Kft. (Merck - Schering-Plough)

Amgen Kft.

GlaxoSmithKline

Servier Hungária Kft.

Source: HITA, 2012

Investing Guide Hungary 2012

Why invest in Hungary? Cash subsidies One of the competitive advantages Hungary has compared to other countries in the region is the government’s strong commitment to easing business processes and to increasing the competitiveness of both SMEs and large enterprises in Hungary based on the wide range of available incentives. Both refundable and nonrefundable incentives are available to investors coming to or expanding in Hungary. The main types of incentives related to investments are

cash subsidies either from the Hungarian Government or from EU Funds, tax incentives, low-interest loans, or land available free or at reduced prices. The regulations on incentive opportunities are in accordance with EU rules.

for large corporations, while small- and medium-sized companies can receive as much as 70%. The maximum aid intensity for the capital city, Budapest, is 10% for large corporations. The maximum available aid intensity decreases if the investment is a large investment (exceeds 50 million euro): 50% of the maximum aid intensity determined in the regional aid map is available for that part of the investment between 50 million and 100 million euros, while 34% of the maximum aid intensity for that part of

Regional aid intensity map The maximum available amounts of regional incentives are based on a regional aid map. All seven regions of Hungary are qualified for incentives, and aid intensity varies between 10% and 50%

the investment beyond 100 million euros. When calculating the maximum available amount of regional incentives, all regional incentives – including cash subsidies, development tax incentive, etc. – need to be taken into account.

both refundable and non-refundable incentives are available to investors coming to or expanding in Hungary.

Regional Aid Intensity Map*

NORTHERN HUNGARY 50% Győr

Miskolc

NORTHERN GREAT PLAIN 50%

Budapest

CENTRAL TRANSDANUBIA 40%

Székesfehérvár

WESTERN TRANSDANUBIA 30%

SOUTHERN TRANSDANUBIA

50%

10%

CENTRAL HUNGARY 30%

SOUTHERN GREAT PLAIN 50%

Debrecen

50% 40% 30%

Szeged

10%

Pécs

*Please note that the indicated intensities can be increased by 10% in case of medium-

Source: HITA, 2012

sized enterprises and by 20% in case of micro- and small-sized enterprises.

Investing Guide Hungary 2012

Non-refundable cash subsidies from the Hungarian budget: “VIP” negotiation process

“Vip” training subsidy The Hungarian Government offers what’s known as the VIP subsidy opportunity also for training employees for new positions. The subsidy is available to investors creating at least 50 new jobs. The maximum amount of the training subsidy for creating 50 to 500 new jobs is 1 million euros and 2 million euros for creating more than 500 new jobs. It is provided for both general and targeted training. The maximum aid intensity is 60% in the case of general training and 25% for targeted training. The aid intensity can be increased further in the case of small- and medium-sized enterprises and for training disabled or disadvantaged workers. The training subsidy is not a regional incentive, thus it is provided beyond the regional aid and it can be granted on top of the regional maximum aid intensity.

The main types of cash incentives related to investments are focused on implementing the investment (e.g. purchasing assets, construction work, etc.), creating new jobs and training employees.

The Hungarian Government provides a negotiationbased “VIP” subsidy opportunity for investments greater than EUR 10 million with a certain number of newly created jobs, depending on the purpose and location of the investment. “Vip” investment subsidy3 The Hungarian Government provides a negotiation-based “VIP” subsidy opportunity for investments greater than EUR 10 million with a certain number of newly created jobs, depending on the purpose and location of the investment. If the investment is between EUR 10 and 25 million, the Hungarian authorities investigate the possibility of subsidising the project from available EU Funds. The main areas that attract support are investments in manufacturing (greenfield, brownfield or capacity extension), shared service centres (“SSCs”), research and development (“R&D”), logistics projects and tourism projects.

“VIP” job creation subsidy

Subsidy applications can be submitted to HITA in either Hungarian or English. The terms and conditions of the VIP subsidy are determined in the negotiation procedure between the investor and the Hungarian authorities. Manufacturing investments State aid is highly important for implementing manufacturing investments in Hungary. Since the introduction of the VIP subsidy opportunity in 2004, 80 companies have

already received Hungarian Government support. These companies had decided to carry out investments with a value of over HUF 1,906 billion (cca. EUR 6.35 billion) and to create, altogether, approximately 35 thousand new jobs. The Hungarian Government decided to grant a total of HUF 160.5 billion (cca. EUR 535 million), paid in tranches, as the projects progress. A large number of projects have been located in Budapest, Central Transdanubia, Northern Hungary and the Northern Great Plain. Furthermore,

investment volume has been especially high in Central Transdanubia and the Southern Great Plain due to some very large investments. Based on the negotiations initiated within the last two years (2010 and 2011), there is significant interest in the VIP negotiation process, as 28 companies have submitted subsidy applications for a combined investment value of HUF 1,113 billion (cca. EUR 3.71 billion). The most dominant sectors are car manufacturing, green energy and shared service centers.

The eligible costs for a manufacturing investment can be the purchase of the plot, construction costs or rental fee for the building, infrastructural costs, the purchase of new equipment and machines, intangible assets, etc. The investment period is determined by the investor, and usually does not exceed five years. The commitment period, starting after the completion of the investment, is five years. R&D investments The Hungarian Government places special importance on

the development and support of R&D activity, both in terms of supporting R&D investments (R&D property and asset costs or R&D-related salary costs), and R&D project-based costs (e.g. project-related salary costs, materials costs, etc.). Because of the world-class scientific knowledge available in Hungary, it is an attractive environment for multinationals (e.g. telecommunications companies, the automotive sector, etc.), which often collaborate with Hungarian universities on R&D projects and expand their R&D capacities here.

Shared Service Centres Hungary is also a preferred location for shared service centres. A total of 80 SSCs have operations here, mostly in Budapest. Their main reasons for choosing Hungary are: the availability of highly skilled workforce, the lowcost operating environment and a high standard of local infrastructure. The Hungarian Government has provided state aid for 24 months’ salary for new employees employed within a three-year-period at many SSCs.

The Hungarian Government provides a job creation subsidy for those investments entitled to VIP investment subsidy and that create at least 500 new jobs in disadvantagedor in the least-developed micro-regions (at least 50% of the jobs created filled by registered unemployed). The maximum available subsidy is HUF 340 million (cca. EUR 1.13 million), depending on the location and the number of new positions. 3

Further details and information or more news about recently available opportunities can be found in the Subsidy Alerts published on PwC’s website at www.pwc.com/hu/subsidyalert.

Investing Guide Hungary 2012

Everybody plays with LEGO DUPLO made in Hungary sales revenues of HUF 10.8 billion (cca. EUR 36 million) came almost entirely from exports (to the Danish parent company), with the value of domestic sales totalling just HUF 131.2 million (cca.

The Nyíregyháza factory manufactured almost 9 billion Lego bricks in 2010 – this is one-fourth of global production.

he Lego group brought capacities to Hungary when it outsourced production in 2004: initially, production was carried out in the Transdanubian town of Sárvár, but since 2008, the company has manufacturing capacities

only in the eastern Hungarian county seat. Lego Manufacturing Kft, the Hungarian unit of Denmark’s Lego Group, has been producing toys in Nyíregyháza since December 2008. Besides this plant, only three other units make

LEGO products worldwide. The launch of production here was made possible by the Danish parent company striking an agreement with Flextronics Kft on taking over the latter’s operations in Nyíregyháza and on renting its plant. The company’s 2010

EUR 0.43 million). One year earlier, the Nyíregyháza plant had sales of HUF 8.6 billion (cca. EUR 28.66 million), and it employed an average of more than 1,200 workers in these two years. According to the company’s announcement in January 2012, the number of its workers will be increased by around 250 in Nyíregyháza, as it is setting up its fully owned manufacturing base in a EUR 100 million greenfield investment. This unit, with its new ownership structure, is expected to take over all of the production in the second half of 2014. The Nyíregyháza factory currently operates on 38,000 square meters and manufactured almost 9 billion LEGO bricks in 2010 – this is one-fourth of global production. The products falling under DUPLO brand name are manufactured only by the company in Hungary. IGH

Non-refundable cash subsidies from EU funds: tendering process4 There is a wide range of tender opportunities available from EU Funds, for which investments of less than EUR 10 million can also qualify. The conditions for EU tender application, the timing, and the total amount of the subsidy available vary from tender to tender. The tenders reflect the importance given to supporting research and development activities, the creation of new workplaces, environmental investments, and technological investments (with preference given to small and medium-sized enterprises). Cash subsidies from EU Funds for 2011-2013 are

available through the New Széchenyi Plan (“Új Széchenyi Terv”, “ÚSZT”), which was announced in January 2011. The Plan focuses on the following areas: • Health industry • Green economy • Enterprise development • Science – innovation • Employment • Transportation The aim of Hungary is to utilize the EU tender opportunities as much as possible due to the fact that the current programming period of the EU is valid until 2013. R&D activities and investment activities (e.g. 4

technology investments, property investments) are also subsidized for large corporations; the available subsidy amount and conditions are specified in the tender calls. Based on the number of foreign direct investments undertaken in the last couple of years in Hungary, it has become more important to subsidize suppliers; therefore, a special tender call for suppliers will be launched in 2012. The available subsidy is expected to be a maximum of HUF 500 million (cca. EUR 1.66 million) per project.

The aim of Hungary is to utilize the EU tender opportunities as much as possible due to the fact that the current programming period of the EU is valid until 2013.

The tenders are published by the National Development Agency (“Nemzeti Fejlesztési Ügynökség”, “NFÜ”), only in Hungarian: http://ujszechenyiterv.gov.hu or http:// nfu.gov.hu. All applications have to be submitted in Hungarian and the Subsidy Contract is also in Hungarian.

Investing Guide Hungary 2012

Hungary makes use of European Union development funds

ver the past year, the National Development Agency (Nemzeti Fejlesztési Ügynökség, NFÜ) – the agency that allocates EU funding – has carried out several changes: the application process, the awarding of grants, and actual payments have all been expedited. The government hopes that funding totalling HUF 1,500 billion (cca. EUR 5 billion) will be successfully committed under application programs of the New Széchenyi Plan (Új Széchenyi Terv, ÚSZT) in 2012, and that HUF 1,400 billion (cca. EUR 4.66 billion) will actually be paid out to recipients. As a result of the economic crisis, the utilization of funds has slowed down, so the NFÜ has regrouped several items in order to salvage financial support: for example, of the amount originally earmarked for transport development, HUF 160 billion (cca. EUR 533 million) was channelled into the green economy development program, to support investments in energy efficiency and renewable energy. There is also significant unused funding under the enterprise development programs: HUF 27 billion (cca. EUR 90 million) will be available this year alone under ten application programs aimed at improving competitiveness. These include programs aimed at technology develop-

ment – supporting both new technologies and employment – at micro- and small enterprises, as well as programs aimed at developing logistics centres and services. In addition to businesses’ market-oriented research and development activities, the ÚSZT is also supporting the innovation and R&D plans of clusters and their member companies. A total of HUF 15 billion (cca. EUR 50 million) has been set aside for grant programs

As a result of the economic crisis, the utilization of funds has slowed down, so the NFÜ has regrouped several items in order to salvage financial support.

to support innovation and technology parks, and some HUF 14 billion (cca. EUR 46.6 million) will be available to support health tourism development projects through 2013. According to the Science and Innovation program, the main goals include increasing competitiveness; the creation of jobs securing higher intellectual added value; securing sustainable development; and improving the population’s quality of life. A specific goal

is that Hungary’s spending on R&D&I increase gradually and reach 1.5% of GDP by the middle of the decade, and approach 2% by the end of the decade. Innovation performance, measured on the basis of the summary innovation index, should reach

A total of HUF 15 billion (cca. EUR 50 million) has been set aside for grant programs to support innovation and technology parks. the EU average and Hungary should be among the top third of EU countries in this respect in the next decade. Economic policymakers hope that Hungarian players will be able to successfully compete for available European R&D&I resources, which will increase significantly after 2014. This is also aided by the reorganization of the institutional system: the National Innovation Office – in addition to working out and implementing science, technology and innovation policy – will act as a kind of agency, cooperating with domestic and foreign players, incubating SMEs and young innovative companies, while also supporting network and research partnerships. IGH

Investing Guide Hungary 2012

Tax incentives Tax incentives are available for companies’ future transactions. Applications have to be submitted to the competent Authority in Hungary or to the competent EU institution before projects start.

Development tax incentives Each development tax incentive may be claimed for a 10-year period (beginning after the completion of the development) in the Corporate Income Tax (“CIT”) returns within a maximum period of 14 years from the original application for the incentive. In any given tax year, the tax incentive is available for up to 80% of the tax payable, but in total up to the state aid intensity ceiling. Applications for tax incentives have to be submitted to the Ministry for National Economy, and the Hungarian Government has the right to grant the permission if the aggregate eligible costs of the investment exceed EUR 100 million. If the investment is below this threshold, taxpayers only need to notify the Ministry for National Economy before starting the investment. Tax incentives are available for investments if, among other conditions: • The current value of the investment is at least HUF 3 billion (cca. EUR 10 million); or • The current value of the investment is at least HUF 1 billion (cca. EUR 3.33 million) in certain designated areas; and provided that: • The investment results in the creation of new

Investing Guide Hungary 2012

facilities or the extension of existing facilities; or • The investment results in substantially changed products or production processes (excluding investments in basic research, applied research and experimental development); and • In the four years following the year in which the tax incentive is first used against the tax base: • The annual average number of employees has increased by at least 150 (excluding the number of employees who are employed by a foreign branch) compared with either the year before the investment was made or the average number of employees for the three years preceding the investment (by 75 in certain designated areas); or • Annual wage costs have increased by 600 times the minimum wage (excluding the wage costs of the employees who are employed by a foreign branch) effective on the first day of the tax year (by a multiple of 300 in certain designated areas) compared with either the annual wage costs of the year before the investment was commenced or the average annual wage cost for the three years preceding the investment. Provided that the investment results in the creation of new facilities or the extension

of existing facilities, or substantially changed products or production processes, the government may also grant tax incentives to companies that invest in, e.g., environmental protection projects, broadband Internet services, R&D projects, etc. if the amount of the eligible costs is at least HUF 100 million (cca. EUR 0.33 million). Furthermore, in the case of job creation, there is no limitation on the amount of the eligible costs.

Other tax incentives Tax incentive related to R&D A CIT base allowance, and Local Business Tax (“LBT”) base allowance, apply to R&D activities if the taxpayer carries out R&D activities itself. The direct costs of an entity’s own R&D, and also the value of purchased R&D services – if it was not

incurred in connection with R&D services purchased from a Hungarianresident taxpayer, a private entrepreneur or a Hungarian permanent establishment of a foreign company – are deductible from the tax base. Tax advantages for Shared Service Centres Jobs created by SSCs may entitle the companies to obtain CIT and LBT

incentives. For CIT purposes, SSCs may obtain a tax allowance for job creation and in this case, depending on the location of the SSC, the amount of the allowance may be up to 12 months’ total salary expenses and contributions for newly hired employees. The LBT base may also be reduced by HUF 1 million (cca. EUR 3,333) per each additional employee in the year they are hired.

Film, performing arts and spectator sports incentives In Hungary companies are encouraged to subsidize film production, performing arts and spectator sports through the high rate of tax savings available. As sponsors, companies are able to achieve tax savings up to 119% of the financial support they provide for film makers, performing artists or sport clubs. IGH

Each development tax incentive may be claimed for a 10-year period (beginning after the completion of the development) in the Corporate Income Tax (“CIT”) returns within a maximum period of 14 years from the original application for the incentive.

Investing Guide Hungary 2012

How does one invest in Hungary? Establishing your business In Hungary the same rules for establishing a business apply to foreign individuals and

legal entities as to Hungarian citizens and Hungarian entities. In the following table we have summarised the four main types of business associations which are the most commonly

established in Hungary. Foreign businesses may also conduct their business activities in the form of a branch office or representative office established in Hungary.

Limited

Limited liability

Private company

Public company

partnership

company

limited by shares

(Betéti

(Korlátolt

(Zártkörűen működő

(Nyilvánosan működő

társaság)

felelősségű társaság)

részvénytársaság)

Main

· Business association · Business association

· Business association

characteristics

without legal

with legal personality;

personality;

· Established with an

· Established with share

· Established with a share

· At least one

initial capital contribution,

capital consisting of

capital consisting of shares

member with

the amount of which is

shares of a pre-determined

of a pre-determined

unlimited liability;

predetermined by law;

number and face value.

· At least one other

· The members are only

· Invitations to the public

· The shares can only

member is only

liable up to the amount

to subscribe for shares

be subscribed publicly.

obliged to provide

of their capital contribution

are prohibited.

a capital

(limited liability).

contribution

(limited liability).

For whom

Founders who

Generally recommended

Founders who have the

Founders who do not

recommended

do not have the

because of

required minimum capital

have the required

minimum capital

limited liability.

and intend to provide

minimum capital or if the

required

different rights to the

company’s activity

for a limited liability

members of the company

will be costly.

company.

in the form of preference

shares (i.e. preferred

dividends, preference

related to voting rights, etc).

Minimum number of founders

Two

One

Two

HUF 1/member

HUF 500,000

HUF 5,000,000

HUF 20,000,000

(cca. EUR 1,670)

(cca. EUR 16,670)

(cca. EUR 66,670)

Minimum amount of initial capital

Investing Guide Hungary 2012

Accounting requirements The statutory accounting records must be maintained in accordance with local GAAP. Bookkeeping has to be coordinated and reviewed, and SFS has to be prepared by an accountant certified and registered as auditor or chartered accountant at the Hungarian Ministry for National Econo-

Investing Guide Hungary 2012

number are included in the SFS. Documents can be stored outside of Hungary. However, in case of a tax inspection by tax authorities original documents and records must be made available within a minimum of three working days. Documents must be stored in a readable format for a minimum of 10 years in hard copy.

my. They are responsible for the Hungarian bookkeeping and for compiling and supplying true and reliable information, for maintaining and ensuring that the data disclosed in the SFS conforms to legal provisions, provide a true and fair view and are sufficiently documented in compliance with Hungarian accounting principles; furthermore their name and individual licence

Hungarian companies must file their local GAAP SFS and founder’s resolution (in relation to profit distribution) annually within five months of their financial year end. They must be filed electronically (not XBRL) using the mandatory pre-defined special format of pdf files that are uploaded on to the website. Printed documents

Foreign currency bookkeeping

What constitutes statutory accounting records in Hungary?

Type of

Required

GAAP

Specific

Currency

Language

Frequency

accounting

by local

to be

format

to be

of update

record

law

used

Nominal

Yes

Local

Yes (specific

Hungarian

Required for tax purposes

Monthly/quarterly

Yes – for

ledger

chart of

forint,

(depending on

CIT

accounts)

Euro or

frequency of VAT

functional

Hungarian

Journal book

Yes

Local

Nominal ledger

Hungarian

return) Monthly/quarterly

forint,

(depending on

Euro or

frequency of VAT

functional

Hungarian

Trial balance

Yes

Local

Yes (specific

chart of

accounts)

Fixed asset

Yes

Local

Hungarian

forint,

Hungarian

Annually

functional

Hungarian

forint, Euro or

functional

Purchase Yes Local No Prime Books/ day book Subledgers

Hungarian

Sales day

Yes

Local

subledger

based on

assets immediately) CIT

Hungarian

forint

performance

date)

CIT

affecting liquid

frequency of VAT

No (to be

reflect all events

functional

Local

Yes – for

Yes

VAT

Continuous (to

(depending on

forint, Euro or

Other - VAT

CIT and

Monthly/quarterly

book

Yes – for

forint, Euro or

CIT

functional Hungarian

Local

Yes – for

Euro or

forint, Euro or

Yes

return) Annually

converted into an image file format (scanned) shall not be accepted. A special file received from the Ministry of Justice must also be filed in order to support the payment of the publication fee. Non-compliance with the above-mentioned accounting requirements can trigger penalties and criminal law punishment.

return) Monthly/quarterly

Yes – for

(depending on

CIT

frequency of VAT return) Monthly/quarterly

Yes – for

(depending on

VAT

frequency of VAT return)

A company can prepare its annual financial statements in the convertible foreign currency specified in its founding document, provided that at least 25% of its (i) income, costs and expenditures; and (ii) financial assets and financial liabilities were earned or incurred, as applicable, in that convertible currency in both the current year and the previous year. A company is in compliance with the conditions if the total amount of items listed in both points (i) and (ii) is at least 25%. Point (ii) does not include off-balance-sheet items. Additionally, from 2010 all companies can prepare their annual financial statements in Euros (without the above limitation) if this is specified in their accounting policies. However, the accounting currency cannot be changed for five years after that.

Audit cycle A company’s supreme body is obliged to elect an auditor for a fixed term of not more than

Investing Guide Hungary 2012

Establishing a business in Hungary step-by-step STEP 1

Preparation of corporate documents by a Hungarian attorney-at-law

(certain documents must be countersigned by a Hungarian attorney).

Time to complete: minimum one day. Costs: Attorney fees range widely.

STEP 2

Opening of a bank account

Time to complete: one day.

Costs: depending on the bank.

STEP 3

Registering the company at the Hungarian Court of Registration and

obtaining a tax identification number. Time to complete: in the case of

companies established using standard format constituting documents

– one working hour from the issue of the company’s tax identification

number (NB: this simplified registration procedure is not

available for public companies limited by shares), otherwise the

registration procedure takes 15 working days. It should be noted that the

process can be more time-consuming if the procedure is suspended

because the tax authority needs more than one day to provide the

Court with the tax identification number.

Costs:

Registration fees:

Hiring and employment Labour costs Compared with other EU countries, labour costs in Hungary are in the lower third, as shown in the following table:

Hourly labour costs (EUR) Romania Hungary Poland Slovakia Czech Republic United Kingdom Spain Austria Germany France 0

• for limited partnerships: HUF 50,000 (cca: EUR 167); • for limited liability companies and for private companies limited by shares: HUF 100,000 (cca. EUR 334)

Source: Eurostat – Hourly labour costs 2010

• for public companies limited by shares: HUF 600,000 (cca: EUR 2,000) Simplified registration procedure: • for limited liability companies and for private companies limited by shares HUF 50,000 (cca. EUR 167); • for limited partnerships: HUF 25,000 (cca. EUR 83)

Publication fees: uniformly HUF 5,000 (cca. EUR 17). In the case of the

simplified registration procedure, publication is free of charge.

STEP 4

Registration with the Hungarian tax authority and the Hungarian

statistical office.

Time to complete: one day.

Costs: free of charge.

The global economic crisis deeply affected the Hungarian labour market: due to the fall in export orders and companies’ cost cutting measures, many employees lost their jobs. The unemployment rate in September 2011 was 10.7%, a slight decrease compared with the previous quarter’s data (10.8%).

Unemployment rate (in Q3 2011) year under review did not exceed 50 persons.

16,1%

l To ta

ain at

at So

er rth No

uth

nH er

ain Pl

ga un

an rth No

10,7%

10,0%

ia sd

ub nT ra n

sd er uth

ter W es

ns Tr a

ntr al Ce

nu da

ng Hu

ntr al

13,9%

12,5%

7,2%

bia

y ar

st pe da Ce

Companies automatically receive tax identification and social security numbers at the time they file their registration documents with the Court of Registration. The Court of Registration also forwards their requests for VAT and statistical registration to the relevant authorities, at the company’s request (thus steps 3 and 4 may be combined).

9,1%

8,9%

nT ra n

9,7%

One-stop shop

five years. Audits of annual financial statements are not compulsory if both of the following conditions are satisfied: • The company’s annual net sales revenue (calculated for the financial year) does not exceed an average HUF 200 million (cca. EUR 0.66 million) for the two financial years preceding the financial year under review; and • The average number of the company’s employees for the two financial years preceding the financial

Unemployment

Source: KSH, 2011

One of the most important goals announced by the Hungarian Government is to encourage companies to create jobs.

Investing Guide Hungary 2012

Labour law An employment relationship can only be established through a written employment contract, regardless of the anticipated duration of the employment. The employment contract must specify the employee’s base salary, the employee’s position, and the specific place of employment. After the employment contract has been signed, the employer must provide the employee with a written description of his or her most important rights and obligations. Effective as of 1 January 2012, the mandatory minimum gross monthly wage is HUF 93,000 (cca. EUR 310), but for workers employed in positions requiring a secondary school diploma or advanced vocational training (or higher education) it is HUF 108,000 (cca. EUR 360) per month. Employers must pay additional premiums for evening and night shifts, weekend work and overtime. Standard working hours for full-time employment are eight hours a day, or forty hours per week. Employers may not order more than 200 hours of overtime a year, or more than 300 hours if a collective bargaining agreement or a separate written agreement with the respective employee to that effect is in place. The minimum amount of paid leave is twenty days, which increases with the employee’s age (the first increase is when the employee reaches the age of 25). The

Investing Guide Hungary 2012

maximum amount of paid leave is thirty days, which applies to employees over 45. Minors and employees with children are entitled to additional days. The paid leave days must be granted in the year in which they are due. Employment may be terminated by mutual agreement, or by ordinary or extraordinary termination. The employees cannot be dismissed (except during the probationary period) by the employer without sufficient justification that clearly describes the reasons for the termination. The option of extraordinary termination may be exercised if the other party violates an employment obligation substantially and wilfully or by gross negligence, or acts in a way that renders the continuation of the employment impossible. The reasons for ordinary termination can be related to the employee’s performance or to the employer’s operations. Special rules apply to layoffs in which numerous employees are dismissed at the same time. There are specific situations in which employment cannot be terminated by the employer (i.e. during sick leave or maternity leave). There are certain consequences if the employer unlawfully terminates employment (i.e. the employee may claim compensation). In the case of ordinary termination of employment, the termination period is at least thirty days, but the length of the termination

period increases in proportion to the number of years the employee has spent at the employer, with 90 days as the maximum termination period.

An employment relationship can only be established through a written employment contract. Employees are entitled to a severance payment if (a) the employer terminates the employment by ordinary termination; or (b) the employer is terminated without a legal successor; or (c) the employee terminates the employment by extraordinary termination. Depending on the number of years the employee has spent at the employer, the amount of the severance payment can be between one month’s and six months’ average salary (in specific cases, e.g. when the employee would reach the relevant age for retirement within five years, it can be up to nine months’ average salary). However, the employee is only entitled to a severance payment if he/she has worked for the employer for at least three years. Finally, it should be noted that a new labour code was adopted by the Hungarian Parliament, the rules of which are to be applied from 1 July 2012.

Investing Guide Hungary 2012

The New Labour Code 2012 will be a year of transition, as the new Labour Code comes into effect from 1 July. Similar to its predecessor, the new law also declares that employment is only legal if it is based on a written work contract which includes the employee’s salary and job description. However, as of July, the location where the work is carried out does not have to be included in the work contract. Invalidity due to a lack of a written contract may only be claimed by the employee, within 30 days of taking up employment. The new act allows more room for individual and collective bargaining. For example, it allows the collective contract to depart from the act’s provisions (except in cases in which the act expressly prohibits such departure) but changes detrimental to the employee may only be made in the specific points listed in the act (e.g. regarding the date of salary payment). A new element is that either party may cancel the contract during the period between the date of signing and the day on which the employment begins if during this period significant changes occur at either party that would make the establishment of employment impossible or would cause disproportionate harm to the party concerned. Employers must give a reason for termination under the new rules as well, but layoffs will be

easier. In general, women on maternity leave and workers close to retirement age will be protected from termination, but they may also be terminated in the event of a material breach of their employment-related obligations through wilfulness or gross negligence, or any behaviour that would make it impossible to maintain the employment relationship. In the case of collective redundancy, the new act requires employers to conduct negotiations with the works council. If there is no such institution at the company, the employer has no obligation to consult with the employees’ representatives. In the event of wrongful termination, the employee may turn to the courts for legal remedy. The new act, however, reduces the amount of damages that can be awarded, as the basis for calculating lost wages will be the absentee fee rather than the average salary. The absentee fee is also the basis of severance pay: depending on the length of service at the employer, this can amount to one-to-six months’ worth of fees. From July, stricter rules will apply to employees concerning payments of damages: the concepts of slight and gross negligence will be introduced— in the case of the latter, the worker is liable for all of the damages, as in the case of causing intentional damage. At the same time, the employer’s liability in cases involving damages will be limited.

Full-time working hours will generally remain at eight hours a day, and there will still be extra pay for afternoon, night and Sunday shifts, as well as remuneration for overtime. At the same time, the number of extraordinary working hours that can be ordered in a calendar year has been raised from 200 to 250, but the maximum number that can be set in collective contracts will remain 300 hours. The regulation of working time has also become employer-friendlier. As of July, the powers of trade unions will be reduced; the number of trade union officials under labour law protection will be linked to the number of workers, while at the same time works councils will be strengthened. In certain cases, an agreement signed by the works council may, in effect, regulate rights and obligations related to employment as a collective contract – but it may not contain statements regarding salaries (among others).

The rules on annual leave will remain unchanged in that workers are granted at least 20 working days off per year, which will increase from age 25 up to a maximum of 30 days that is granted as of age 45. Based on an agreement between the parties, the employer may grant one-third of unused vacation days until the end of the following year. Under the relevant provisions of the collective contract, it is also possible for employers to grant one-fourth of an employee’s annual holiday entitlement until 31 March of the year following the year in question if the employer’s vital economic interests are at stake or for reasons that directly and seriously affect the employer’s business operation. IGH

Investing Guide Hungary 2012

Foreign workers Foreign nationals can work in Hungary under the terms of a Hungarian work contract or as assignees. The legal requirements for staying and working in Hungary applicable to EEA (European Economic Area) and third country nationals are different, as outlined below.

Demographic capital, education, language In 2009/2010, more than 65,000 students graduated from Hungarian universities and colleges with graduate and post-graduate degrees. The most popular majors are economics, law, IT, technical sciences, engineering, health and medical sciences and human sciences. An increasing number of primary and secondary schools

teach English and German as second languages. French, Spanish and Chinese bilingual schools are also available in Hungary.

Key tax-related issues Corporate income tax Resident taxpayers are subject to unlimited tax liability. Non-residents are subject to corporate income taxation on their income from their Hungarian branch’s business activities. In general, Hungarian companies are subject to corporate income tax (“CIT”), which is based on profit before tax and is subject to certain modifications. The most common deductions from the tax base include: • Losses carried forward (see details below);

European Economic Area (EEA) nationals Remuneration The remuneration received for work should reflect the activity carried out and the qualification required for the job. The statutory gross minimum wage for

2012 is HUF 93,000 (cca. EUR 310) per month. Employers must pay additional wages for evening and night shifts, weekend work and overtime. Average monthly wages vary by region, as shown in the table below.

Average monthly gross wage (EUR)

An EEA national staying in Hungary for longer than 90 days needs to obtain a Registration Card and an Address Card from the Immigration Office. The company where the EEA national carries out his/her activities must report the EEA national’s position and nationality to the Labour Office.

Third country nationals The Hungarian entity is obliged to submit a workforce demand application form

Total

before a work permit application can be submitted.

700.3

Southern Great Plain

552.5

When the workforce demand application has been accepted, the work permit ap-

Northern Great Plain

555.0

plication can be submitted. The permit must be obtained before commencement

Northern Hungary

585.7

of the employment.

Southern Transdanubia

583.8

A Schengen visa has to be obtained for the individual to enter Hungary. The ap-

Western Transdanubia Central Transdanubia Central Hungary Budapest Source: KSH, 2011

614.8

plication should be submitted with the work permit application at the Hungarian embassy in the individual’s home country.

631.1 836.0 890.4

After receiving the visa and entering Hungary, the individual needs to go to the Immigration Office to obtain the residence permit and register his/her Hungarian address.

• Reversal of provisions; • Deductions relating to research and development (“R&D”) activity (see details below); • Depreciation based on rates prescribed in the CDTA; • Reversal of impairment losses; • Capital gains from the alienation of registered shares; • 50% of royalties received by Hungarian entities.

The legal requirements for staying and working in Hungary applicable to EEA (European Economic Area) and third country nationals are different. The most common additions to the tax base include: • Provisions for prospective obligations and for future expenses; • Depreciation based on the accounting rules; • Penalties and fines levied by the Hungarian Tax Authorities; • Costs and expenses not incurred in the interest of the company’s business activity; • Interest expenses in excess of the allowable amount under the thin capitalization rules (see details below). The CIT rate is 10% on the first HUF 500 million (cca. EUR 1.66 million) of the positive CIT base without any further preconditions and 19% on the CIT base above this limit. If a company’s CIT base or the pre-tax profit

Investing Guide Hungary 2012

tion to the Tax Authority and held the property for at least one year. Alternatively, if such reporting was not made, gains realized on a sale would still be exempt if the taxable gain is used to purchase qualifying intellectual property within three years of the sale.

Local business tax

From 1 January 2012, there are further incentives available for holding intellectual properties.

(whichever is higher) is less than 2% of its total revenues reduced by the cost of goods sold, the value of mediated services and the income of the foreign permanent establishments (“minimum tax base”), the company can choose to file a declaration presenting its cost settlement and pay CIT in accordance with the general provisions or pay CIT on its minimum tax base. A special regime applies to income from royalties, under which half of the general tax rate may be applicable on royalties.

Thin capitalisation rules may apply to interest on any non-banking debt and noninterest-bearing loans received from related parties in excess of three times the equity. Tax losses can be carried forward indefinitely and their use is no longer subject to the Tax Authority’s approval. As of 2012, tax losses are deductible up to 50% of the positive tax base. Hungary has concluded double tax treaties with 70 countries, including all EU

member states, Switzerland, the USA, Canada, China, Hong Kong, Japan, South-Korea, Brazil, Mexico, etc. Double tax treaties are also being negotiated with several countries, e.g. Taiwan, United Arab Emirates, Qatar, Jordan, and Syria, while those with Switzerland, Austria, Belgium and Singapore are in the process of re-negotiation. Dividends, interest and royalties are exempt from withholding tax under the domestic rules. Capital gains realized by foreign persons are exempt from

CIT in Hungary. However, this exemption does not apply to capital gains that are related to participations in Hungarian real estate companies; in these cases, transfer tax may also apply. From 1 January 2012, there are further incentives available for holding intellectual properties. Any gains on the sale (or a capital increase that is not in cash) for qualifying intellectual property would be exempt from corporate income tax if the seller reported the acquisi-

Entrepreneurs must pay the local business tax (“LBT”) in the municipalities where their activities are located. LBT must be paid on the amount of adjusted annual turnover determined by law. When calculating the LBT base, the annual turnover can be reduced by the cost of goods sold, the costs of intermediated services and subcontractors’ activities, the costs of materials and the direct costs of R&D. Royalty and interest income are exempt from LBT. The tax rate is determined by the local government within whose jurisdiction the company carries out its business activities, but cannot exceed the maximum determined in the Local Tax Act (2%). If a company carries out its business activities within the jurisdiction of more than one Hungarian local municipality, its LBT base has to be allocated amongst the different municipalities. LBT has to be paid even if the company had a tax loss for CIT purposes. The LBT base of a foreign permanent establishment of a Hungarian company is included in the Hungarian LBT base, however the LBT base of a foreign permanent establishment of a Hungarian company is exempted from the Hungarian LBT.

Innovation contribution Companies fitting the definition in the Accounting Act are subject to this contribution, except for small and mediumsized enterprises and branches. The innovation contribution is calculated on the LBT base. The tax rate is 0.3%.

Value added tax As a general rule, Value Added Tax (“VAT”) should be charged on the following transactions: • Supplies of goods and services provided for consideration in Hungary; • Intra-Community acquisitions of goods in Hungary; • Imports of goods. Certain services are exempt from VAT, including but not limited to medical, cultural, sporting, and educational services provided as public services; and financial and insurance services. Intra-Community supplies of services and exports are also treated as exempt transactions. For the rental of real estate and for the sale of real estate and land (except building plots), VAT exemption is optional. (In the case of the sale of residential property, the exemption does not include the sales before putting into usage and the sales within two years from the date on which the usage permit becomes effective.). In the case of business-tobusiness services, the general rule is that the place of supply is where the customer is established for financial purposes. The standard VAT rate in Hungary is 27%. There are also two reduced rates, 18% and 5%. The 18% rate applies to certain dairy products and commer-

cial accommodation services. The 5% rate applies to certain pharmaceutical products, audio books, printed books, newspapers and certain live performance activities. Related companies that have established business presences in Hungary are entitled to form a VAT group. The essence of a VAT group is that its members act under a single VAT number in their transactions (i.e. they issue invoices under a shared VAT number and submit a single, joint tax return), and product and service supplies between the members do not qualify as business transactions for VAT purposes. The VAT act allows Hungarian taxpayers to apply the reverse-charge mechanism to the following transactions: • Services related to immovable property (e.g. construction, maintenance); • Sales of waste materials; and • Sales of carbon quotas (from January 2011). Under the general rule, VAT returns have to be submitted quarterly. However, in some circumstances monthly or annual VAT returns have to be prepared. In the case of intra-Community transactions, the taxable person has to submit recapitulative statements (monthly or quarterly). These statements can be submitted to the Hungarian Tax Authority only in electronic form. If a taxpayer has a negative VAT balance in a return period, this amount can be recovered, provided that the tax balance reaches or exceeds an absolute value of HUF 1 million (cca. EUR 3,333) for monthly filers, HUF 250,000 (cca. EUR 833) for quarterly filers or HUF 50,000 (cca. EUR 167) for annual filers.

Investing Guide Hungary 2012

Environmental Protection Product Fee Businesses engaged in manufacturing, importing and intra-Community purchases of certain products must pay an environmental protection product fee. The following products are subject to the product fee in 2012: • Certain petroleum products; • Tyres; • Packaging materials (included as part of the packaging); • Batteries; • Commercial printing paper; and • Electrical and electronic products. The parties liable to pay the product fee are the first domestic distributor or the end user; in the case of domestically manufactured petroleum products, the first buyer from the domestic distributor; and in the case of toll manufacturing, the party that orders the toll manufacturing. The product fee is calculated on the basis of the weight of the product multiplied by the fee rate. The tax returns have to be filed quarterly, and an advance payment has to be made for the fourth quarter of the year. In certain cases the product fee can be reclaimed if the taxpayer meets the requirements.

Transfer Pricing In Hungary transfer pricing rules apply. Accordingly, if the prices applied in related-party transactions are not arm’s-length prices, the Tax Authority is entitled

Investing Guide Hungary 2012

to modify a company’s CIT and special tax base by the difference between the prices applied and the arm’s-length prices. Taxpayers are obliged to prepare transfer pricing documentation on intragroup transactions and also on transactions carried out between Hungarian companies and their foreign branches. The documentation has to be prepared for every contract (transaction) between related parties (including in-kind contributions made at the time entities are established). As of 1 January 2012, it will not be required to prepare transfer pricing documentation for certain transactions between a branch office located in a country with which Hungary has a double tax treaty currently in force and a company in a third country if their pricing does not affect the Hungarian tax base.

Rulings The Tax Authority and the Ministry for National Economy provide the following types of ruling on submission of a formal request: • Non binding rulings on the interpretation of regulations, provided free of charge. • Binding rulings may be requested by taxpayers and foreign entities regarding any type of tax, provided the ruling has bearing on the tax consequences of a future contract, transaction or chain of transactions, and a detailed description is provided.

• Advance Pricing Agreements are available for the purpose of setting a transfer price or price range with the Tax Authority.

simplify the administrative obligations and decrease the labour costs borne by employers during the next few years. Employers can provide their employees (and in certain cases the employee’s close relatives) with fringe benefits (e.g. meal vouchers, vacation and recreation, local travel passes, etc.). These benefits are taxed at preferential rates com pared with the taxation of employment income. Benefits available to all employees of the employer can also be provided at preferential tax rates. Although there is no special expatriate tax regime in Hungary for assignees, they can be provided with certain tax-free benefits. The social security coverage of international assignees from the EEA countries is governed by EC Regulations 883/2004 or 1408/71. Third-country nationals assigned to Hungary become subject to Hungarian social security if the length of their assignment exceeds two years, unless a bilateral social security agreement stipulates otherwise. IGH

Other taxes Several new taxes have come into effect in the last few years, e.g. taxes related to the energy, telecommunications and retail sectors (“Austerity tax”), a bank tax, levied on financial institutions and insurance companies, and a public health product tax. In addition to the abovelisted main taxes, Hungarian taxpayer entities are subject to several smaller taxes, e.g. excise tax, customs duties, stamp duties, registration tax, community tax, tourism tax, sector-specific taxes (energy tax, pharma taxes), disaster management contribution, accident tax, etc., which are not covered in this booklet.

Personal Income Tax Tax and social security liabilities The aim of the Hungarian Government is to

Personal income tax and social security rates applicable on employment income – 2012 Employee Personal income tax * Pension contribution **

Employer

Social tax

Health insurance and unemployment contribution

16 or 20.32

8.5

Training fund

contribution

1,5

* 16% up to the annual gross income of HUF 2,424,000 (cca. EUR 8,080) and 20.32% above ** capped at HUF 7,942,200 (cca. EUR 26,474) annual gross income

Investing Guide Hungary 2012

“Companies see their Hungarian investments secured for the long term and many of them are planning further investments,” said Erzsébet Dobos, the president of the Hungarian Investment and Trade Agency (HITA).

About the Hungarian Investment and Trade Agency (HITA)

ITA was founded by the Hungarian Government with the aim of promoting foreign investment and bilateral trade, as well as helping the EU integration-oriented SME development. The Hungarian Investment and Trade Agency has representative offices in six regional centres of Hungary and a foreign network operating under Hungary’s diplomatic services and special assignments in more than fifty countries. HITA’s Investment Promotion Department’s main tasks are:

During the pre-decision stage • Preparing tailored and comprehensive information packages on the economy,

financial incentives, business environment, tax • Assistance in location search and evaluation, site visits organized • Organising partner meetings

During the ramp-up stage • Project partner and project financing advice • Supplying information on procedures for acquiring permits • Assistance in applications for incentives

In operations • Expansion and reinvestment assistance • Advocacy to improve the business climate

Contact details Hungarian Investment and Trade Agency H-1055 Budapest, Honvéd u. 20. Telephone: +36 1 872 6520 Fax: +36 1 872 6699 E-mail: info@hita.hu, investment@hita.hu Web: http://hita.hu

Companies have confidence in Hungary – How many investors are you currently in negotiations with and what is the value of investments they would bring?

– While HITA handled 83 projects at the end of last year, this number stood at 112 in January this year, so investor interest toward Hungary has increased

significantly. These include new investors as well as companies planning to expand their previous investments. These investments could create

more than 20,000 jobs directly in the next three to five years and at least as many additional jobs indirectly. If every investor makes a positive decision,

the combined value of the planned investments could reach EUR 6 billion. – What sectors are showing interest in Hungary? – The SSC industry remains popular, with investments in this sector now also appearing in countryside cities in addition to Budapest; especially university towns are attractive destinations. Besides service centers, investments in production continue to be popular as well: in line with the trend of previous years, in addition to the high number of projects in the electronics and auto industries, there is definite interest toward Hungary in the food sector. Different countries dominate investments in different sectors: German companies have the biggest share in auto industry investments in the country, the Far East dominates in electronics, while U.S. and Western European companies do so with regard to service centers.

– Why could Hungary be important to investors? – Investors are showing strong interest toward opportunities in Hungary and as I have mentioned, there are several among them considering repeat investments, with an expansion of production and the creation of new jobs planned. This indicates that these companies see their Hungarian investments secured for the long term. The reduction of the lower corporate tax rate has increased Hungary's competitiveness greatly within the region. Companies continue to be satisfied with the quality of the Hungarian workforce, the regulatory environment and the infrastructure. – What kind of support can the government provide to potential investors? – There are both EU cofinanced and subsidies based on governmental decision to support investments in Hungary. For investments of special importance exceeding EUR 10 million in value, the Hungarian state provides grants, development tax breaks and other employment related support via individual government decisions. Investments receiving EU co-financing could be interesting for investors because there are still significant available resources for these projects until the end of 2013. IGH

Investing Guide Hungary 2012

About PwC PwC in Hungary

Our services

PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. Please go to pwc.com for more information. PwC has been present on the Hungarian market for more than two decades now, during which we have directed our efforts toward building strong, trust-based relationships with our clients, being reliable partners for them in their day-to-day management decisions and assisting them with defining and implementing their long-term goals. Our staff of more than 600 experts draw on the experience and outstanding professional know-how we have built up over 20 years, and their main goal is to develop the best solutions for you in the course of auditing and consultancy work. In 2011, among the BIG 4 international assurance, tax and legal, and advisory practices, PwC was the first to set up an office outside of Budapest, in Győr, as a result of which the firm’s staff members will be delivering PwC’s outstanding standard services directly to business in that region.

Advisory Services

• • • •

Business Consulting Deals Forensic Services Business Recovery and Restructuring

Tax and Legal Services • • • • • • • • •

•

Corporate Tax Mergers & Acquisitions Transfer Pricing Tax Controversy & Dispute Resolution Services Indirect Tax Human Resource Services International Assignment Solutions Immigration Services Bookkeeping, payroll, financial statement preparation and tax compliance services Legal Services (in cooperation with Réti, Antall & Partners correspondent law firm) State Aid and Incentives

Audit/Assurance • Audit • Financial Regulatory Services • Accounting including IFRS and US GAAP • System and Process Assurance • Internal Audit

PwC’s Academy • Professional education and qualifications

We make your industry our own If a consulting and auditing firm wants to work successfully for its clients, it needs to understand much more about them than their balance sheets and numbers. An in-depth knowledge and understanding of your industry, its competitive environment and the national and international regulatory requirements are vital factors in PwC’s success – and in yours. This is why we continuously develop and expand our industry expertise. Technical experts in each business area work together across all industries. This is how we can offer our clients tailored services as one firm.

We focus on the following industry groups • Automotive • Retail&Consumer • Telecommunications, Infocommunications • Pharma&Healthcare • Financial Services • Transportation&Logistics

• Industrial products • Private Company Services

Automotive In the global automotive industry, opportunities and risks are everywhere, in emerging and mature markets alike. But while opportunities are plentiful, profitable growth

is becoming more difficult to achieve and challenges – from the supply chain to the retail environment – can upset even the best-laid plans. Automotive organisations must conduct their business in this environment, while at the same time adapting to new regulations, reducing costs, managing capacity and inventory, and controlling healthcare and compensation costs. In PwC’s Global Automotive practice, we bring together experts in these and more areas to help you address these important issues.

Pharmaceuticals PwC and its correspondent law firm, Réti, Antall &

Partners, have been providing services to pharmaceutical companies for many years. Our services cover the entire spectrum of issues related to corporate management. We operate with specialist teams that focus on services within their area of expertise. Our specialists have a deep knowledge of the specific features of the pharmaceutical industry.

Infocommunication Infocommunication companies are experiencing what many analysts and industry insiders would term the perfect storm - a sluggish economy, depressed revenues

and a lingering capacity glut, coupled with a cash crunch, heavy debt and eroding franchise. Add to these woes fierce competition, transformational innovation and complex new regulations. The industry is undergoing a sea-change as retrenchment and consolidation speed up.

Retail and Consumer Services Due to a combination of market forces, today’s business environment presents retail and consumer product (R&C) companies with many challenges. R&C Sector companies are constrained in their ability to grow and

maintain profit margins as a result of a deflationary operating environment, market saturation, slowing population growth, and more discerning but less loyal consumers. In addition, there are the immediate concerns of growing competitive pressures, an increase in the number of alternative sales channels, a blurring of roles between suppliers and retailers, and — particularly for consumer product manufacturers — a shift in the balance of power to the retailers. Due to stakeholder demands and the resultant Sarbanes-Oxley legislation, the retail & consumer industry is also experiencing heightened regulatory pressures. These pressures will require greater accountability and accuracy in the reporting of financial results, increased levels of corporate governance and Board involvement, stronger internal control documentation and a greater need for more robust risk management practices throughout the enterprise.

Financial Services PwC’s Financial Services Industry Group in Hungary is a focused business advisory, audit and tax practice that can help your organisation turn challenges into opportunities. Without doubt, the financial sector in Hungary has seen dramatic changes over the last 15 years. However, the current post-EU Accession environment and extremely competitive mar-

Investing Guide Hungary 2012

Contacts PwC Ofﬁces Budapest H-1077 Budapest Wesselényi Street 16. Telephone: +36 (1) 461 9100 Fax: + 36 (1) 461 9101 Contacts at PwC Budapest Ofﬁce

Győr H-9024 Győr Hunyadi Street 14. (Leier City Center) Telephone: +36 (96) 547 660 Fax: + 36 (96) 547 661 Contacts at PwC Győr Ofﬁce

Tamás Lőcsei Partner – Tax and Incentive Services Direct: + 36 (1) 461 9358 E-mail: tamas.locsei@hu.pwc.com

Armin Krug Partner – Assurance Services Direct: + 36 (1) 461 9552 E-mail: armin.krug@hu.pwc.com

Tünde Kis Senior Manager – State Aid and Incentive Services Direct: + 49 (89) 5790 5724 E-mail: tuende.kis@de.pwc.com

Kornélia Lett Leader of the Győr Office – Assurance Services Direct: + 36 (96) 547 660 E-mail: kornelia.lett@hu.pwc.com

Éva Faragó Manager – State Aid and Incentive Services Direct: + 36 (1) 461 9180 E-mail: eva.farago@hu.pwc.com ket continue to provide new demands and challenges. Staying on top of market processes, complying with regulations, manoeuvering through the complex tax and fi nancial regulatory framework, improving efficiency and productivity, and fi nding new ways to optimize customer relationships, are all now permanent features of the Hungarian marketplace.

Transportation and Logistics Thanks to globalisation and workforce mobility,

the transportation market is still expected to flourish above the average. Logistics companies are trying to take control of their whole supply network by vertically expanding their range of services. Acquisitions, joint ventures and allies are largely contributing to the restructuring of the industry. PwC’s transportation and logistics experts help their clients with professional advisory services in every field, enabling the establishment of efficiently operating world-wide

networks and supporting the development of new business relationships. Hungary’s EU accession resulted in many changes in the VAT rules on transportation services. Our tax experts can help you avoid VAT risks. Our work-group, which specialises in freight-transportation tax issues, has been operating successfully for several years, and has already completed a considerable number of tax reviews. Our advisers are actively involved in the implementation of EU practices in Hungary.

Private Company Services Privately owned small and medium-sized businesses are at the heart of the Hungarian economy. Recent difficult market conditions as well as their own dynamic growth have brought many new challenges and opportunities. Our dedicated Private Company Services (PCS) team provides full practical and commercial assistance, tailored to the needs of private businesses, family businesses, entrepreneurs and high net wealth individuals.

Norbert Izer Manager – Tax Services Direct: + 36 (1) 461 9433 E-mail: norbert.izer@hu.pwc.com

Please visit our website at www.pwc.com/hu The Investing Guide was prepared by PricewaterhouseCoopers Hungary Ltd. in cooperation with the Hungarian Investment and Trade Agency. Additional content was provided by Napi Gazdaság as publisher. Neither PricewaterhouseCoopers Hungary Ltd. nor the co-authors accept any responsibility for losses arising from any action taken or not taken by anyone using this publication. It should not be regarded as a basis for ascertaining tax liability in specific circumstances. Professional advice should always be sought before acting on any information contained in this booklet. © 2012 PwC. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers Auditing Ltd., PricewaterhouseCoopers Hungary Ltd. and PricewaterhouseCoopers Advisory Services Ltd. which are member firms of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

www.pwc.com/hu

Ideas drive opportunities

We help to find the opportunities for investors. PwC is the Trusted Business Advisor of investors in Hungary. © 2012 PwC. All rights reserved. In this document, PwC refers to PricewaterhouseCoopers Auditing Ltd., PricewaterhouseCoopers Hungary Ltd. and PricewaterhouseCoopers Advisory Services Ltd. which are member �rms of PricewaterhouseCoopers International Limited, each member �rm of which is a separate legal entity.