Hungary Country Profile

Hungary is located in the heart of the Carpathian basin. It is an ideal place for companies to set up, serving as a gateway to the Central and Eastern Europe (CEE) region.

Considered one of the most competitive advantages Hungary has compared to other countries in the CEE region is the government’s strong dedication to streamlining business procedures in order to increase the competitiveness of both SMEs and large enterprises in Hungary by means of an array of available incentives .

Both refundable and non-refundable benefits are available to investors coming to or expanding in Hungary. The main kinds of incentives linked to investments are cash subsidies (both from the Hungarian Government or from EU Funds), tax incentives, low-interest loans, or land available for free or at reduced prices. The regulations on incentive opportunities are actually in accordance with EU rules.

Hungary is located in the heart of Europe, making the country an ideal place for manufacturing, service industries and logistic hubs. Hungary is the perfect base for investors, which are planning cross-border business developments. Foreign capital is, in a large part, attracted by the highly skilled and highly educated labor force, particularly in the engineering, IT, pharmaceutical, economics, mathematics, physics and professional services sectors. Around two-thirds of the workforce in Hungary has completed a secondary, technical or vocational education.

The average wages in Hungary are 60% below the average of the EU 27, rendering the Hungarian workforce highly competitive. High English proficiency (90% of students speak English) and a high number of working hours/year make Hungarians a highly efficient workforce.

Beside the favorable business environment together with availability of various incentives, Hungary is an ideal location for doing business for a series of other reasons:

• Ideal geographical position in the center of Europe for manufacturing, services and logistics;
• Excellent infrastructure, ready made industrial sites, offices and science parks;
• Good balance of labor costs and quality;
• Governmental and municipal incentives (cash subsidy, tax allowance)
• Investment favorable economic policy
• Competitive tax system
• Financial and fiscal stability
• Success in lowering public debt
• English accepted as a business language
• Western style business culture
• Over £28 billion EU funding between 2014 and 2020
• Strategic location in the heart of Europe
• Well developed transport network
• Open economy
• Good infrastructure and communications
• Investment incentives

Challenges

Hungary ranks 54th in the World Bank’s Ease of Doing Business report. However, the report places Hungary at 128th with regards to protecting investors. In spite of Hungary’s increasingly westernized business culture, international companies can experience difficulties. These include:
Bureaucracy
Corruption
Language issues, particularly with smaller companies and outside Budapest
Legal barriers at public procurement

Growth potential

Gross Domestic Product (GDP) growth for 2013 is anticipated to be between 1.1% and 1.3% . 2 .1% growth  is forecasted for both 2014 and 2015. Inflation was at a record low in 2013 at 1.7% with core inflation at 3.3%.

European Union (EU) funds

Hungary gets significant structural and cohesion funds from the EU. Hungary will receive EUR 20.56 million via the EU’s Multi-annual Financial Framework (MFF) 2014 to 2020. The government aspires to allocate 60% of the available funding to strengthen the economy and domestic Small and Medium Enterprises (SMEs). The outstanding funds will be used to:
Improve the infrastructure
Develop human resources
Increase energy efficiency
High Growth Europe
The Central European region (CE) provides considerable potential to DO business. The CE countries have a combined GDP in the region of more than £2.2 trillion.

Hungary is part of the CEE region and can act as a gateway into other markets. The CEE region is :
Easily accessible that is interconnected to western and eastern Europe, which has a widespread use of English as the business language
A market of over 210 million consumers
Anticipated to have GDP growth of 4.7% annually over the next 10 years
Making large investments in energy, transport and other infrastructure as a result of £124 billion in EU funding
Trade agreements
Hungary is a member of the EU, the World Trade Organization (WTO) and other international bodies. Goods manufactured in the EU are exempt from import duties.

Contact the CeSport team if you have market access issues associated with the operation of the Single Market.

Start-up considerations

Hungary has been an EU member since 2004, so European business procedures and standards generally apply.
It is advisable to appoint a distributor or an agent who understands the market as well as being well connected to export directly to Hungary. Local representatives can provide either national or regional coverage.
Before entering the marketplace be sure you extensively research the market. Your background checks needs to include:
Research into products, competitors and market strategy
Testing your product or service
Consulting with Hungarian buyers at international trade shows
Getting an initial market assessment from the experts
Legal considerations

Hungary’s legal system is mostly harmonized with EU requirements. In spite of this, you need to still find professional legal advice before doing business in Hungary.

If you are contemplating a large scale transaction, it is advisable to consult one of the international law firms based in Hungary.
Standards and technical regulations

Services and products must meet relevant EU safety standards. These include clear instructions on proper use and warnings against misuse.

As the primary regulator the Hungarian Trade Licensing Office’s standards affect foreign products entering into the country. Special rules are in force for the registration and certification of certain products.

Labelling needs to be in Hungarian. It is advisable to seek advice from the appropriate registration or certification authority on the extent to which labelling should comply with Hungarian domestic legislation on:
Advertising
Health and safety
There are EU standards relating to packaging.

Intellectual property (IP)

Trademarks, designs, patents and copyright are the primary forms of IP protection available to companies and individuals.
EU IP law has a significant influence on local law. However law covering intellectual property is not completely harmonized within the EU. Particularly patent protection is only harmonized to a certain degree.
The Hungarian Intellectual Property Office has responsibility for IP.

Tax and customs considerations

Value Added Tax (VAT)
All enterprises supplying goods or services within the territory of Hungary will have to register for and charge VAT. Small businesses can select to be VAT exempt under certain conditions.

The 4 VAT rates in Hungary are:
A standard rate of 27%
18% for central heating, bakery and dairy products, and providing commercial accommodation services
5% for some goods and services such as certain pharmaceutical products, books and daily papers
0% for some transactions such as radio, television, postal and financial services

Corporate tax
Locate information on Hungarian tax for enterprises on the National Tax and Customs Administration of Hungary ( NTCA ) website.

Income tax
A flat tax system has been in force in Hungary since 2010. Individuals’ income will be taxed by 16%.

Customs
The internal market of the EU is a single market, that enables the free movement of goods and services. Consequently, no import duties apply.

Business behavior
German is the most widely spoken foreign languages in Hungary, however the use of English is swiftly increasing.
Business cards are used extensively. Hungarians usually place their surnames first on business cards printed in Hungarian.

Entry requirements
EU passport holders will not require a visa to travel or work in Hungary, but passports need to have 6 months validity.

Facts

    Full name: Hungary
    Population: 10 million (UN, 2012)
    Capital: Budapest
    Area: 93,030 sq km (35,919 sq miles)
    Major language: Hungarian
    Major religion: Christianity
    Life expectancy: 71 years (men), 78 years (women) (UN)
    Monetary unit: Forint
    Main exports: Machinery and transport equipment, foodstuffs, chemicals
    GNI per capita: US $12,730 (World Bank, 2011)
    Internet domain: .hu
    International dialling code: +36