Economy Profile Hungary

Ease of Doing Business in Hungary

ease of doing business in hungary

Rankings on Doing Business topics – Hungary

rankings on doing business topics hungary<

Topic scores

topic scores hungary

Starting a Business

This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city.

To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators.

The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Procedures to legally start and formally operate a company (number)

  • Preregistration (for example, name verification or reservation, notarization)

  • Registration in the economy’s largest business city

  • Postregistration (for example, social security registration, company seal)

  • Obtaining approval from spouse to start a business or to leave the home to register the company

  • Obtaining any gender specific document for company registration and operation or national identification card

Time required to complete each procedure (calendar days)

  • Does not include time spent gathering information

  • Each procedure starts on a separate day (2 procedures cannot start on the same day)

  • Procedures fully completed online are recorded as ½ day

  • Procedure is considered completed once final document is received

  • No prior contact with officials

Cost required to complete each procedure (% of income per capita)

  • Official costs only, no bribes

  • No professional fees unless services required by law or commonly used in practice

Paid-in minimum capital (% of income per capita)

  • Funds deposited in a bank or with third party before registration or up to 3 months after incorporation

To make the data comparable across economies, several assumptions about the business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes.

The business:

-Is a limited liability company (or its legal equivalent). If there is more than one type of limited liability company in the economy, the limited liability form most common among domestic firms is chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office.

-Operates in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

-Performs general industrial or commercial activities such as the production or sale to the public of goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily polluting production processes.

-Does not qualify for investment incentives or any special benefits.

-Is 100% domestically owned.

-Has five business owners, none of whom is a legal entity. One business owner holds 30% of the company shares, two owners have 20% of shares each, and two owners have 15% of shares each.

-Is managed by one local director.

-Has between 10 and 50 employees one month after the commencement of operations, all of them domestic nationals.

-Has start-up capital of 10 times income per capita.

-Has an estimated turnover of at least 100 times income per capita.

-Leases the commercial plant or offices and is not a proprietor of real estate.

-Has an annual lease for the office space equivalent to one income per capita.

-Is in an office space of approximately 929 square meters (10,000 square feet).

-Has a company deed that is 10 pages long.

The owners:

-Have reached the legal age of majority and are capable of making decisions as an adult. If there is no legal age of majority, they are assumed to be 30 years old.

-Are in good health and have no criminal record.

-Are married, the marriage is monogamous and registered with the authorities.

-Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population.

Starting a Business – Hungary

starting a business hungary

Figure – Starting a Business in Hungary – Score

figure starting a business in hungary score

Figure – Starting a Business in Hungary and comparator economies – Ranking and Score

DB 2020 Starting a Business Score

figure starting a business in hungary and comparator economies ranking and score

Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators.

Figure – Starting a Business in Hungary – Procedure, Time and Cost

figure starting a business in hungary procedure time and cost

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below.

Details – Starting a Business in Hungary – Procedure, Time and Cost

1 Hire a lawyer who will represent the company; create the company deed and prepare any other necessary legal document

Agency : Lawyer

The company must be represented by a lawyer during the registration process. The lawyer's commission fee is subject to free agreement, and it depends on the complexity of the case.

1 day HUF 100,000-260,000 ;

varies according to the complexity

2 Open a bank account and deposit the capital

Agency : Bank

Companies must open a bank account and deposit their capital.

The current legislation envisages certain restrictions that relate to dividend distribution and apply to those founders who pay less than 50% of the required minimum paid-in capital at the time of incorporation. Furthermore, such founders bear liability for the company’s obligations in the amount of their outstanding obligations. These provisions are stipulated in the Section 3:162 of the Civil Code.

1 day no charge

3 Apply for registration at the Registration Court (simplified electronic registration)

Agency : Registration Court

The Tax Authority examines if the request for company’s registration was submitted to the Court of Registration. The Tax Authority can refuse to issue a tax number if a hindrance (e.g. tax debt exceeding HUF 15 million) exists regarding a managing director, an owner entitled to represent the company or an owner/majority shareholder. The Tax Authority also examines these circumstances and hindrances in case there is any change in the above enlisted persons.

The Registry Court receives the application for registration, and after a certificate is issued with the company’s name, address, temporary tax and statistical number and the number of reference of the registration. If the National Customs and Tax Authority consider that the founder or the managing director falls under suspicion according to the above detailed statutory obstacles, Tax Authority does not duly send the tax number of the company to the Registry Court within one working day and the registration process will be suspended for the period of the pending investigation.

Companies can be incorporated in 2 ways:

  1. By simplified electronic filing

    Incorporation: 2 business days (up to 8 business days)

    In the simplified electronic filing, the companies must use a standardized template for the articles of association.

  2. By standard electronic filing:

Incorporation: 15 business days

As of March 16, 2017, the fee for incorporation has been abolished.

Along with the submission of the registration application, the court also registers companies with the State Tax Authority (for VAT and income tax purposes) and with the Statistical Office through an online system.

2 days Free of charge for incorporation.

4 Register with the National Office for Health Insurance

Agency : National Office for Health Insurance (done through the National Tax and Customs Authority)

The company needs to register with the Hungarian Social Security Office. Before commencing an employment, the employer has to file the employee’s data to the Tax Authority, i.e. to notify the Tax Authority on the employment with that employee.

Once the filing is done, the notification is considered to be performed. Data required for each employee:

  1. Name;

  2. Birthdate and place of birth;

  3. Tax and social securty number;

  4. Citizenship;

  5. The start of the work-contract and the code of the type of employment (i.e., permanent, termporary);

  6. Field of activity (FEOR statistical code for activity types);

  7. Weekly working times;

  8. Education, training or qualifications, as well as the certifications number and issuing entities name.

1 day no charge

5 Registration for Municipal Business Tax

Agency : Tax Department of Municipality

Newly incorporated companies are obliged to register with the municipality for the municipal business tax (helyi iparüzési adó) within 15 days after registration at the company registrar. The information they need to provide includes: company name, seat, tax number, etc. In Budapest this can happen in three ways: 1. Download and print the registration form from the municipality´s homepage (https://ssl.budapest.hu/web_hair/ufo.do?_ID=2016-01) and submit filled out form by registered mail; or 2. In person at the municipal tax department; or 3. electronic filing of the registration form through the e-government system (ügyfélkapú) if one has access to it.

1 day, simultaneous with no charge

previous procedure

The municipality issues a certificate of receipt for the online registration and, in the case of paper based registration, a stamped certification of receipt. Later on, the municipality issues a local taxpayer-number to the company. The number is sent by mail to the company address. The tax rate in Budapest is currently set at 2% (the maximum limit set by national law; from this downwards the municipality can decide on rebates), payable twice a year.

Starting from 1st of January 2018, the state tax authority can forward the details of a company received via the court of registry by way of electronic means to the municipal tax authority where the company’s registered office is located, provided that the municipal government’s local business tax ordinance is in effect. However, it is still commonly done directly by the entrepreneur with the municipality.

6 Register with the Hungarian Chamber of Commerce and Industry

Agency : Hungarian Chamber of Commerce and Industry

Economic actors whose registration in the register of companies is mandatory and private entrepreneurs shall within five working days after registration apply for registration in the regional chamber of economy of competence (Section 8/A of Act CXXI of 1999 on Chambers of Economy as amended on January 1, 2012).

Chamber registers shall contain the following particulars of economic operators:

  1. name;

  2. registered seat, establishment(s), branch(es);

  3. main activity, and the activity or activities actually performed;

  4. tax number;

  5. bank account number(s);

  6. classification according to the Act on Small and Medium-sized Enterprises and the Support Provided to Such Enterprises;

  7. electronic contact information (e-mail, website);

  8. name of legal representative, and – in the case of voluntary disclosure, upon the economic operator’s specific request – name of the designated contact person, including contact information.

Dealing with Construction Permits

This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information

What the indicators measure

Procedures to legally build a warehouse (number)

  • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates

  • Submitting all required notifications and receiving all necessary inspections

  • Obtaining utility connections for water and sewerage

  • Registering and selling the warehouse after its completion

Time required to complete each procedure (calendar days)

  • Does not include time spent gathering information

  • Each procedure starts on a separate day—though procedures that can be fully completed online are an exception to this rule

  • Procedure is considered completed once final document is received

  • No prior contact with officials

Cost required to complete each procedure (% of income per capita)

  • Official costs only, no bribes

Building quality control index (0-15)

  • Quality of building regulations (0-2)

  • Quality control before construction (0-1)

  • Quality control during construction (0-3)

  • Quality control after construction (0-3)

  • Liability and insurance regimes (0-2)

  • Professional certifications (0-4)

To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used.

The construction company (BuildCo):

  • Is a limited liability company (or its legal equivalent) and operates in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects or engineers. BuildCo is not assumed to have any other employees who are technical or licensed experts, such as geological or topographical experts.

  • Owns the land on which the warehouse will be built and will sell the warehouse upon its completion.

The warehouse:

  • Will be used for general storage activities, such as storage of books or stationery.

  • Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita.

  • Will have complete architectural and technical plans prepared by a licensed architect. If preparation of the plans requires such steps as obtaining further documentation or getting prior approvals from external agencies, these are counted as procedures.

  • Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements).

The water and sewerage connections:

  • Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built.

  • Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater flow of 1,136 liters (300 gallons) a day.

  • Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection.

Dealing with Construction Permits – Hungary

dealing with construction permits hungary

Figure – Dealing with Construction Permits in Hungary – Score

figure dealing with construction permits in hungary score

Figure – Dealing with Construction Permits in Hungary and comparator economies – Ranking and Score

DB 2020 Dealing with Construction Permits Score

figure dealing with construction permits in hungary and comparator economies ranking and score

Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators.

Figure – Dealing with Construction Permits in Hungary – Procedure, Time and Cost

figure dealing with construction permits in hungary procedure time and cost

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website ( http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below.

Figure – Dealing with Construction Permits in Hungary and comparator economies – Measure of Quality

figure dealing with construction permits in hungary and comparator economies measure of quality

Details – Dealing with Construction Permits in Hungary – Procedure, Time and Cost

1 Request and obtain certificate of site ownership and site map from the Földhivatal

Agency : Land Administration Földhivatal

The site map is obtained by BuildCo. The site ownership certificate can be obtained either by BuildCo or by the local construction authority. The authorities have introduced an electronic application and database and internal administrative processes have become more efficient. However, site ownership certificate and the site maps have to be obtained in a physical copy for the purposes of applying for a building permit.

1 day HUF 9,250

2 Obtain a geodetic survey of the site

Agency : Licensed Private Company

The geodetic survey is about measuring the site and its features on the surface with the utmost precision. The result of the survey is a digital map required for (1) the draft plan to be submitted for the urban planning approval and for (2) the final architectural plans to be submitted to the building authority for obtaining construction permit.

7 days HUF 200,000

3 Request and obtain urban planning approval

Agency : Municipal Planning Board

The Municipal Planning Board has to approve the basic project plan (not the detailed architectural plans) of the building. During this approval the Municipal Planning Board establishes whether the building will be far away from other neighboring buildings, how it fits into the landscape, and whether the envisioned construction project complies with the aesthetic standards of the region.

4 Obtain a geo-technical report

Agency : Private Licensed Company

BuildCo hires an external geo-technician in order to study the land’s capacity, quality, and its groundwater properties. The hired technician visits the site and digs the land at two or three points depending on the quality of the land. The cost recorded is based on two digging points. The technician submits the soil samples to a laboratory. The lab result defines the methods by which the foundation of the warehouse is laid. This information is also necessary in order for BuildCo’s architect to draw the architectural plans. BuildCo is required to attach the geo-technician's report as part of the technical documentation for the construction license, pursuant to Regulation No.

5 Request and obtain a utility statement from Budapest Waterworks Ltd.

Agency : Budapest Waterworks Ltd.

BuildCo completes a form and submits it to Budapest Waterworks Ltd. The form has to include the property’s address, and the estimated water demand along with an attached site map. After the form is received by the utility it issues a utility statement. The statement states the water capacity: the external network water capacity for consumption and in case of fire, and at what pressure level the fire water can be provided in case of fire. The form is also submitted when applying for the water and sewage connection.

1 day

no charge

According to Regulation No. 312/2012 (XI.8.), BuildCo is no longer required to submit the utility's official statement to the construction license application. However, according to the same regulation, BuildCo is required to state that the technical conditions of the site will able to facilitate the water connection. Therefore, a statement is requested from the utility, and attached to the construction license application. Moreover, the information provided in the statement is essential for BuildCo to draw the fire plans that are part of the construction license application.

The statement is free of charge if the diameter of the water pipe is less than 32 mm (~1.26 inches), so for BuildCo it is free.

312/2012. (XI. 8.).

30 days no charge

Details – Dealing with Construction Permits in Hungary – Measure of Quality

details dealing with construction permits in hungary measure of quality

Getting Electricity

This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Procedures to obtain an electricity connection (number)

  • Submitting all relevant documents and obtaining all necessary clearances and permits

  • Completing all required notifications and receiving all necessary inspections

  • Obtaining external installation works and possibly purchasing material for these works

  • Concluding any necessary supply contract and obtaining final supply

Time required to complete each procedure (calendar days)

  • Is at least 1 calendar day

  • Each procedure starts on a separate day

  • Does not include time spent gathering information

  • Reflects the time spent in practice, with little follow-up and no prior contact with officials

Cost required to complete each procedure (% of income per capita)

  • Official costs only, no bribes

  • Value added tax excluded

The reliability of supply and transparency of tariffs index (0-8)

  • Duration and frequency of power outages (0–3)

  • Tools to monitor power outages (0–1)

  • Tools to restore power supply (0–1)

  • Regulatory monitoring of utilities’ performance (0–1)

  • Financial deterrents limiting outages (0–1)

  • Transparency and accessibility of tariffs (0–1)

To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used.

The warehouse:

  • Is owned by a local entrepreneur and is used for storage of goods.

  • Is located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway.

  • Is a new construction and is being connected to electricity for the first time.

  • Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square feet). The plot of land on which it is built is 929 square meters (10,000 square feet).

The electricity connection:

  • Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW).

  • Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more common in the area where the warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.

  • Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service panel or switchboard and the meter base.

The monthly consumption:

  • It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh.

  • If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier.

  • Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation purposes only 30 days are used.

Price of electricity (cents per kilowatt-hour)*

*Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity.

Getting Electricity – Hungary

getting electricity hungary

Figure – Getting Electricity in Hungary – Score

figure getting electricity in hungary score

Figure – Getting Electricity in Hungary and comparator economies – Ranking and Score

DB 2020 Getting Electricity Score

figure getting electricity in hungary and comparator economies ranking and score

Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity.

Figure – Getting Electricity in Hungary – Procedure, Time and Cost

figure getting electricity in hungary procedure time and cost

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures

Figure – Getting Electricity in Hungary and comparator economies – Measure of Quality

figure getting electricity in hungary and comparator economies measure of quality

Details – Getting Electricity in Hungary – Procedure, Time and Cost

1 Submit application to ELMŰ Hálózati Kft. and await estimate

Agency : ELMŰ Hálózati Kft.

The application can be submitted by e-mail, in-person or by mail. The application must provide a site map that shows the connection point, the requested voltage level, and a proof of the applicant’s eligibility to request the external connection. The utility overviews the application and proposes an offer- the “technical-economic plan”- which includes the preliminary technical details, the time frame and the estimate cost of the grid connection. This document defines the utility’s technical responsibilities on the expansion of the network, on the meter installation, and on the final connection. It also defines the customer’s responsibility during the course of the project, such as the requirement of installing a meter box and to place equipment within the box.

25 calendar days HUF 0

2 Obtain external connection works by ELMŰ Hálózati Kft.

Agency : ELMŰ Hálózati Kft.

The utility prepares the design and carries out the external connection works. The utility also obtains all necessary approvals on behalf of the customer.

Based on the offer accepted by the customer after applying for connection, the utility prepares the grid connection contract which includes a detailed project plan and its timeframe, the invoice of the connection, the payment deadlines, and the deadline for placing the meter box. The applicant has to sign the grid connection contract and pay 10% of the total connection fee. Simultaneously, the utility hires an external electrical engineer to prepare an implementation plan and design the project for the external network. The electrical engineer obtains all the required maps from the gas, telecommunication, water and sewage utilities in order to examine whether there is any conflict with the existing underground networks. The electrical engineer draws the implementation plan and has it approved by the utility’s project manager. Once this implementation map is cleared internally, it is submitted for approval by gas, telecommunication, water and sewage utilities.

Authorizations have to be obtained from all interested public authorities, such as the notary from the Mayor’s Office of the local Municipality and specialized authorities (Environment Protection Authority, local Road Department, Hungarian Road Authority, etc.). Each authority has maximum 30 days to review the plans. In practice, this can take longer. The authorization process is regulated by the governmental Regulation no. 382/2007 (XII.23.). Simultaneously, permission have to be obtained from the owners of neighboring lands whose properties are impacted by constructing the cables. Oftentimes, there are multiple interested parties that need to be notified. Once all approvals have been obtained, the new geodetic map with the underground cables has to be authorized for registration by the local Land Registry. The Land Registry overviews the map from a cartographic point of view. After the Land Registry registered the map, the utility requests a construction right from the Measurement and Technical Safety Authority (Budapest Capital City Government Office). The authority reviews the new geodetic map to verify whether it complies with regulations. The construction right allows the utility to access the customer’s and all of the relevant parties’ properties to place the cables. It also gives right to the utility to access the installed cables in the future, should any further work be needed. The process of obtaining the cable right is regulated by the Electricity Law (2007. LXXXVI.). The Measurement and Technical Safety Authority has maximum 60 days to overview and authorize the plans. After the construction right is granted, the department informs the utilities (gas, telecommunication, water and sewage), the relevant specialized authorities, and the owners of the interested lands. These parties can appeal the decision within 15 days after receiving the notice from the department. Once the appeal period expires, the construction license of the cables is legally binding and ELMŰ Hálózati Kft. can start the connection works.

Once the construction license of the cables is legally binding, the Land Registry calculates the exact size of the area affected by the new cables. This calculation takes into account regulations on safety distances and on the size limits of the cables installed on public and private lands. The Land Registry adds the results of the calculations to all of the properties’ site ownership certificate and the site map.

15 days before the connection works starts, the utility notifies all the relevant parties (the Measurement and Technical Safety Authority, the local notary, the neighbors) on the exact date of the power outage due to the construction on site. Before the construction can start, the applicant is required to pay the remaining 90% of the connection fee. The external connection works takes around 2-3 days. All the project related documents during the construction are submitted electronically to the e-construction log.

224 calendar days HUF 3,094,800

3 Request and obtain a permit to install the cables within the meter box from the utility

Agency : Measurement Technology and Meter Controlling Department, ELMŰ Hálózati Kft.

The customer needs to obtain a permit from the Measurement Technology and Meter Controlling Department of the utility to install the cables within the meter box. These cables are connecting the external cables to the internal one. This step is required in order to connect the warehouse with electricity, and it can be done at any time after the grid connection application is obtained.

Typically, the customer requests the approval once the starting date of the external connection work is given by the utility.

16 calendar days HUF 0

4 Request and obtain a statement on the agreement to provide electricity from a supplier

Agency : Licensed electricity supplier

The customer chooses the most suitable electricity supplier from the market. The supplier sends to the customer the supply contract, which includes a statement on the agreement to provide electricity. The customer forwards the statement on the agreement to provide electricity to the utility. This statement is required before making a request for meter installation, and can be obtained at any time after grid connection application is obtained. Typically, the customer requests the agreement once the starting date of the external connection work is given by the utility.

3 calendar days HUF 0

5 Sign contracts and obtain meter installation, final connection and electricity flow

Agency : ELMŰ Hálózati Kft.

The customer has to sign the grid usage contract, grid connection contract and supply contract. These three contracts are not necessarily signed in parallel. Upon connection, the grid charge becomes due and payable, while the date of conclusion of the supply contract is up to the customer. The first two contracts take only few hours (sample contracts to fill in) while the third one takes some days. The installation of the meter and the start of supply of electricity require all three contracts to be signed. The meter is not installed at the same time as when the connection is done. The utility (Measurement technology and meter controlling department) is installing the meter.

8 calendar days HUF 0

Details – Getting Electricity in Hungary – Measure of Quality

details getting electricity in hungary measure of quality

Answer

Reliability of supply and transparency of tariff index (0-8) 7

System average interruption duration index (SAIDI) 2.6

Total duration and frequency of outages per customer a year (0-3) 2

What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0

System average interruption frequency index (SAIFI) 1.2

Does the distribution utility use automated tools to monitor outages? Yes

Mechanisms for monitoring outages (0-1) 1

Does the distribution utility use automated tools to restore service? Yes

Mechanisms for restoring service (0-1) 1

Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes

Regulatory monitoring (0-1) 1

Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? Yes

Financial deterrents aimed at limiting outages (0-1) 1

Are effective tariffs available online? Yes

Communication of tariffs and tariff changes (0-1) 1

Link to the website, if available online http://www.mekh.hu/arak-

Are customers notified of a change in tariff ahead of the billing cycle? Yes

villamos-energia

Note:

If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index.

If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index.

Registering Property

This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Procedures to legally transfer title on immovable property (number)

  • Preregistration procedures (for example, checking for liens, notarizing sales agreement, paying property transfer taxes)

  • Registration procedures in the economy's largest business city.

  • Postregistration procedures (for example, filling title with municipality)

Time required to complete each procedure (calendar days)

  • Does not include time spent gathering information

  • Each procedure starts on a separate day – though procedures that can be fully completed online are an exception to this rule

  • Procedure is considered completed once final document is received

  • No prior contact with officials

Cost required to complete each procedure (% of property value)

  • Official costs only (such as administrative fees, duties and taxes).

  • Value Added Tax, Capital Gains Tax and illicit payments are excluded

Quality of land administration index (0-30)

  • Reliability of infrastructure index (0-8)

  • Transparency of information index (0–6)

  • Geographic coverage index (0–8)

  • Land dispute resolution index (0–8)

  • Equal access to property rights index (-2–0)

To make the data comparable across economies, several assumptions about the parties to the transaction, the property and the procedures are used.

The parties (buyer and seller):

  • Are limited liability companies (or the legal equivalent).

  • Are located in the periurban (that is, on the outskirts of the city but still within its official limits) area of the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Are 100% domestically and privately owned.

  • Perform general commercial activities.

The property (fully owned by the seller):

  • Has a value of 50 times income per capita, which equals the sale price.

  • Is fully owned by the seller.

  • Has no mortgages attached and has been under the same ownership for the past 10 years.

  • Is registered in the land registry or cadastre, or both, and is free of title disputes.

  • Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required.

  • Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, building codes and legal requirements. The property, consisting of land and building, will be transferred in its entirety.

  • Will not be subject to renovations or additional construction following the purchase.

  • Has no trees, natural water sources, natural reserves or historical monuments of any kind.

  • Will not be used for special purposes, and no special permits, such as for residential use, industrial plants, waste storage or certain types of agricultural activities, are required.

  • Has no occupants, and no other party holds a legal interest in it.

Registering Property – Hungary

registering property hungary

Figure – Registering Property in Hungary – Score

figure registering property in hungary score

Figure – Registering Property in Hungary and comparator economies – Ranking and Score

DB 2020 Registering Property Score

figure registering property in hungary and comparator economies ranking and score

Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators.

Figure – Registering Property in Hungary – Procedure, Time and Cost

figure registering property in hungary procedure time and cost

* This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure.

Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below.

Figure – Registering Property in Hungary and comparator economies – Measure of Quality

figure registering property in hungary and comparator economies measure of quality

Details – Registering Property in Hungary – Procedure, Time and Cost

1 Obtain a certified title record at the Land Registry Office

Agency : Land Registry office

Obtain an original certified title sheet at the Land Registry Office to check the current data of the property. The title sheet includes information on liens and outstanding taxes. According to the Hungarian law, the countersigning lawyer may use a title sheet which is issued within 30 days preceding the signing. Due to the amendment of the land registry rules, the fee of the hard copy of a certified title record was increased to HUF 6,250. Since January 1, 2010, the request for electronic land registry sheet is also possible for HUF 3,600 for certified sheet and for HUF 1,000 uncertified sheet. Please note that the printed form of the electronic certified sheet is not considered as certified land registry sheet.

Less than one day, online

HUF 3,600; (Hard copy certificate HUF 6,250; Electronic certificate HUF 3,600; and Uncertified

sheet HUF 1,000)

2 The sale and purchase agreement is signed by a lawyer

Agency : Lawyer

After the negotiations between parties, a written sale and purchase agreement is required, and each page must be initialed/signed by the parties. The contract becomes valid by the countersignature of a lawyer (signature, the chamber identification number, stamp, dry stamp). The countersignature certifies the identity of the signing parties and that the content of the agreement is in accordance with the legal regulations and the will of the parties. The lawyers’ fees are subject to the parties’ agreement and may vary between 0.5 and 3% of the property value.

3 Obtain the extract of the purchaser from the Court of Registry

Agency : The Court of Registry, the Ministry of Justice, and notary public

Since the parties of the property transfer are companies, they should obtain an extract from the commercial registry both for the buyer and the seller. The extract (as well as the specimen of signature) is to be filed for both parties to the Land Registry Office. With the data indicated in the extract the officer can check that the legal entity really exists and that the manager is really entitled to sign for the company. The commercial register is public, so anybody can go there and ask for a company extract. The extract must contain the deleted and actual data of the company and may not be issued earlier than 30 days preceding the sale. In case the data of the seller have not been amended as of the date of purchase (or any further filing), it is enough to refer to this fact on the standardized application form, together with the case number in which the required documents had been filed. If no such reference is made, the cost of the extract is payable both in relation to the seller and the buyer. The cost varies according to the issuing agencies and the length of the extract. Generally, the cost is between HUF 3,000 and 7,000.

1 day

HUF 5,000

An electronic extract can be obtained via the e-mail (cegszolgalat@im.gov.hu) with pre-payment

of the cost (HUF 1,980).

Current market conditions have been pushing fees down to around 1% of the property value.

1 day HUF 2,070,652.64; (1% of

the purchase price (lawyer’s fees) – subject to the parties’ agreement)

4 Register the title at the Land Registry Office

Agency : Land Registry Offices of Capital Budapest Government Office

As of January 1, 2010, there are two Land Registry Offices operating in Budapest. The land registry offices accept specimen of signatures both from notary public and from attorney-at-law.

A new fast-track procedure has been introduced to reduce the registration time at the Land Registry for a higher registration fee of HUF 16,600. The registration fee for the regular procedure is HUF 6,600 according to Act 122 of 2006, effective February 4, 2007. As of January 2006, it is possible to retrieve a standardized application form online at: www.takarnet.hu.

The Registry office only accepts this standard form. Once the application has been submitted to the Land Registry Office, one set of the documents are forwarded to the stamp duty office. The purchaser then receives a letter from the stamp duty office and will pay stamp duty by postal check or bank transfer.

Note: Usually, if the purchaser does not pay the full purchase price at the signing of the contract, the vendor retains its ownership. (Such retention may be registered until the payment of the full purchase price). The application may request the registration of the sale with retention of ownership, or the registration of title. As of a regulation issued in January 2006, the seller may declare that he/she will request registration of the purchaser's title at a certain date, but no later than 6 months from the date of the agreement. During this period the registration is pending, and no other registrations or applications may be fulfilled regarding the property. If the land registry office does not receive the consent from the owner of the property, the pending application is deleted. The fact of sale with retention of ownership is indicated on a side note within 24 hours from the submission. This means that an application was submitted about the property, but it was not verified by the Land Registry Office yet (not registered, not refused). For sales with retention of ownership, a declaration must be submitted stating that the title may be registered, simultaneously with the deletion of the retention of ownership. Following the submission of the declaration, a new side note will be indicated, and the title of the purchaser will be registered. Transfers of property might be subject to a 27% VAT.

As of 2010, the general duty rate on the transfer of property for consideration was reduced to 4% from 10% on up to HUF 1 billion (1,000,000,000) of the property value.

The documentation shall include:

  1. The standardized application form;

  2. Two original copies and one photocopy of the contract;

  3. Original extract of the purchaser from the commercial register;

  4. The company extract and the specimen of signature of both the seller and the purchaser are to be filed.

15 days HUF 8,299,210.55; (4% of

property value (Stamp duty) up to value HUF 1 billion (or 2% for values above with a cap of HUF 200 million)

+ HUF 16,600 (registration fee, expedited Procedure), or

HUF 6,600 (registration fee, regular Procedure))

Details – Registering Property in Hungary – Measure of Quality

image image image

Getting Credit

This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

Strength of legal rights index (0–12)

  • Rights of borrowers and lenders through collateral laws (0-10)

  • Protection of secured creditors’ rights through bankruptcy laws (0-2)

Depth of credit information index (0–8)

  • Scope and accessibility of credit information distributed by credit bureaus and credit registries (0-8)

Credit bureau coverage (% of adults)

  • Number of individuals and firms listed in largest credit bureau as a percentage of adult population

Credit registry coverage (% of adults)

  • Number of individuals and firms listed in credit registry as a percentage of adult population

Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit information index measures rules and practices affecting the coverage, scope and accessibility of credit information available through a credit registry or a credit bureau. The strength of legal rights index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary secured transactions system exists. Then two case scenarios, case A and case B, are used to determine how a nonpossessory security interest is created, publicized and enforced according to the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a secured lender, BizBank.

In some economies the legal framework for secured transactions will allow only case A or case B (not both) to apply. Both cases examine the same set of legal provisions relating to the use of movable collateral.

Several assumptions about the secured borrower (ABC) and lender (BizBank) are used:

  • ABC is a domestic limited liability company (or its legal equivalent).

  • ABC has up to 50 employees.

  • ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Both ABC and BizBank are 100% domestically owned.

The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests).

In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets.

Getting Credit – Hungary

getting credit hungary

Figure – Getting Credit in Hungary – Score

figure getting credit in hungary score

Figure – Getting Credit in Hungary and comparator economies – Ranking and Score

DB 2020 Getting Credit Score

figure getting credit in hungary and comparator economies ranking and score

Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index.

Figure – Legal Rights in Hungary and comparator economies

figure legal rights in hungary and comparator economies

Details – Legal Rights in Hungary

details legal rights in hungary

Figure – Credit Information in Hungary and comparator economies

figure credit information in hungary and comparator economies

Details – Credit Information in Hungary

details credit information in hungary

Protecting Minority Investors

This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

What the indicators measure

  • Extent of disclosure index (0–10): Disclosure, review, and approval requirements for related-party transactions

  • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for prejudicial related-party transactions; Available legal remedies (damages, disgorgement of profits, disqualification

    from managerial position(s) for one year or more, rescission of the transaction)

  • Ease of shareholder suits index (0–10): Access to internal corporate documents; Evidence obtainable during trial and allocation of legal expenses

  • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of shareholder suits indices

  • Extent of shareholder rights index (0-6): Shareholders’ rights and role in major corporate decisions

  • Extent of ownership and control index (0-7): Governance safeguards protecting shareholders from undue board control and entrenchment

  • Extent of corporate transparency index (0-7): Corporate transparency on ownership stakes, compensation, audits and financial prospects

  • Extent of shareholder governance index (0–20): Sum of the extent of shareholders rights, extent of ownership and control and extent of corporate transparency indices

  • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices

To make the data comparable across economies, a case study uses several assumptions about the business and the transaction.

The business (Buyer):

  • Is a publicly traded corporation listed on the economy’s most important stock exchange.

  • Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not specifically required by law.

  • Has a supervisory board in economies with a two-tier board system on which Mr. James appointed 60% of the shareholder-elected members.

  • Has not adopted bylaws or articles of association that go beyond the minimum requirements. Does not follow codes, principles, recommendations or guidelines that are not mandatory.

  • Is a manufacturing company with its own distribution network.

The transaction involves the following details:

  • Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to Buyer’s five-member board.

  • Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores.

  • Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of Buyer’s assets and is higher than the market value.

  • The proposed transaction is part of the company’s principal activity and is not outside the authority of the company.

  • Buyer enters into the transaction. All required approvals are obtained, and all required disclosures made—that is, the transaction was not entered into fraudulently.

  • The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and directors that approved the transaction.

Stock exchange information

Stock exchange Budapest Stock Exchange

Protecting Minority Investors – Hungary

protecting minority investors hungary protecting minority investors hungary

Figure – Protecting Minority in Hungary – Score

Figure – Protecting Minority Investors in Hungary and comparator economies – Ranking and Score

DB 2020 Protecting Minority Investors Score

Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index.

Figure – Protecting Minority Investors in Hungary and comparator economies – Measure of Quality

Details – Protecting Minority Investors in Hungary – Measure of Quality

image

Answer

Score

Extent of conflict of interest regulation index (0-30)

image

Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3)

CEO alone

0.0

Extent of disclosure index (0-10) 2.0

image

Must Mr. James disclose his conflict of interest to the board of directors? (0-2)

No disclosure

obligation

0.0

Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0

image

Must Buyer immediately disclose the transaction to the public? (0-2)

Disclosure on the

transaction only

1.0

Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the transaction only

1.0

image

Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to

Buyer? (0-1)

Yes

1.0

Extent of director liability index (0-10) 4.0

image

Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2)

Liable if negligent

1.0

Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0

image

Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1)

No

0.0

Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0

image

Can a court void the transaction upon a successful claim by shareholders? (0-2)

Only in case of fraud 0.0

or bad faith

Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0

image

Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents?

(0-1)

Yes

1.0

Ease of shareholder suits index (0-10) 7.0

image

Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1)

Yes

1.0

Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant document

3.0

image

Is the level of proof required for civil suits lower than that of criminal cases? (0-1)

No

0.0

Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Preapproved questions only

1.0

image

Extent of shareholder governance index (0-20)

Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0

image

Does the sale of 51% of Buyer's assets require shareholder approval?

No

0.0

Extent of shareholder rights index (0-6) 4.0

image

Must Buyer obtain its shareholders’ approval every time it issues new shares?

Yes

1.0

Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? Yes 1.0

image

Do shareholders elect and dismiss the external auditor?

Yes

1.0

Do shareholders automatically receive preemption rights every time Buyer issues new shares? No 0.0

image

Extent of ownership and control index (0-7)

5.0

Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? Yes 1.0

image

Must the board of directors include independent and nonexecutive board members?

Yes

1.0

Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? Yes 1.0

Can shareholders remove members of the board of directors without cause before the end of their term?

Yes

1.0

Must the board of directors include a separate audit committee exclusively comprising board members?

Yes

1.0

Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer?

Yes

1.0

Must Buyer pay declared dividends within a maximum period set by law?

No

0.0

Is a subsidiary prohibited from acquiring shares issued by its parent company?

No

0.0

Extent of corporate transparency index (0-7)

5.0

Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%?

Yes

1.0

Must Buyer disclose information about board members’ primary employment and directorships in other companies?

No

0.0

Must Buyer disclose the compensation of individual managers?

No

0.0

Must a detailed notice of general meeting be sent 21 days before the meeting?

Yes

1.0

Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda?

Yes

1.0

Must Buyer's annual financial statements be audited by an external auditor?

Yes

1.0

Must Buyer disclose its audit reports to the public?

Yes

1.0

image

Paying Taxes

This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information.

image

What the indicators measure

Case study assumptions

Tax payments for a manufacturing company in 2018 (number per year adjusted for electronic and joint filing and payment)

  • Total number of taxes and contributions paid or withheld, including consumption taxes (value added tax, sales tax or goods and service tax)

  • Method and frequency of filing and payment

    Time required to comply with 3 major taxes (hours per year)

  • Collecting information, computing tax payable

  • Preparing separate tax accounting books, if required

  • Completing tax return, filing with agencies

  • Arranging payment or withholding

    Total tax and contribution rate (% of commercial profits)

  • Profit or corporate income tax

  • Social contributions, labor taxes paid by employer

  • Property and property transfer taxes

  • Dividend, capital gains, financial transactions taxes

  • Waste collection, vehicle, road and other taxes

    Postfiling Index

  • Time to comply with VAT refund (hours)

  • Time to obtain VAT refund (weeks)

  • Time to comply with a corporate income tax correction (hours)

  • Time to complete a corporate income tax correction (weeks)

Using a case scenario, Doing Business records taxes and mandatory contributions a medium size company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of filing and payments, time taken to comply with tax laws, time taken to comply with the requirements of postfiling processes and time waiting.

To make data comparable across economies, several assumptions are used:

  • TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the second year of operation (calendar year 2018). Taxes and mandatory contributions are measured at all levels of government.

The VAT refund process:

  • In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will exceed Output VAT in June 2018.

The corporate income tax audit process:

  • An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period.

Paying Taxes – Hungary

Indicator

Hungary

OECD high income

Best Regulatory Performance

Payments (number per year)

11

10.3

3 (2 Economies)

Time (hours per year)

277

158.8

49 (3 Economies)

Total tax and contribution rate (% of profit)

37.9

39.9

26.1 (33 Economies)

Postfiling index (0-100)

87.5

86.7

None in 2018/19

Figure – Paying Taxes in Hungary – Score

image

86.7

image

64.8

image

83.4

image

87.5

Payments

Time

Total tax and contribution rate

Postfiling index

Figure – Paying Taxes in Hungary and comparator economies – Ranking and Score

DB 2020 Paying Taxes Score

image

0 100

85.2: Moldova (Rank: 33)

84.3: Regional Average (OECD high income)

81.4: Czech Republic (Rank: 53)

80.6: Hungary (Rank: 56)

76.4: Poland (Rank: 77)

72.3: Bulgaria (Rank: 97)

Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold.

Figure – Paying Taxes in Hungary and comparator economies – Measure of Quality

image

87.5

90.5

90.8

86.7

71.2

77.4

100

90

Index score

80

70

60

50

40

30

20

10

0

Hungary Bulgaria Czech Republic

Moldova Poland OECD high

income

image

Details – Paying Taxes in Hungary

image

Tax or mandatory contribution

Payments (number)

Notes on Payments

Time (hours)

Statutory tax rate

Tax base

Total tax and contribution rate (% of profit)

Notes on TTCR

Social tax

1.0

online

146.0

19.5%

gross salaries

22.00

image

Corporate

income tax

1.0

online

35.0

9%

taxable profit

3.46

Local business tax

1.0 online 2% adjusted net revenue

5.89

image

Training

contribution

0.0

jointly

1.5%

gross salaries

1.69

Rehabilitation contribution

1.0 online HUF 1,242,000 5% of the employees

2.36

image

Innovation

contribution

1.0

online

0.3%

adjusted net

revenue

0.88

Property tax 1.0 online HUF 1,850 per square meter

building area 1.09

Fringe benefit tax 0.0 jointly 15% plus (14%

image

Vehicle tax

1.0

online

HUF 850 per

100kg

vehicle weight

plus half load

0.11

or 19,5% of 1.18 times value)

fringe benefit 0.36

image

Fuel tax

1.0

included into the

fuel price

0.00

small amount

Land tax 1.0 online HUF 336 per square meter

land area 0.04

Employee paid – Social security contributions

  1. jointly 18.5% gross salaries 0.00 withheld

    image

    Environmental tax

  2. online fixed fee depends on nature and type of pollution

0.00 small amount

image

Totals

11

277

37.9

Value added tax (VAT)

1.0 online 96.0 27% value added 0.00 not included

Details – Paying Taxes in Hungary – Tax by Type

image

Taxes by type

Answer

Profit tax (% of profit)

9.4

Labor tax and contributions (% of profit)

26.4

Other taxes (% of profit)

2.1

image

Details – Paying Taxes in Hungary – Measure of Quality

Answer

Score

Postfiling index (0-100)

87.5

VAT refunds

Does VAT exist?

Yes

Does a VAT refund process exist per the case study?

Yes

Restrictions on VAT refund process

none

Percentage of cases exposed to a VAT audit (%)

50% – 74%

Is there a mandatory carry forward period?

No

Time to comply with VAT refund (hours)

15.0

70.0

Time to obtain VAT refund (weeks)

11.0

84.6

Corporate income tax audits

Does corporate income tax exist?

Yes

Percentage of cases exposed to a corporate income tax audit (%)

0% – 24%

Time to comply with a corporate income tax correction (hours)

4.0

95.4

Time to complete a corporate income tax correction (weeks)

No tax audit per case study scenario

100

Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable.

The hours for Social Security include all the hours for labor taxes and mandatory contributions in general.

The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction.

N/A = Not applicable.

image

Trading across Borders

Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information.

image

What the indicators measure

Case study assumptions

Documentary compliance

  • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in origin economy

  • Obtaining, preparing and submitting documents required by destination economy and any transit economies

  • Covers all documents required by law and in practice, including electronic submissions of information

    Border compliance

  • Customs clearance and inspections

  • Inspections by other agencies (if applied to more than 20% of shipments)

  • Handling and inspections that take place at the economy’s port or border

    Domestic transport

  • Loading or unloading of the shipment at the warehouse or port/border

  • Transport between warehouse and port/border

  • Traffic delays and road police checks while shipment is en route

To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions:

Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours.

Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector experts in international trade logistics and are informed about exchange rates.

Assumptions of the case study:

  • For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy.

  • It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from its natural import partner—the economy from which it imports the largest value (price times quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000.

  • The mode of transport is the one most widely used for the chosen export or import product and the trading partner, as is the seaport or land border crossing.

  • All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process.

  • A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy.

  • Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities.

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Trading across Borders – Hungary

Indicator

Hungary

OECD high income

Best Regulatory Performance

Time to export: Border compliance (hours)

0

12.7

1 (19 Economies)

Cost to export: Border compliance (USD)

0

136.8

0 (19 Economies)

Time to export: Documentary compliance (hours)

1

2.3

1 (26 Economies)

Cost to export: Documentary compliance (USD)

0

33.4

0 (20 Economies)

Time to import: Border compliance (hours)

0

8.5

1 (25 Economies)

Cost to import: Border compliance (USD)

0

98.1

0 (28 Economies)

Time to import: Documentary compliance (hours)

1

3.4

1 (30 Economies)

Cost to import: Documentary compliance (USD)

0

23.5

0 (30 Economies)

Figure – Trading across Borders in Hungary – Score

Time

Cost

Time

Cost

Time

Cost

Time

Cost

to

to

to

to

to

to

to

to

export:

export:

export:

export:

import:

import:

import:

import:

Border

Border

Documentary

Documentary

Border

Border

Documentary

Documentary

compliance

compliance

compliance

compliance

compliance

compliance

compliance

compliance

Figure – Trading across Borders in Hungary and comparator economies – Ranking and Score

image

100.0

image

100.0

image

100.0

image

100.0

image

100.0

image

100.0

image

100.0

image

100.0

DB 2020 Trading Across Borders Score

image

0 100

97.4: Bulgaria (Rank: 21)

92.3:

94.3: Regional Average (OECD high income) Moldova (Rank: 38)

100: Czech Republic (Rank: 1)

100: Hungary (Rank: 1)

100: Poland (Rank: 1)

Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import.

Figure – Trading across Borders in Hungary – Time and Cost

image

image

1.2

Time (hours) Cost (USD)

image

1

1

0

0

0

0

0

0

1.2

1 1

Time (hours)

Cost (USD)

0.8 0.8

0.6 0.6

0.4 0.4

0.2 0.2

0

Export

Border Compliance

Export

Documentary Compliance

Import

Border Compliance

0

Import

Documentary Compliance

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Details – Trading across Borders in Hungary

image

Characteristics Export Import

Product HS 85 : Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles

HS 8708: Parts and accessories of motor vehicles

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Border

Hungary- Slovak Republic border crossing

Hungary- Slovak Republic border crossing

Trade partner Germany Germany

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Domestic transport time (hours)

3

3

Distance (km) 200 200

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Domestic transport cost (USD) 400 400

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Details – Trading across Borders in Hungary – Components of Border Compliance

Time to Complete (hours)

Associated Costs (USD)

Export: Clearance and inspections required by customs authorities

0.0

0.0

Export: Clearance and inspections required by agencies other than customs

0.0

0.0

Export: Port or border handling

0.0

0.0

Import: Clearance and inspections required by customs authorities

0.0

0.0

Import: Clearance and inspections required by agencies other than customs

0.0

0.0

Import: Port or border handling

0.0

0.0

Details – Trading across Borders in Hungary – Trade Documents

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Export

Import

CMR waybill CMR waybill

Commercial invoice Commercial invoice

EKAER number EKAER number

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Intrastat Intrastat

Packing list Packing list

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Enforcing Contracts

The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information.

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What the indicators measure

Case study assumptions

Time required to enforce a contract through the courts (calendar days)

  • Time to file and serve the case

  • Time for trial and to obtain the judgment

  • Time to enforce the judgment

    Cost required to enforce a contract through the courts (% of claim value)

  • Average attorney fees

  • Court costs

  • Enforcement costs

    Quality of judicial processes index (0-18)

  • Court structure and proceedings (-1-5)

  • Case management (0-6)

  • Court automation (0-4)

  • Alternative dispute resolution (0-3)

The dispute in the case study involves the breach of a sales contract between two domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement.

To make the data on the time and comparable across economies, several assumptions about the case are used:

  • The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of adequate quality.

  • The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater.

  • The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater.

  • The Seller requests the pretrial attachment of the defendant’s movable assets to secure the claim.

  • The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods was not adequate.

  • The judge decides in favor of the seller; there is no appeal.

  • The Seller enforces the judgment through a public sale of the Buyer’s movable assets.

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Standardized Case

Claim value HUF 7,489,501

Enforcing Contracts – Hungary

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City Covered Budapest

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Court name Pest or Buda Central District Court

Indicator

Hungary

OECD high income

Best Regulatory Performance

Time (days)

605

589.6

120 (Singapore)

Cost (% of claim value)

15.0

21.5

0.1 (Bhutan)

Quality of judicial processes index (0-18)

12.5

11.7

None in 2018/19

Figure – Enforcing Contracts in Hungary – Score

image

60.2

image

83.2

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69.4

Time

Cost

Quality of judicial processes index

Figure – Enforcing Contracts in Hungary and comparator economies – Ranking and Score

DB 2020 Enforcing Contracts Score

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0 100

71.0: Hungary (Rank: 25)

67.8: Regional Average (OECD high income) 67.0: Bulgaria (Rank: 42)

64.4: Poland (Rank: 55)

63.6: Moldova (Rank: 62)

56.4: Czech Republic (Rank: 103)

Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators.

Figure – Enforcing Contracts in Hungary – Time and Cost

700

600

Time (days)

500

400

300

200

100

0

Bulgaria Czech

Republic

Time (days) Cost (% of claim value)

image

678

685

564

33.8

605

585

589.6

28.6

21.5

18.6

19.4

15.0

image

image

Hungary Moldova OECD high

income

40

Cost (% of claim value)

35

30

25

20

15

10

5

0

Poland

Figure – Enforcing Contracts in Hungary and comparator economies – Measure of Quality

Hungary

Bulgaria

Czech Republic

Moldova

Poland

OECD high income

image

image

3

4

2.5

3

2.5

2.5

2

3.5

2

3

3

1.5

2.5

3

2

3.5

3

1.5

1.5

5

2.5

3.2

2.4

3.6

0 2 4 6 8 10 12 14

Sub-Indicator Score

image

image

image

image

Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5)

Details – Enforcing Contracts in Hungary

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Indicator

Time (days) 605

Trial and judgment 365

Filing and service 60

Cost (% of claim value) 15.0

Enforcement of judgment 180

Court fees 8

Attorney fees 5

Quality of judicial processes index (0-18) 12.5

Enforcement fees 2

Case management (0-6) 4.0

Court structure and proceedings (-1-5) 3.0

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Alternative dispute resolution (0-3) 3.0

Court automation (0-4) 2.5

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Details – Enforcing Contracts in Hungary – Measure of Quality

Answer

Score

Quality of judicial processes index (0-18)

12.5

Court structure and proceedings (-1-5)

3.0

1. Is there a court or division of a court dedicated solely to hearing commercial cases?

Yes

1.5

2. Small claims court

0.0

2.a. Is there a small claims court or a fast-track procedure for small claims?

No

2.b. If yes, is self-representation allowed?

n.a.

3. Is pretrial attachment available?

Yes

1.0

4. Are new cases assigned randomly to judges?

Yes, but manual

0.5

5. Does a woman's testimony carry the same evidentiary weight in court as a man's?

Yes

0.0

Case management (0-6)

4.0

1. Time standards

1.0

1.a. Are there laws setting overall time standards for key court events in a civil case?

Yes

1.b. If yes, are the time standards set for at least three court events?

Yes

1.c. Are these time standards respected in more than 50% of cases?

Yes

2. Adjournments

0.0

2.a. Does the law regulate the maximum number of adjournments that can be granted?

No

2.b. Are adjournments limited to unforeseen and exceptional circumstances?

No

2.c. If rules on adjournments exist, are they respected in more than 50% of cases?

n.a.

3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report?

Yes

1.0

4. Is a pretrial conference among the case management techniques used before the competent court?

No

0.0

5. Are there any electronic case management tools in place within the competent court for use by judges?

Yes

1.0

6. Are there any electronic case management tools in place within the competent court for use by lawyers?

Yes

1.0

Court automation (0-4)

2.5

1. Can the initial complaint be filed electronically through a dedicated platform within the competent court?

Yes

1.0

2. Is it possible to carry out service of process electronically for claims filed before the competent court?

No

0.0

3. Can court fees be paid electronically within the competent court?

Yes

1.0

4. Publication of judgments

0.5

4.a Are judgments rendered in commercial cases at all levels made available to the general public through publication in official gazettes, in newspapers or on the internet or court website?

No

4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through publication in official gazettes, in newspapers or on the internet or court website?

Yes

Alternative dispute resolution (0-3)

3.0

1. Arbitration

1.5

1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects?

Yes

1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— that cannot be submitted to arbitration?

No

1.c. Are valid arbitration clauses or agreements usually enforced by the courts?

Yes

2. Mediation/Conciliation 1.5

image

2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or

section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig

Yes

2.a. Is voluntary mediation or conciliation available? Yes

2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or conciliation is successful, a refund of court filing fees, income tax credits or the like)?

Yes

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Resolving Insolvency

Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information.

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What the indicators measure

Case study assumptions

Time required to recover debt (years)

  • Measured in calendar years

  • Appeals and requests for extension are included

    Cost required to recover debt (% of debtor’s estate)

  • Measured as percentage of estate value

  • Court fees

  • Fees of insolvency administrators

  • Lawyers’ fees

  • Assessors’ and auctioneers’ fees

  • Other related fees

    To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used:

    • A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties.

    • The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater.

    • The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. The hotel cannot pay back the loan, but makes enough money to operate otherwise.

    In addition, Doing Business evaluates the quality of legal framework applicable to judicial liquidation and reorganization proceedings and the extent to which best insolvency practices have been implemented in each economy covered.

    Outcome

  • Whether business continues operating as a going concern or business assets are sold piecemeal

    Recovery rate for creditors

  • Measures the cents on the dollar recovered by secured creditors

  • Outcome for the business (survival or not) determines the maximum value that can be recovered

  • Official costs of the insolvency proceedings are deducted

  • Depreciation of furniture is taken into account

  • Present value of debt recovered

    Strength of insolvency framework index (0- 16)

  • Sum of the scores of four component indices:

  • Commencement of proceedings index (0-3)

  • Management of debtor’s assets index (0-6)

  • Reorganization proceedings index (0-3)

  • Creditor participation index (0-4)

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Indicator

Hungary

OECD high income

Best Regulatory Performance

Recovery rate (cents on the dollar)

44.2

70.2

92.9 (Norway)

Resolving Insolvency – Hungary

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Cost (% of estate)

14.5

9.3

1.0 (Norway)

Time (years) 2.0 1.7 0.4 (Ireland)

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Figure – Resolving Insolvency in Hungary – Score

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Strength of insolvency framework index (0-16)

10.0

11.9

None in 2018/19

Outcome (0 as piecemeal sale and 1 as going concern) 0 .. ..

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47.6

image

62.5

Recovery rate Strength of insolvency framework index

Figure – Resolving Insolvency in Hungary and comparator economies – Ranking and Score

DB 2020 Resolving Insolvency Score

image

0 100

80.1: Czech Republic (Rank: 16)

76.5: Poland (Rank: 25)

74.9: Regional Average (OECD high income)

57.8: Bulgaria (Rank: 61)

55.0: Hungary (Rank: 66)

54.8: Moldova (Rank: 67)

Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index.

Figure – Resolving Insolvency in Hungary – Time and Cost

3.5

3

Time (years)

2.5

2

1.5

1

0.5

0

image

3.3

17.0

14.5

2.8

15.0

3.0

15.0

2.1

2.0

9.0

1.7

9.3

Bulgaria Czech

Republic

image

Time (years) Cost (% of estate)

image

Hungary Moldova OECD high

income

18

Cost (% of estate)

16

14

12

10

8

6

4

2

0

Poland

Figure – Resolving Insolvency in Hungary and comparator economies – Measure of Quality

Hungary

Bulgaria

Czech Republic

Moldova

Poland

OECD high income

image

image

5

2.5

2

0.5

3

2.5

4

2.5

5.5

2.5

3

3

4

2.5

3

2.5

6

3

2

3

5.3

2.8

2.1

1.9

0 2 4 6 8 10 12 14 16

Sub-Indicator Score

image

image

image

image

Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3)

Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.”

Figure – Resolving Insolvency in Hungary and comparator economies – Recovery Rate

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67.5

70.2

60.9

44.2

37.7

32.1

Recovery rate(cents on the dollar)

80

70

60

50

40

30

20

10

0

Hungary Bulgaria Czech Republic Moldova Poland OECD high income

Details – Resolving Insolvency in Hungary

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Indicator

Answer

Score

Proceeding

liquidation

Banks usually use a standard procedure to initiate liquidation, if a debtor defaults on a loan and remains in default for a certain period of time. Bizbank is not entitled to initiate reorganization, as it can only be filed by the debtor. As the most

likely initial procedure is liquidation, it will not convert into any other procedure.

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Time (in years)

2.0

The court commences liquidation proceedings of Mirage within 60 days upon receipt of the BizBank's request. Once the order on the liquidation proceedings of Mirage becomes final, the court forthwith appoints the liquidator and orders the disclosure of such order in the Companies' Gazette. The creditors shall announce their claims within 40 days from the date of the above order. The creditors may also announce their claims after the 40 days' deadline but within 180 days, and such claims will only be satisfied once every other claim has been satisfied in accordance with the general waterfall rules. The first meeting of the creditors shall be held within 75 days after the disclosure of the liquidation order to form the creditors’ committee or appoint the creditors’ representative. In case creditors established their committee, it may adopt a decision within 100 days from the publication date of the liquidation order to operate Mirage as a going concern during the insolvency proceedings (in case the creditors' committee has been established at a later stage, the decision on the operation of Mirage as a going concern during the insolvency proceedings may be adopted within 60 days from the establishment of the creditors' committee). The liquidator shall sell Mirage's assets through public sales. If the received amount is sufficient to cover the claims of the creditors, the liquidator may prepare an interim financial statement following the deadline for the notification of claims and submit it to the competent court. The court may approve such interim financial statements within 30 days. The deadline for the submission of the final balance sheet is

24 months from the date of the publication of the order on liquidation proceedings.

Outcome piecemeal sale The goal of liquidation proceedings is to provide satisfaction to the creditors of an insolvent debtor upon its winding-up without succession. Mirage has too many credits and, therefore, it will not be able to operate further.

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Recovery rate

(cents on the dollar)

44.2

Cost (% of estate) 14.5 The total cost of the proceedings will amount to approximately 14.5% of the value of the hotel. The majority of the expenses comprise: – legal fees: 5%; – fees of the insolvency administrator: 5%; – fees of other professionals that may be hired by the insolvency administrator: 3%; – fees of the auctioneer: 1%; – other fees, including the registration fee: 0,5%.

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Details – Resolving Insolvency in Hungary – Measure of Quality

Answer

Score

Strength of insolvency framework index (0-16)

10.0

Commencement of proceedings index (0-3)

2.5

What procedures are available to a DEBTOR when commencing insolvency proceedings?

(a) Debtor may file for both liquidation and reorganization

1.0

Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor?

(b) Yes, but a creditor may file for liquidation only

0.5

What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value of its assets

(c) Both (a) and (b) options are available, but only one of them needs to be complied with

1.0

Management of debtor's assets index (0-6)

5.0

Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the debtor?

Yes

1.0

Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts?

Yes

1.0

Does the insolvency framework allow avoidance of preferential transactions?

Yes

1.0

Does the insolvency framework allow avoidance of undervalued transactions?

Yes

1.0

Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of insolvency proceedings?

Yes

1.0

Does the insolvency framework assign priority to post-commencement credit?

(c) No priority is assigned to post- commencement creditors

0.0

Reorganization proceedings index (0-3)

0.5

Which creditors vote on the proposed reorganization plan?

(a) All creditors

0.5

Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation?

No

0.0

Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in the same class treated equally?

No

0.0

Creditor participation index (0-4)

2.0

Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency representative?

Yes

1.0

Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor?

No

0.0

Does the insolvency framework provide that a creditor has the right to request information from the insolvency representative?

No

0.0

Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting creditors' claims?

Yes

1.0

Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.”

Employing Workers

Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business.

The most recent round of data collection was completed in May 2019. See the methodology for more information.

What the indicators measure

Hiring

(i) whether fixed-term contracts are prohibited for permanent tasks; (ii) maximum cumulative duration of fixed-term contracts;

(iii) length of the maximum probationary period; (iv) minimum wage;(v) ratio of minimum wage to the average value added per worker.

Working hours

(i) maximum number of working days allowed per week; (ii) premiums for work: at night, on a weekly rest day and overtime;

(iii) whether there are restrictions on work at night, work on a weekly rest day and for overtime work; (iv) length of paid annual leave.

Redundancy rules

(i) whether redundancy can be basis for terminating workers; (ii) whether employer needs to notify and/or get approval from third party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment.

To make the data comparable across economies, several assumptions about the worker and the business are used.

The worker:

  • Is a cashier in a supermarket or grocery store, age 19, with one year of work experience.

  • Is a full-time employee.

  • Is not a member of the labor union, unless membership is mandatory.

The business:

  • Is a limited liability company (or the equivalent in the economy).

  • Operates a supermarket or grocery store in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city.

  • Has 60 employees.

  • Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and they apply even to firms that are not party to them.

  • Abides by every law and regulation but does not grant workers more benefits than those mandated by law, regulation or (if applicable) collective bargaining agreements.

Redundancy cost

(i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected.

Employing Workers – Hungary

Details – Employing Workers in Hungary

Answer

Hiring

Fixed-term contracts prohibited for permanent tasks? No

Maximum length of a single fixed-term contract (months) 60.0

Maximum length of fixed-term contracts, including renewals (months) 60.0

Minimum wage applicable to the worker assumed in the case study (US$/month) 524.9

Maximum length of probationary period (months) 3.0

Ratio of minimum wage to value added per worker 0.3

Working hours

Standard workday 8.0

Maximum number of working days per week 5.0

Premium for night work (% of hourly pay) 15.0

Premium for work on weekly rest day (% of hourly pay) 50.0

Premium for overtime work (% of hourly pay) 50.0

Restrictions on night work? No

Restrictions on weekly holiday? No

Restrictions on overtime work? Yes

Paid annual leave for a worker with 1 year of tenure (working days) 20.0

Paid annual leave for a worker with 5 years of tenure (working days) 21.0

Paid annual leave for a worker with 10 years of tenure (working days) 23.0

Redundancy rules

Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 21.3

Third-party notification if one worker is dismissed? No

Dismissal due to redundancy allowed by law? Yes

Third-party notification if nine workers are dismissed? No

Third-party approval if one worker is dismissed? No

Retraining or reassignment obligation before redundancy? No

Third-party approval if nine workers are dismissed? No

Priority rules for reemployment? No

Priority rules for redundancies? No

Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3

Redundancy cost

Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 7.9

Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 6.4

Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 0.0

Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 6.2

Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 8.7

Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 13.0

Unemployment protection after one year of employment? Yes

Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 7.2

PEO Hungary

Hungary, as a Professional Employer Organization (PEO) country, offers a dynamic and enticing environment for businesses seeking to expand their operations. With its strategic location at the crossroads of Europe, Hungary serves as a gateway to various markets, making it an appealing destination for companies aiming to establish a presence in the region. The country boasts a skilled and educated workforce, renowned for its technical expertise and multilingual capabilities, making recruitment and talent acquisition relatively seamless. Additionally, Hungary’s favorable business regulations and competitive cost structure provide an advantageous backdrop for companies looking to optimize their operational efficiency and cost-effectiveness. As a PEO destination, Hungary’s blend of economic stability, strategic location, and skilled workforce makes it an alluring choice for enterprises seeking to navigate the complexities of international expansion while mitigating administrative and legal burdens.

PEO services in Hungary offer a comprehensive solution for businesses seeking to navigate the complexities of human resources, payroll, and employment regulations. These services provide a strategic partnership wherein the PEO becomes the employer of record for the client’s workforce, managing essential functions such as payroll processing, tax compliance, employee benefits administration, and legal adherence. By availing PEO services in Hungary, companies can streamline their operations, reduce administrative burdens, and enhance compliance with local labor laws. This allows organizations to focus on their core activities and expansion strategies while ensuring that their employees receive efficient HR support. PEO services in Hungary act as a bridge between companies and the intricacies of the Hungarian employment landscape, enabling international businesses to establish a strong foothold in the market without being encumbered by HR intricacies.

Business Reforms in Hungary

From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by

Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008.

=Doing Business reform making it easier to do business. = Change making it more difficult to do business.

DB2020

Paying Taxes: Hungary made paying taxes easier by upgrading the internal electronic tax system. Hungary also made paying taxes less costly by reducing the social tax rate paid by the employer.

Employing Workers: Hungary changed regulations pertaining to overtime work.

DB2019

Protecting Minority Investors: Hungary strengthened minority investors protections by allowing parties to pose questions to defendants and witnesses during trial after obtaining the judge's approval.

Paying Taxes: Hungary made paying taxes less costly by decreasing the social tax rate paid by the employer and by reducing the corporate income tax rate to a flat rate.

DB2018

Getting Credit: Hungary improved access to credit information by offering commercial credit scores.

Paying Taxes: Hungary made paying taxes easier by improving the tax authority internal risk management system for selecting companies for a tax audit.

Enforcing Contracts: Hungary made enforcing contracts easier by introducing a system that allows users to pay court fees electronically.

DB2017

Paying Taxes: Hungary made paying taxes less costly for small and medium-sized businesses by allowing additional deduction for new acquisitions of land and buildings.

Enforcing Contracts: Hungary made enforcing contracts easier by introducing an electronic filing system.

Employing Workers: Hungary amended legislation to remove restrictions limiting the operating hours for retail shops.

DB2016

Employing Workers: Hungary adopted legislation limiting the operating hours for retail shops.

DB2015

Starting a Business: Hungary made starting a business more difficult by increasing the paid-in minimum capital requirement.

Getting Credit: Hungary improved access to credit by adopting a new legal regime on secured transactions that implements a functional approach to secured transactions, extends security interests to the products and proceeds of the original asset, and establishes a unified, and notice-based collateral registry.

Paying Taxes: Hungary made paying taxes easier and less costly for companies by abolishing the special tax that had been temporarily introduced in 2010 and by reducing the vehicle tax rate.

DB2014

Employing Workers: Hungary reduced the premium for night work and weekly holiday work and increased the minimum wage.

DB2013

Starting a Business: Hungary made starting a business more complex by increasing the registration fees for limited liability companies and adding a new tax registration at the time of incorporation and enforcing a requirement for mandatory registration with the Hungarian Chamber of Commerce and Industry.

Getting Credit: Hungary improved access to credit information by passing its first credit bureau law mandating the creation of a database with positive credit information on individuals.

Paying Taxes: Hungary made paying taxes easier for companies by abolishing the community tax. At the same time, Hungary increased health insurance contributions paid by the employer.

Trading across Borders: Hungary reduced the time to export and import by allowing electronic submission of customs declarations and other documents.

DB2012

Getting Credit: Hungary reduced the amount of credit information available from private credit bureaus by shortening the period for retaining data on defaults and

DB2011

Dealing with Construction Permits: Hungary implemented a time limit for the issuance of building permits.

Registering Property: Hungary reduced the property registration fee by 6% of the property value.

Paying Taxes: Hungary simplified taxes and tax bases.

Resolving Insolvency: Amendments to Hungary’s bankruptcy law encourage insolvent companies to consider reaching agreements with creditors out of court so as to avoid bankruptcy.

DB2010

Starting a Business: Hungary made starting a business easier by implementing online registration, with registration confirmed 1 hour after application.

DB2009

Starting a Business: Hungary made starting a business easier by reducing the minimum capital requirement, introducing online filing and publication and making the use of notaries optional.

Registering Property: Hungary established a new registry office in Budapest, which speeded up property registration by reducing the time required to register a title.

DB2008

Starting a Business: Hungary made starting a business easier through a new company act and corporate procedure act introducing standardized forms, a “silence is consent” rule and electronic registration.

Registering Property: Hungary made property registration faster by opening a second land registry office in Budapest, which reduced the time required to submit an application to the land registry and to register the title.

Paying Taxes: Hungary made paying taxes more costly for companies by increasing the health insurance contribution rate.

Resolving Insolvency: Hungary enhanced its insolvency process through an amendment to its bankruptcy legislation granting secured creditors priority over their pledged security.

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