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The Hungarian Government recently adopted Act no. LVII of 2018 on the Control of Investments Detrimental to the Interests of Hungarian National Security (the "Act"). Previously we wrote about a similar legislative proposal [see here] (the "Proposal") which aimed at establishing a similar control mechanism. However, the Act has a more sophisticated approach on the control and approval procedure than the earlier proposal had. Pursuant to the Act, investors from outside the EU, Switzerland and EEA countries who wish to invest in Hungary must obtain prior approval from the minister to be designated by a governmental decree ("Minister") which has not yet been adopted.

“Considering the recent legal developments of the Hungarian market, I would emphasize the latest amendments to the company registry system and the recently-adopted act regulating business and trade secrets,” reports Zoltan Tenk, Managing Partner at Tenk Law Firm, when asked for the buzz in Hungary.

In recent years, the Hungarian Competition Authority (HCA) has seemingly aimed to foster cooperation between itself and market participants. Recent case law shows that the HCA strives for cooperation even when market participants allegedly commit grave infringements of the competition rules. Market participants are advised to harness this tendency and the HCA's willingness to reach decisions more efficiently. This article examines a number of recent cases and the lessons learned.

According to an amendment to the Hungarian Corporate Income Tax Act approved in July 2018, taxpayers may be eligible for higher tax allowance in connection with an investment project to comply with energy efficiency targets, upon placing the project into operation, in the tax year following the year when the project was placed into operation - or in the same tax year at the taxpayer’s discretion - and in the following five tax years.

As Mr. István Nagy, Minister of Agriculture explained in September 2018, „the undivided joint ownership paralyses the Hungarian economy, and from a competitiveness point of view it is essential to be deleted”. The Hungarian agricultural land and forestry ownership conditions are not optimal, since the average plots are too small and they have many owners. This situation affects 3.5 million citizens and 1 million hectares.

The establishment and renovation of shopping centers will be governed by stricter rules according to a new regulation approved in the summer 2018. The so-called “Plázastop” (in English: Law on stopping malls) was introduced in 2012 for the purpose of preventing the spread of shopping malls. The regulation was originally planned to be in force until the end of 2014, however, it had been amended only in 2015 when the extension and establishment of shopping malls exceeding the floor area of 400 sqm was prohibited.

The Hungarian Parliament enacted the tax package for 2019 in July 2018, which contains, inter alia, a significant modification in the cafeteria allowances. The aim of the reform is to simplify the proliferated cafeteria system and to reduce the associated administrative burden.

Dentons has advised the Globe Trade Centre S.A. real estate company on its 100% acquisition of a real property located on the Vaci Corridor in Budapest, adjacent to GTC Hungary’s Center Point Office Buildings. The seller, Masped Zrt., was represented by the Tenk Law Firm.

The Hungarian Minister of Finance announced on 7 August 2018 that the maximum number of third-country nationals who might be employed in Hungary with work permit shall be 55,000. Last year the limitation was 59,000, which means that the maximum number of third-country nationals has been reduced with 4,000. The decision may be surprising, since according to the statistics severe labour shortage is experienced in key sectors and there is a need for the employment of third-country nationals.

The legal practice analyser group of the Curia (i.e. the Hungarian supreme court) published a summarizing opinion on the judicial practice of the possession protection cases initiated before Hungarian notaries. Under the provisions of the Civil Code, the owner shall refrain from any conduct that would unnecessarily disturb others, especially his neighbours, or that would jeopardize the exercise of their rights. The possessor is entitled to request the termination of the disturbance from the notary public within one year.

The discounted 5% VAT rate introduced in 2016 will be abolished as of 1 January 2020, meaning that the 27% VAT rate will be applicable from that date, which can have significant effect on the market. In order to avoid a possible market chaos, the Hungarian Real Estate Development Roundtable Association (IFK) proposed introducing flexible, gradual VAT and stamp duty regulations that may result in increasing tax burden in the next 3-4 years. The new system could ensure that the supply and the sales of the new real estates are not reduced drastically from 2020.

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