Legislative System

As a member state of the EU, Hungary’s legislative system consists of two levels: the EU level and the national level. EU law applies either directly or through implementation by a national legislative instrument. The national level comprises the following legislative instruments:

• the Fundamental Act of Hungary, being the constitution of Hungary;
• acts adopted by the legislative branch, the Hungarian Parliament;
• decrees adopted by the government and the Governor of the National Bank of Hungary;
• decrees adopted by the ministers of the government;
• decrees adopted by the chairperson of autonomous regulatory agencies; and
• municipal decrees relating to local affairs of society.

The fundamental rule that governs legislation is that no legislative instrument may contradict another legislative instrument which is superior to it based on the above-described order of precedence.

Role of the Courts

Hungary has a four-tiered judicial system, where, depending on its complexity, a case may be tried at first instance either in the district court (járásbíróság) or the regional court (törvényszék). The regional court also hears appeals of cases tried in the district court, while the high court (ítélőtábla) may only act as a court of appeal. The highest court in Hungary is the supreme court (Kúria), which only hears appeals of great importance and is also vested with the power of issuing statutory interpretations that are binding on lower courts (see below). Constitutional matters, such as unconstitutional court decisions and (both prior to and post-enactment) legislative instruments are reviewed by the Constitutional Court of Hungary (Alkotmánybíróság). Decisions of the Constitutional Court of Hungary are binding on the ordinary courts, the legislative branch and the executive branch. 

Civil Law Jurisdiction

Being a civil law jurisdiction, codified sets of statutory rules are the primary sources of law in Hungary and have, therefore, a greater significance than case law. Accordingly, the powers of the Hungarian courts were limited to interpreting legislative instruments enacted either by the legislative or the executive branch. Although ruling courts tended to adjudicate in line with the relevant decisions of higher courts, until recently, they were not required legally to do so, which sometimes resulted in confusing or in many cases, even contradicting judgments, creating, in certain areas, inconsistent court practice. On rare occasions, inconsistencies in areas of great interest (such as corporate law) have been resolved by the legislator amending the legal provision that allowed different interpretations by courts. 

An amendment in 2020 to the Code of Civil Procedure made a significant step towards a more consistent court practice by stipulating that the judgments of the Supreme Court that are published in the Register of Court Decisions (Bírósági Határozatok Gyűjteménye) may not be contradicted in questions of law unless the ruling court provides sufficient reasons in its own decision as to why the case in question demanded deviation.

As a consequence, investors contemplating making investments in Hungary are advised to seek legal advice not only on general statutory rules, but also on the case law of the Hungarian Supreme Court that might apply to their matter.

Investments in a Hungarian entity may be subject to sector-specific clearances (such as approvals by the National Bank of Hungary or the Hungarian Energy and Public Utility Regulatory Authority (MEKH)) if additional scrutiny applies, for example where an investment is made into a regulated target or clearances are triggered by other factors (eg, market concentration and foreign investment in certain industries).

In an attempt to monitor FDI, there are two separate regulatory frameworks that need to be considered by investors when contemplating an investment in, or the acquisition of, a Hungarian company that is engaged in certain critical or strategic activities. These FDI regimes apply alongside and not instead of the sector-specific approval requirements or merger control clearances. 

In 2018, before the EU FDI Regulation (Regulation (EU) 2019/452) was passed, the Hungarian Parliament implemented its first FDI screening regime by enacting Act LVII of 2018 (the “2018 FDI Act”) seeking to protect national security by overseeing certain investments into Hungarian companies that engage in activities of critical infrastructure (eg, energy, water or defence), critical technology and dual-use items (eg, AI, nuclear technologies and nanotechnologies).

In 2020, a parallel FDI screening was introduced by a governmental decree, which was replaced by an act in the same year (Act LVIII of 2020). In 2022, an emergency governmental decree (Governmental Decree No 561/2022), effectively replaced Act LVIII of 2020. Most recently, this parallel screening mechanism was incorporated into Act L of 2025, which introduced transitional provisions necessary for the economic protection of Hungarian strategic companies in view of the armed conflict in Ukraine (the “2025 FDI Act”). The 2025 FDI Act is not only applicable to investments that involve Hungarian companies engaged in certain business activities in a strategic sector (such business activities are listed by their relating NACE codes and involve sectors such as transport, energy or communications) but also to the acquisition of infrastructure, facilities and assets that are essential for conducting such activities, as well as to the acquisition of usage and operation rights relating to the above. The 2025 FDI Act will cease to have effect on 31 December 2026.

The 2018 FDI Act and the 2025 FDI Act established two separate FDI regimes which apply in parallel with each other. If an investment triggers both FDI regimes, two separate notifications must be filed with the competent ministers, and the investment must not be completed until the prior approvals of both ministries are obtained. This also means that the investor shall not exercise any shareholder rights in the target company, nor shall it conduct any planned business activities until obtaining the respective approvals.

Investors are advised to be particularly careful when dealing with 2025 FDI Act-related matters as it has an exceptionally broad scope which has triggered filings in cases that usually do not fall under the scope of similar laws. Nevertheless, transactional structuring could be key as, in certain scenarios, filing under the 2025 FDI Act might be avoided by relying on one of the exemptions set out in the Act (see 7.1 Applicable Regulator and Process Overview). Furthermore, the Hungarian state has a pre-emption right with respect to the sale and purchase of Hungarian companies engaged in the solar power plant business; therefore, investors in the renewables space face additional regulatory complexities that demand heightened attention and careful planning.

Similarly, a careful approach to the 2018 FDI Act-implemented regime is also advisable. The applicability of the 2018 FDI Act is rather limited as it may only be triggered by investments in very specific industries that have traditionally been under governmental scrutiny. It is worth noting, however, that the 2018 FDI Act may also apply to the formation of a new company in Hungary and even to the adoption of a new activity by an existing Hungarian company that is controlled by a foreign investor. Typically, neither of these actions would be considered when assessing regulatory requirements in connection with dealings in Hungary. 

Please see 7. Foreign Investment/National Security for a more detailed explanation of the regulatory framework for FDI in Hungary.

Hungary’s Path Through 2025 Amid EU Tensions, the Russia-Ukraine Conflict and US Policy Divergence

The year 2025 was anticipated to mark a turning point for Hungary’s economy after years of turbulence shaped by the pandemic, the ongoing Russia-Ukraine armed conflict, and strained relations with both the EU and the USA. However, hopes for robust recovery have proven elusive. Whilst Hungary avoided slipping back into technical recession, growth has remained anaemic, with GDP forecast to increase by a mere 0.8-0.9% for the year.

Hungary’s inflation, which peaked above 25% in 2023, has moderated significantly but remains above the Hungarian National Bank’s tolerance band, with the Hungarian National Bank forecasting 4.5% by Q4 2025, declining to 3.1% by Q4 2026. The Hungarian National Bank continued its monetary easing policy throughout 2025, and from mid-2025 onwards, the HUF strengthened significantly against both the euro and the US dollar.

Hungary’s access to EU funds remained severely constrained throughout 2025, with roughly EUR15 to EUR18 billion still withheld pending progress on rule of law reforms. Hungary’s budget deficit, as a share of GDP, remains relatively high, with projected deficit nearing 5%, a figure that is above the EU average. Hungary’s opposition to opening EU accession negotiations with Ukraine has further strained relations with Brussels and complicated discussions around the withheld funds, contributing to Hungary’s growing isolation within EU decision-making.

Hungary’s relationship with the USA saw positive developments in 2025, highlighted by the Trump-Orbán summit in early November, signalling strengthened economic and cultural ties. At the same time, tensions related to the ongoing Russia-Ukraine armed conflict have affected Hungary, particularly around oil and gas supplies. The termination of the double taxation treaty between Hungary and the USA, effective from 2024, has not been resolved, generating complications in profit repatriation and increasing the tax burden for multinational enterprises operating in Hungary.

The Hungarian Government’s Response to Challenges 

In response to ongoing global and regional pressures, the Hungarian government has continued – and in some areas expanded – interventional measures first developed in previous years. These measures include:

• maintaining exemption from EU and US sanctions on Russian oil imports to avoid disruptions to domestic energy supply, while simultaneously exploring alternative sources;
• maintaining the “extra profit” tax on financial institutions, with plans to double revenues in 2026 through higher rates and reduced deductions;
• postponing certain public investment projects, notably in infrastructure and non-strategic development, to cap government spending and manage heightened debt levels; and
• updating the Foreign Direct Investment (FDI) screening regime, maintaining the state’s pre-emption right for solar power plant transactions, whilst recent legislative reforms have simplified general FDI reviews and removed the state’s pre-emption right in relation to other transactions.

It should be noted that the 2018 FDI Act and the 2025 FDI Act apply in parallel; if an investment triggers both regimes, two separate notifications must be filed and prior approvals from both ministries must be obtained before completion.

The government introduced social and fiscal measures to bolster domestic demand and ease inflationary pressures, including personal income tax exemptions for mothers with two or more children, broadened family tax benefits, continued payment of the 13th month pension, and a planned 14th month pension to begin in 2026, and selective wage increases in priority industries.

New projects by companies such as Sunwoda, W-Scope, EcoPro, SEMCORP, Gotion and BYD are expanding Hungary’s battery manufacturing capacity across materials, components and assembly, with several facilities representing each firm’s first major presence in Europe. Despite US policy emphasis on reshoring, US-based multinationals continue to expand in Hungary, particularly in research, development, and technology-intensive segments.

Deal Activity in 2025

Strong fluctuations in quarterly M&A activity continued throughout 2025, with Q1 marking the lowest first-quarter deal count in recent years. The first half of 2025 remained below both the long-term benchmark (-9%) and the same period in 2024 (-23%).

The Hungarian State remained among the most active acquirers, whilst the market continues to be driven primarily by independent market players, which accounted for approximately 73-76% of total activity over the past three years.

Among major domestic players, MOL maintained a strong presence by acquiring Endrőd Gázipari, a gas producer, and expanding its waste management portfolio. 4iG continued its acquisition strategy with the purchase of Netfone Telecom, a mobile virtual network operator, and acquired a 74% stake in RÁBA Automotive Holding, a vehicle and component manufacturer with defence industry capabilities, in a transaction valued at approximately EUR65 million. Waberer’s International also remained active, which is evidenced by the ongoing acquisition of a 62.5% stake in rail freight company GYSEV-Cargo, Hungary’s second-largest rail freight operator, and by the acquisition of a 51% stake in Pannon Busz-Rent, a bus transport and rail replacement service provider.

The technology sector recorded stronger activity in 2025, with multiply transactions in both Q2 and Q3, reflecting a welcome rebound after a subdued 2024. Notable acquisitions included Flexi Medical Cloud, Arenim Technologies, Jegymester, and MiniCRM by international strategic and financial investors from Europe, North America, and China. Q2 2025 also marked the return of Chinese strategic buyers to the Hungarian M&A market, with Gstarsoft acquiring CadLine and Haier Europe purchasing Klima ‒ the first direct Chinese acquisitions in Hungary in five years.

In 2025, Hungarian M&A market was relatively active considering the turbulent economic environment and geopolitical uncertainties and, due to competitive wage levels and low corporate tax rates, Hungary remains a popular investment destination in the CEE for private M&A transactions, amongst which share deals and asset deals are commonly seen. Even though the practicality of a share purchase makes it the most popular acquisition method in Hungary, an asset purchase can provide convenient solutions in specific situations (such as a spin-off, distressed sale, downsizing or sale of a business line) and can also be more advantageous if the target company is in financial distress. The business decision on how to structure a transaction should always be examined on a case-by-case basis. Factors affecting the parties’ choice of deal structure in Hungary are similar to what an investor can see elsewhere in Europe.

Transactions in the Hungarian market are mainly carried out through negotiated sale and purchase agreements, but, in an increasing number of cases, sellers are setting up an auction sale process for selected potential buyers to maximise the target’s value.

In terms of structuring consideration, cash deals are most typical and there is less of a tendency towards paper consideration (eg, loan stock). Due to market volatility and other contributing factors, the more traditional completion accounts adjustment structures have been applied in the majority of transactions, and locked box purchase prices mechanisms were rarely seen.

Hungary’s principal source of legislation governing M&A transactions is Book Three (Legal Persons) of Act V of 2013 on the Civil Code (the “Hungarian Civil Code”), which sets out the general rules applicable to all types of legal persons, including high-level rules on the transformation, merger and demerger of legal persons.

The detailed provisions constituting the legal framework for transactions implemented by way of mergers and demergers are set out in Act CLXXVI of 2013 on the transformation, merger and division of legal entities (the “Transformations Act”). Effective as of 1 January 2024, the Transformations Act was amended introducing “spin-off”, a new type of division of legal entities enabling the business community to carve out a business line of a company to a new spin-off entity which becomes the subsidiary of such company. In the case of a company participating in a merger that is not domiciled in Hungary, but in another member state of the EU, in addition to the provisions of the Hungarian Civil Code and the Transformation Act, the provisions of Act CXXIV of 2021 (the “Cross-Border Mergers Act”) are also applicable. 

The procedural aspects of registering corporate changes in relation to M&A deals in Hungary are set out in Act V of 2006 on public company information, company registration and winding-up proceedings (the “Companies Registration Act”), including setting out the specific documents to be submitted to the competent court of registry to register an acquisition or a merger/demerger. From 1 January 2027, Act LIX of 2025 on the registry of legal persons (the “Legal Persons Registration Act”) will replace the Companies Registration Act and will completely reform the rules on the registration process of legal persons. One of the most significant changes will be the consolidation of the separate registers of the various types of legal persons into a unified register, which will include all types of legal entities. This is anticipated to have the effect of standardising procedural rules, expediting registration procedures, eliminating the differences in judicial practices, and further reducing administrative burdens for clients. 

Other than foreign ownership screening requirements (see 7. Foreign Investment/National Security) and merger control approval (see 6. Antitrust/Competition), which can be applicable to a transaction regardless of the industry or sector concerned, special rules may apply to companies operating in certain regulated industries, such as media and financial, investment, insurance, energy or capital market sectors. The merger and demerger of such companies may also require the prior approval of the competent regulatory authorities.

There are two sets of corporate governance rules in the Hungarian Civil Code, which is the main source of legislation in this respect. The first set of rules, setting out governance rules and principles in general, apply to all company forms, while the second set of rules only apply to certain specific company forms.

Legal Entity Forms

Private companies (Kft or Zrt)

The most common company forms for investments in Hungary are the Kft (limited liability company) and the Zrt (private company limited by shares). These two company forms are very similar in terms of internal organisational structure and operation. The most significant difference is that the registered capital of a Kft is divided into quotas, while the registered capital of a Zrt is divided into shares. It is noteworthy that the publicly available Hungarian companies register contains all members of a Kft while it only indicates the majority shareholder (if any) of a Zrt.

A Kft has long been the most popular company form in Hungary, mostly because:

• it can be set up quickly, within a day in certain cases;
• its capital requirement and operation costs are lower than that of a Zrt; and
• members of a Kft have greater flexibility as to how they want to structure the governance of their Kft than shareholders do in a Zrt. 

However, most foreign investors struggle with understanding the concept of the “quota” as it is not unitised and, therefore, the ownership of a quota is only evidenced by an entry in the register of the members, but no security or certificate will be issued for the investor in exchange for its investment.

Public companies (Nyrt)

There is only a single type of publicly traded company form available in Hungary: the Nyrt (public company limited by shares). Setting up an Nyrt is a two-step process; first a Zrt must be established, and then that Zrt can be transformed into an Nyrt by a shareholders’ resolution and by introducing its shares to the stock exchange.

The relationship between the company and its minority shareholders is governed by the Hungarian Civil Code. Generally, the shareholders’ meeting decides with the simple majority of votes, however a company may deviate from these rules and set higher thresholds as long as it does not violate the rights of the minority shareholders. 

The Hungarian Civil Code recognises minority protection rights for shareholders holding at least 5% of the voting rights in Zrts and Kfts and for shareholders holding at least 1% of voting rights in Nyrts. These minority rights are as follows:

• requesting the convening of the shareholders’ meeting;
• requesting that an agenda item not included on the agenda is discussed;
• requesting special audits of the last financial statements of the company or any economic event in connection with the actions of the company’s management in the previous two years; and
• initiating the enforcement of claims on behalf of, and for the benefit of, the company against the members of the company, members of the company’s supervisory board, the company’s executive officers, or the company’s auditor.

There are also certain decisions that can only be passed by a three-quarter majority of the votes (eg, changing the form of the company or decreasing the company’s registered capital), and a decision on amending the articles of association that changes the rights of one or more shareholders to the detriment of such shareholder(s) may be vetoed by such shareholder(s). 

No different or additional rights for institutional investors and other shareholder groups are set out in the Hungarian Civil Code, however as companies may deviate from the rules set out in the Hungarian Civil Code, it is common that certain protective rights (eg, transfer restrictions, drag along, tag along or veto rights) are implemented at the level of the target company to protect the institutional investor’s investment.

Disclosure obligations apply to both listed companies and, in certain cases, companies that are not listed on any markets and their investors (eg, the Ultimate Beneficial Owner (UBO) register described below).

Any investor acquiring more than 5% of voting rights in a listed company must disclose this to the target company and the National Bank of Hungary within two calendar days of the acquisition. The target company is required to publish the same information within two calendar days. In share buyback transactions, the disclosure must be made by the company itself.

The disclosure obligation extends to the purchase of financial instruments that entitles its holder to acquire voting rights in the company at the holder’s discretion, such as an option for shares or share futures. The investor and the company are required to make similar disclosures when the investor exceeds or falls below 5% or other thresholds prescribed by law (eg, 10%, 15%).

According to the relevant EU Anti-Money Laundering Directives, member states were required to set up UBO registers, a database that was not present in Hungary until 2021. In Hungary, the UBO database is maintained by the tax authority and, currently, it is the financial service providers who are required to provide information on their clients obtained during their KYC and AML screenings by forwarding the relevant data to the central UBO register. The UBO register is, however, not an official database and the tax authority is not responsible for the accuracy of its content.

The FDI screening regime requires foreign investors to report investments in certain sectors to the competent minister.

Please see 7. Foreign Investment/National Security and 8.1 Other Regimes for a more detailed discussion of the FDI screening regimes in Hungary.

Hungarian companies have had a tendency to rely on debt financing usually provided by banks and other financial institutions, while capital markets, especially equity markets, are rarely used.

Nevertheless, if a Hungarian company decides to go public, it can choose to have its shares registered on one of the various trading platforms of the Budapest Stock Exchange (BSE), including the BSE prime market and the BSE Xtend market, which is a multilateral trading facility operated by the BSE that primarily targets small and medium-sized enterprises. Listing and prospectus requirements, as well as reporting obligations of the BSE Xtend market, are not as stringent as those of the BSE prime market, therefore, the number of companies that may be eligible for listing on this platform is considerably higher than those eligible for listing on the BSE prime market.

The Hungarian Civil Code sets out the fundamental rules governing securities issued in Hungary, such as method of creation (printed or dematerialised), the essential content requirements and the main rules of security transfers. Additional rules may also apply in terms of certain specific securities, such as bonds, investment units and promissory notes, which are set out in various statutory instruments, such as the Capital Market Act (Act CXX of 2001), the Investment Firms Act (Act CXXXVIII of 2007) and the Promissory Note Act (Act CLXXXV of 2017).

Certain instruments of the EU capital-markets legislation, like the Prospectus Regulation and the Market Abuse Regulation (MAR), are directly applicable in Hungary, while others, such as the Undertakings for Collective Investment in Transferable Securities (UCITS) Directive and the Alternative Investment Fund Managers (AIFM) Directive, regulating the establishment and operation of investment funds, apply through national laws implementing EU law.

The Prospectus Regulation distinguishes between public issuances of securities based on whether the obligation to publish a prospectus applies. The main exemptions include:

• offers of securities aiming exclusively at qualified investors;
• offers of securities aiming at fewer than 150 persons other than qualified investors; and
• offers of securities whose denomination per unit amounts to at least EUR100,000.

Depending on which trading platform the security is offered, either a prospectus or an information document is required to be prepared. The prospectus is a considerably longer document than the information document, and the preparation of a prospectus is a time-consuming exercise, which often takes months to complete. The prospectus is also subject to the approval of the National Bank of Hungary as opposed to the information document which can be prepared in a concise format and is only subject to the approval of the BSE. The various BSE trading platforms may provide for further listing and exchange requirements to be complied with, which are publicly available at the BSE website.

Rules on the operation and establishment of investment funds are primarily set out in national laws implementing the AIFM Directive and the UCITS Directive. These Directives distinguish between investment funds based in an EU member state and in a third country by providing for a certain set of rules and requirements that are only applicable to third-country investment funds. Such rules and requirements have been implemented and are still applicable in Hungary, but the authors are not aware of any Hungarian laws imposing further requirements on foreign investors structured as investment funds.

As of 1 January 2025, a notable development is the expansion of the Hungarian AML and UBO Register Acts to explicitly include certain private equity and venture capital funds within the scope of UBO reporting obligations. This change brings long-awaited clarity to an area previously marked by legal uncertainty and inconsistent market practice. Although the obligation to report UBO data will only take effect for existing funds from July 2026, newly established funds are already subject to the revised rules. UBO data will not be publicly accessible but may be disclosed to competent authorities or to third parties demonstrating a legitimate interest.

Merger Control Regime

Legislation and regulator

The Hungarian merger control regime is established by the Act LVII of 1996 on the Prohibition of Unfair and Restrictive Market Practices (the “Competition Act”). Basic procedural rules for administrative proceedings (including merger review) are set out in Act CL of 2016 on the General Public Administration Procedures together with the special rules in the Competition Act. The rules of the judicial review of merger control decisions are defined by Act I of 2017 on the Code of Administrative Litigation.

Hungarian merger control rules are enforced by the Hungarian Competition Authority (GVH), which is considered to be among the more business-oriented competition offices in the EU with state-of-the-art infrastructure and easily approachable, English-speaking staff and decision makers. The merger control process in Hungary has been significantly streamlined in the past few years. This was a combined result of legislative reforms, the introduction of a new type of fast-track procedure, and higher thresholds for notification, as well as the reduction of the administrative burden on companies. The fast-track procedure for straightforward mergers with no effects on competition reduced the length of the process to as little as four to eight days. The speedy approval process is also the result of the applicants’ willingness to participate in a pre-notification meeting with the GVH, where the authority’s investigators provide feedback on a draft of the notification form allowing adjustments before submission and thereby paving the way for a seamless approval process.

Transactions subject to merger control

The following transactions are subject to merger clearance: 

• acquisition of sole or joint control over the whole or a part of previously independent undertakings;
• merger of two or more previously independent undertakings; and
• creation of a full-function joint venture.

Control is defined as:

• acquisition of over 50% of voting rights in the target company;
• the power to appoint, elect or dismiss the majority of the executive officers of the target; or
• the ability to exert decisive influence over the decisions of the target (either by virtue of contractual arrangements or de facto). 

Notification thresholds 

The GVH must be notified of the transaction if:

• the combined Hungarian net turnover of all parties (ie, the acquirer or acquirers and the target company) exceeds HUF20 billion (approximately EUR50 million) in the previous financial year; and
• the individual Hungarian net turnover of each of at least two parties exceeds HUF1.5 billion (approximately EUR3.75 million) in the previous financial year (the “Mandatory Thresholds”).

Concentrations that do not meet the above Mandatory Thresholds, but may lead to a significant lessening of competition on the relevant market and the combined Hungarian net turnover of all parties exceeds HUF5 billion (approximately EUR12.5 million) can be voluntary notified to the GVH (the “Voluntary Thresholds”).

Specific rules apply to the calculation of thresholds for mergers including in respect of insurance companies, credit institutions, financial enterprises or investment companies, which are largely in line with those set out in the EU’s Jurisdictional Notice.

Mergers that meet the EU merger control filing thresholds will be assessed by the European Commission in line with the “one-stop shop” principle.

Notification, review and clearance timetable 

Filing is mandatory in the case of mergers reaching the Mandatory Thresholds and voluntary in the case of reaching the Voluntary Thresholds. An application for clearance is submitted using the simplified new filing forms since 1 July 2023 that may be downloaded from the GVH’s website and is available in both Hungarian and English. Typically, the application is the acquirer’s responsibility. It is strongly advisable to engage in a pre-notification discussion with the GVH prior to submission.

There is no deadline for filing, but the merger cannot be implemented prior to clearance by the GVH. There are no specific sanctions for not filing per se, but severe sanctions, including suspension or reversion of all integration steps and financial penalties apply for closing before clearance. The GVH may investigate transactions reaching the Voluntary Thresholds for six months after closing in the absence of notification.

In straightforward, non-problematic cases, the GVH closes the procedure and acknowledges the transaction within eight days of receipt of the notification (provided that no additional information is requested) by issuing an administrative certificate (fast-track procedure). If this is not the case, the GVH opens the investigation phase.

If the investigation enters Phase I, the waiting period is 30 days, while Phase II lasts an additional four months. The GVH may extend its review by a maximum of 20 days in Phase I, and two months in Phase II. The clock also stops until information requests are complied with. If the GVH fails to issue its decision within the applicable waiting period, its approval is deemed to be granted. The GVH uses the “significant impediment to effective competition” (SIEC) test for its assessment of mergers and will clear transactions that do not result in an SIEC, particularly by creating or intensifying a dominant position on the relevant market.

Exemptions under notifications

A special “public interest exemption” exists under the Hungarian competition regime, which permits the government to qualify a merger as “strategic” and exempt it from the merger control filing requirement. Although, in theory, this exemption can apply to FDIs as well, based on the publicly available decisions of the GVH, it rather exempts local transactions of great significance.

Irrespective of the notification thresholds, a temporary acquisition for the purpose of resale does not need to be notified in cases where certain types of financial companies and investment funds acquire assets or shares of another undertaking if the resale is carried out within a one-year period.

Approval of other authorities

There are special sectors where the approval of other authorities is necessary in addition to merger review by the GVH, for instance, the approval of the National Bank of Hungary or the MEKH. These approvals are required to close the transaction, but the GVH may conclude the merger review proceeding independently from these. The approval of the National Media and Infocommunications’ Media Council (the “Media Council”) for certain transactions involving media companies is, however, mandatory prior to the merger notification. Please refer to 8.1 Other Regimes for further information.

For a substantive merger analysis, the GVH, besides the SIEC test, assesses unilateral and co-ordinated effects in horizontal, vertical and conglomerate mergers including portfolio effects, by weighing pro- and anti-competitive aspects, in particular:

• structure and characteristics of the relevant markets;
• actual and potential competitive pressure;
• presumed competitive effects;
• sourcing and sale opportunities;
• costs, risks and conditions of market entry and exit;
• market position and business strategy of the parties; and
• effects on suppliers and other partners.

The GVH also takes into account economic efficiencies. In practice, efficiencies are expected to be specific to the transaction and to bring along quantifiable consumer benefit (the sooner the benefits are predicted to arise, the larger weight they carry in the assessment).

The GVH may prohibit transactions or impose structural or behavioural remedies. If a transaction’s projected anti-competitive effects can be prevented by imposing structural or behavioural remedies, the GVH can clear the merger subject to appropriate remedies. Usually, the GVH prefers structural remedies because these are easier to monitor. 

Timing and conditions are imposed on a case-by-case basis. However, all remedies must comply with some basic requirements:

• they must be capable of removing competition concerns;
• they must be proposed by the parties; and
• they must be exact, consistent and verifiable.

Commitments are normally subject to market testing and the GVH also holds hearings to discuss proposed remedies.

The GVH may prohibit transactions or require undertakings to remedy the competition law concerns. 

The GVH’s decision is subject to judicial review, which may be launched within 30 days of receipt of the GVH’s decision. The first instance court decision may be subject to appeal to the Supreme Court.

There are currently two FDI screening regimes that may be triggered by an investment into a Hungarian company (see 1.2 Regulatory Framework for FDI). A foreign investment falling under the scope of either or both FDI regimes cannot be completed without the prior approval of the competent minister. The 2018 FDI screening regime is overseen by the minister responsible for the civil national security services (currently the Minister of the Prime Minister’s Cabinet Office) while the 2025 FDI screening regime is overseen by the minister responsible for domestic economy (currently the Minister for National Economy).

It is worth noting that transactions, such as bond purchases, obtaining usufruct rights or obtaining the right to operate or use assets, that usually fall outside the scope of similar FDI screening laws, may trigger the application of one of the two Hungarian FDI screening regimes.

Exemptions from the filing requirement are only defined under the 2025 FDI screening regime and only apply to one specific case: where the investment is made in the foreign parent entity and a Hungarian company is involved in the investment as a subsidiary of such foreign target company.

As legal representation is mandatory in proceedings under the 2025 FDI Act, notifications are prepared with the assistance of, and filed by, a legal counsel. As a general rule, (i) the official Hungarian translation of the transaction documentation (investment agreements/SHAs and SPAs), and (ii) any document suitable for determining, in a transparent manner, the ownership structure of the foreign investor, must be submitted. The 2025 FDI Act also contains an exhaustive list for information to be notified.

Under the 2018 FDI Act, the competent minister has 60 days from the receipt of the notification to issue a decision (with a possible 60-day extension), whilst under the 2025 FDI Act, the competent minister shall issue its decision within 30 working days from the receipt of the notification (with a possible 15-day extension).

To determine whether a transaction may fall under the scope of either FDI screening regime, the following questions must be asked:

• does the target company fall under the scope of either FDI screening regime;
• does the investor qualify as a foreign investor under either FDI screening regime; and
• are the necessary monetary and/or ownership thresholds met?

If the answer is yes to each question, the relevant investment will fall under the scope of either or both FDI screening regimes.

Target Company

The focus of the analysis under both FDI screening regimes shall be on the business activities the target company is engaged in.

The 2025 FDI Act lists the NACE codes of the business activities which trigger the application of the 2025 FDI Act. If any of such NACE codes is indicated in the Hungarian company register as a business activity of the target company, the 2025 FDI Act applies, regardless of whether the target actually carries out this activity. 

The 2018 FDI Act takes a rather complex approach in this regard as the list of the relevant activities is not clearly defined and the assessment of whether the business activities of a Hungarian company are subject to approval under the 2018 FDI Act can seldom be completed without the active co-operation of the target company and/or the seller(s). Therefore, it is recommended that the investor verify in advance whether a notification is required under the 2018 FDI screening regime, ideally during the due diligence of the target company. 

Foreign Investor

Under both FDI screening regimes, the investment shall be made by a foreign investor for either of the FDI screening regimes to apply.

A (natural or legal) person qualifies as foreign investor under both FDI screening regimes if:

• it is a company incorporated in, or a citizen of a country outside of, the EU, the EEA and Switzerland (“Third Country”); or
• it is a company incorporated in Hungary, the EU, EEA or Switzerland in which a Third Country citizen or company has a controlling interest.

Although EU, EEA and Swiss investors do not qualify as foreign investors, their investments may be subject to FDI screening under the 2025 FDI Act if (i) the value of such investment reaches a monetary threshold of HUF350 million (approximately EUR0.9 million) and (ii) such investor acquires a controlling interest (meaning either (i) being able to cast the majority of votes (alone, through intermediary entities, or pursuant to a shareholders’ agreement) or (ii) being entitled to appoint or recall the majority of board members, managing directors or supervisory board members).

Thresholds

The 2018 FDI Act applies if, as a result of the relevant transaction:

• the foreign investor acquires directly or indirectly more than 25% ownership interest (or more than 10% ownership interest in case of a public company);
• the foreign investor acquires a controlling interest; or
• two or more foreign investors’ combined ownership interest exceeds 25% in a non-public company.

The 2025 FDI Act applies if, as a result of the relevant transaction:

• a foreign investor (including EU/EFTA citizen or entity) acquires directly or indirectly a controlling interest, subject to the investment being at least HUF350 million (EUR0.9 million) in value;
• a foreign investor (other than an EU/EFTA citizen or entity) acquires directly or indirectly at least 5% ownership interest (or 3% ownership interest in case of a public company), subject to the investment being at least HUF350 million (EUR0.9 million) in value;
• a foreign investor (other than an EU/EFTA citizen or entity) acquires ownership interest of 10%, 20%, or 50%; or
• the ownership interests of two or more foreign investors (other than EU/EFTA citizens or entities) would jointly exceed 25% in a non-public company.

Both FDI screening regimes are triggered by investments in a less than 25% stake in a target company that is formed as a private company if this results in the combined ownership interest of the foreign investors reaching a 25% threshold.

The relevant FDI Acts are silent on the matter of remedies and commitments, and decisions of the competent authorities in FDI screening procedures are confidential. Nor is there any official guidance as to the competent authorities’ approach regarding remedies or other commitments. Therefore, the authors are not aware of any occasion when any remedy or commitment has been requested or required by the competent authorities. Although the competent ministries have made some attempts at providing guidance to the addressees on some of the more ambiguous parts of the FDI screening regimes, insight into which factors are considered during the approval process have not been issued so far.

The Decision and the Right to Appeal 

The competent authorities (ministries) may prohibit an investment under both FDI regimes. The immediate legal consequence is that the transaction becomes null and void if, despite the parties’ decision to move forward with a transaction, the director of the target company is obligated by law to prevent the investor from exercising its voting rights in the company (or admitting the investor in the share register).

A decision on the prohibition of the transaction may be challenged through a non-contentious administrative procedure on the grounds that the substantive procedural rules have been violated or that the findings or the reasoning of the competent authority’s decision contains flaws. The court, however, is not permitted to amend the prohibiting decision; it may only order that the FDI screening is repeated. 

Criteria for a Prohibiting Decision

Under the 2018 FDI Act, an investment may be prohibited if it poses a threat to the national security, whereas the 2025 FDI Act contains an exhaustive list of those circumstances which, if present (either one or more), the minister may prohibit the investment. Such circumstances include:

• a threat to the interest, public security or public order of Hungary or the possibility of the occurrence of such, in particular with regard to security of supply of basic social needs;
• the foreign investor being directly or indirectly controlled by a third-country government;
• the foreign investor has already been involved in activities affecting security or public order in a member state; or
• there is a serious risk that the foreign investor engages in illegal or criminal activities.

Non-Compliance

Non-compliance with the minister’s decision in any of the FDI regimes, or failure to notify the minister when required, may result in fines and an ex-post procedure once the authorities discover the non-compliance. An ex-post FDI screening may only be initiated in the five years since the investment and in the 18-month period from the date the minister became aware of the non-compliance under the 2018 FDI Act and the six-month period from the date the minister became aware of the non-compliance under the 2025 FDI Act. Should the minister impose an ex-post prohibition under the 2018 FDI Act, the investor will have 30 days to dispose of its ownership interest in the target company, with the Hungarian state having a pre-emption right on such disposal. 

The maximum amount of fine that may be imposed under the 2018 FDI screening regime is HUF10 million (approximately EUR25,000), while the 2025 FDI screening regime allows for a fine of up to two times the total transaction (investment) value, but a minimum 1% of the annual net turnover of the target company in the preceding financial year.

Special rules apply to companies engaged in certain regulated sectors, most notably the financial, energy and media sectors (see 3.2 Regulation of Domestic M&A Transactions). Completing a transaction involving companies operating in such sectors may also require the prior approval of the competent regulatory bodies, setting further preconditions and documentation requirements. The competent authorities for these sectors include the National Bank of Hungary, the MEKH, and the Media Council. Further special rules may be applicable to companies operating in certain other regulated industries, such as insurance or mining.

Investment Control in the Financial Sector

Companies operating in the financial sector, such as banks, payment service providers and investment firms, are subject to specific restrictions in terms of their ownership structure. Any investor who intends to acquire a holding in an undertaking operating in the financial sector which represents 10% or more of the capital or of the voting rights must apply for the approval of the National Bank of Hungary. Similar requirements apply to exceeding the threshold of 20%, 33% and 50%. 

Although the requirements are different for each sub-sector within the financial sector, generally, investors in any kind of financial services firm are required to verify their good business reputation. In the assessment of the investor’s reputation, the regulator may request documents regarding its ownership status or information on present or past business endeavours.

Investment Control in the Energy Sector

The MEKH’s prior approval is required for any natural gas, electricity, or district heating licensee’s demerger, merger with another company, transformation, termination without legal succession, or reduction of its registered capital by at least one quarter.

The MEKH’s prior approval is required for an acquisition of voting rights or influence to control voting rights reaching or exceeding a 5%, 20%, 25%, 33%, 50%, 75% or 90% threshold, or reaching a 100% threshold of a natural gas, electricity or district heating licensee.

In case a transaction results in the direct acquisition of ownership interests or voting rights in a natural gas or electricity public company licensee, or in the indirect acquisition of ownership interests or voting rights in a licensee being the subsidiary of such public company licensee, then, should such ownership interest or voting right reach or exceed: 

• a 5%, 10%, 15%, 20% threshold, the MEKH’s acknowledgement must be requested immediately after closing;
• a 25%, 33%, 50%, 75% threshold or reaches a 100 % threshold, the MEKH’s prior approval must be requested; or
• a 40%, 45%, 80%, 85%, 90% and every 1% above 90%, the MEKH’s acknowledgement must be requested immediately after closing (in addition to its prior approval in the previous item). 

Further, the MEKH’s prior approval is required for the outsourcing of a substantial part of the licensed activity of a natural gas or electricity licensee, or for the transfer or other disposal of the fundamental assets and property rights specified in its operating licence, including their assignment, lease, long-term use by another person, encumbrance, or pledge as security. Whereas the MEKH’s prior notification is required for the outsourcing of other parts of the licensed activity of a natural gas or electricity licensee.

In the absence of the prior approval or the acknowledgement (whichever is applicable) of the MEKH, the acquiring party will not be able to exercise voting rights in the company (but will be able to receive dividends) and may not be entered into the register of shareholders. Furthermore, the MEKH may impose a fine up to the maximum amount of 1% of the net revenues originating from the licensed activity or HUF100 million (approximately EUR260,000), whichever is the higher, on the licensee and/or the person acquiring the voting rights or influence to control the voting rights therein.

Certain exemptions may apply if the target company is a combined small power plant licensee, a private line licensee, a direct line licensee, a charging station operator, a waste heat seller licensee, a one-stop-shop international transmission pipeline licensee, a restricted natural gas trading licensee, a natural gas trader, or a location-specific service provider. However, even if an exemption from the prior approval or acknowledgement applies (which should be checked on a case-by-case basis), the MEKH must be notified within 30 days of the acquisition of ownership interests or voting rights. In the absence of such notification, the MEKH may impose a fine.

Investment Control in the Media Sector

The Media Council’s approval is required for M&A where at least two of the company groups involved in the concentration have editorial control, bear editorial responsibility and the primary objective of which is to distribute media content to the general public via an electronic communications network or a printed press product. In such cases the prior approval of the Media Council shall be submitted with the petition to GVH, or the GVH suspends the merger control procedure until the Media Council’s approval is granted. The Media Council issues its decision within 120 days and, if no decision is issued, the approval is deemed to have been granted. The Media Council’s rejection to approve the transaction is binding on the GVH which then cannot approve the concentration.

Foreign Subsidy Regulation (FSR)

Lastly, Regulation (EU) 2022/2560 of the European Parliament and of the Council of 14 December 2022 on foreign subsidies distorting the internal market (FSR) has also been (directly) applicable in Hungary as of 12 July 2023. Under the FSR, the European Commission has the power to investigate financial contributions granted by non-EU governments to companies active in the EU to ensure a level playing field for all companies. During summer 2025, the Commission launched the first review of the FSR on how to improve the regulation’s implementation and enforcement, with the result report to be published early 2026.

The following main taxes apply to businesses in Hungary.

Corporate Income Tax

Companies that are resident in Hungary for tax purposes are subject to corporate income tax on their worldwide income. Companies that operate in Hungary without being resident in Hungary for tax purposes are subject to corporate income tax on their Hungarian source income.

The calculation of the corporate income tax is, in general, based on the accounting pre-tax profit, modified by certain tax base adjustment items. The corporate income tax rate is 9%.

Global minimum corporate income tax is also levied on certain taxpayers in line with Directive (EU) 2022/2523 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the EU.

Value Added Tax (VAT)

Hungary’s VAT regulation is based on the EU VAT Directives. The standard VAT rate is 27%. Reduced rates of 18% and 5% apply to certain goods and services.

Local Business Tax 

Local municipalities levy local business tax on companies having their seat or tax-permanent establishment in the territory of the respective municipality. The basis of the local business tax is the accounting net sales revenue, modified by certain tax base adjusting items. The rate of the local business tax varies between 0-2%, depending on the regulations of the different municipalities.

Innovation Contribution

The base of the innovation contribution is identical to the local business tax base. The rate of the innovation contribution is 0.3%. Tax exemption applies to newly established companies and micro or small-size businesses.

Transfer Tax

The acquisition of Hungarian real property, certain rights to such properties or shares of companies qualifying as Hungarian real estate holding entities may be subject to transfer tax, on the basis of the fair market value of the real property, at a rate of 4% up to a fair market value of HUF1 billion (approximately EUR2.5 million) and 2% with respect to that part of the fair market value that exceeds the HUF1 billion (approximately EUR2.5 million) threshold, but a maximum of HUF200 million (approximately EUR500,000) per real property.

Building Tax and Land Tax

Municipalities are entitled to levy tax on building owners and owners of lands in their territories.

Other Taxes

Beside the above main taxes, special taxes are levied on companies engaged in certain businesses or operating in certain industries (eg, environmental tax, “Robin Hood Tax”, excise tax and extra profit tax).

Hungary does not levy withholding tax on dividend, interest, royalty or management fee payments from Hungarian to non-Hungarian corporate entities.

Hungary’s tax regulation allows relatively wide scope for the tax efficient operation of businesses. Beyond the withholding tax exemption that applies to dividend, interest and royalty payments from Hungarian taxpayers to non-Hungarian corporate recipients, Hungarian taxpayers are subject to tax exemption on their dividend revenues. Furthermore, tax exemption on capital gains realised on the sale of shares is also accessible for Hungarian taxpayers if certain conditions are met.

Expenditures incurred in relation to the business activity, such as depreciation, interest and royalty payments, are in general deductible from the corporate income tax base, with certain limitations. Limited tax loss carry-forward rules also allow businesses to offset their future profits with the losses they suffered in the past.

Tax consolidation is also possible, both in terms of corporate income tax and VAT.

Capital gain derived by a non-Hungarian tax resident investor from the sale of shares in a Hungarian entity or sale of assets located in Hungary is not taxable in Hungary unless the shares or assets are attributable to a Hungarian tax-permanent establishment of the non-Hungarian investor.

Special rules may apply to the sale of Hungarian real properties. In such cases, if the regulation of the relevant double tax treaty allows, or in the absence of such applicable double tax treaty, profit realised from the sale of the Hungarian real property may be subject to corporate income tax in Hungary. This corporate income tax regulation also applies to the sale of shares in an entity that has more than 75% of its assets invested in Hungarian real estate.

The domestic general anti-abuse rule (GAAR) in Hungary enables the Hungarian tax authorities to requalify a transaction for tax purposes, if the purpose of the transaction is the abuse or evasion of tax rules. In addition to the GAAR, several specific limitations have been introduced to prevent tax evasion and aggressive tax planning. Such limitations include the “thin cap” rules, the “CFC rules”, the “anti-hybrid” rules, as well as the transfer pricing rules.

• The interest limitation rule generally disallows the deduction of financial costs from the corporate income tax base if they exceed the higher of 30% of the EBITDA or HUF939 million (approximately EUR2,350,000).
• “CFC rules” aim to prevent tax-base erosion arising from the payments made by Hungarian taxpayers to non-Hungarian “controlled foreign companies” as well as to ensure the proper taxation of incomes that Hungarian taxpayers receive from “controlled foreign companies”.
• Driven by similar purposes, “anti-hybrid” rules aim to prevent tax leakage in cross-border transactions. Hungarian “anti-hybrid” regulation covers several cross-border transactions that may lead to tax base erosion due to the different tax treatment of the cross-border transaction in the respective jurisdictions.
• Transfer pricing rules in Hungary follow the OECD guidelines, specifically that transactions between associated enterprises shall be considered, for tax purposes, as occurring on an arm’s length basis – ie, at the price that unrelated parties apply or would apply in an equivalent transaction. If the price applied by affiliated entities differs from the arm’s length price, then the Hungarian tax authority may adjust the tax base to reflect the arm’s length price. In general, associated enterprises are required to prepare separate documentation that shows how the arm’s length price specific to their transaction has been determined.

Hungary has a rather employer friendly legislative framework in the EU which contributes to marketing the Hungarian labour force as well-trained, relatively cheap and flexible, thereby trying to bolster Hungary’s competitiveness. This approach is somewhat counterbalanced by the Hungarian labour courts that tend to be more lenient with employees. 

The most important labour law rules are set out in Act I of 2012 on the Labour Code (the “Hungarian Labour Code”), which is applicable if the employee habitually works in Hungary.

The basic terms of employment must be agreed in a written employment agreement. In addition, it is typical that various internal policies of the employer also apply to the employees’ employment (eg, code of conduct, bonus policy and remote working policy).

Besides standard employment relationships, there are certain special forms of employment such as temporary agency work, telework, fixed-term employment and employment of executives. 

Hungarian health and safety (H&S) regulations prescribe various obligations for the employers, including providing information on H&S to employees, securing a healthy and safe work environment and conducting risk assessments. 

Employees are entitled to represent themselves via trade unions or works councils. Trade unions and employers may conclude collective bargaining agreements. Except for some specific industry sectors, employees rarely take advantage of these opportunities. 

Employees are also protected in many ways by the Hungarian Labour Code, which includes setting out a mandatory notice period of minimum 30 days for termination of employment, granting a minimum of 20 working days annual leave and several other types of special leave, granting the right to request modifications to certain terms of the employment relationship and limiting overtime to 250 hours per year (with certain exceptions). 

Employment of third-country nationals (ie, except EU/EEA citizens) is typically subject to a work permit or residence permit for employment.

The most common form of compensation is cash coupled with certain other employee benefits (see below). Employee equity compensation is less commonly applied; however, with the appearance of an increasing number of start-up companies, employee stock ownership (ESOP) arrangements are spreading fast. This is also facilitated by the various legislative changes around ESOP enabling tax efficient equity compensation to founders and key employees, while the introduction of a regulated employee participation scheme (MRP) and the possibility of incentivising employees through the ownership of shares of the employer (or members of its group) have gained popularity among Hungary’s blue-chip companies. 

Base salary must be specified in a written employment agreement. In 2025, the statutory minimum gross base salary for a full-time employee was HUF290,800 (approximately EUR750) per month and HUF348,800 (approximately EUR900) per month for employees working in positions requiring at least a secondary school graduation certificate. As a general rule, the employer must deduct and pay social security contribution at 18.5% and personal income tax at 15% from the gross salary of the employees, and the employer must also pay social security tax at 13% (all calculated based on the gross base salary of the employee).

The most common non-mandatory employee benefits are company car, recreational vouchers, supplementary pension scheme and private healthcare services. 

Various incentive and bonus schemes are common means of motivation and retention of key employees. 

In the case of certain transactions, eg, asset deals, typically, the transfer of undertakings (TUPE transfer) occurs and affected employees transfer to the new employer by virtue of law. In this case, the transferee employer must pay the same salary and benefits as the transferor employer.

Change-of-control transactions do not trigger any change in the status of employees, as the employer (target company) remains the same. The transaction parties may agree in the transaction documents that the acquiring group must honour certain commitments of the seller group made to the target’s employees. 

Rules on the TUPE transfer are typically triggered by business/asset/portfolio transfer deals, where the employees transfer together with the business as it transfers from the seller to the purchaser as a going concern, or together with the portfolio or assets (where assets are not transferred as part of a business), based on the assumption that the employees pertain to the assets or portfolio of that transfer. Employees and the works council (if any) must be informed about the TUPE transfer prior to such transfer. This is a notification obligation only, and employees or employee representation bodies do not have the right to veto or prevent the transfer. Subject to certain conditions, the transferor employer’s collective bargaining agreements must be maintained and applied by the transferee employer for one year following the TUPE transfer; however, this is not a condition precedent to the transfer. 

Employees may terminate their employment relationship in the event a material adverse change occurs in their employment relationship as a result of the transfer. These employees may be entitled to statutory severance pay and paid garden leave.

Transferor and transferee employers are jointly and severally liable for all employee claims that became due prior to the transfer date if the claim is asserted within a one-year period after the transfer date.

Under the 2025 FDI Act, sectors of strategic importance include numerous IP-heavy sectors such as pharmaceutical production, medical device manufacture, the communication sector (filmmaking, publishing, etc) and information technology services, while investments in such sectors are less likely to trigger the applicability of the 2018 FDI regime. However, as there is no publicly available guidance as to the method the competent authorities apply when reviewing FDI screening notifications, it is not clear whether IP is considered an important aspect by the competent authorities under the Hungarian FDI screening regimes.

There is a strong intellectual property regime in place in Hungary, offering protection to all major intellectual property rights (“IP rights”): patents, utility models, trademarks, geographical indications, copyright, designs, trade secrets, know-how and supplementary protection certificates.

Patents, utility models, trademarks, geographical indications and designs can be registered at national level, with the Hungarian Intellectual Property Office (SZTNH).

Registration or other formalities are not required for the existence or enforceability of copyright protection. However, the SZTNH offers a voluntary registration system for copyright and related rights. This voluntary registration system does not grant copyright or any other title of protection but offers evidence that works registered with the SZTNH exist and their author is identifiable.

Enforcement

IP rights can be enforced through the Hungarian courts. Upon infringement of IP rights, the owner/author or the authorised user may seek judicial enforcement by means of a civil action for infringement and/or a request for a preliminary injunction. The main civil remedies are establishing the infringement, cease and desist order, seizure or destruction of the infringing products, restitution of unjust enrichment and claim for damages. In certain cases, IP infringers are prosecuted in criminal proceedings. 

Alternatively, rights-holders may request the competent customs authorities, by filing an application for action (AFA) to take action against certain goods suspected of infringing IP rights. The legal framework of customs enforcement based on an AFA is regulated both at the EU and national levels and can be based on national and/or EU IP rights. 

Another legal tool for rights-holders is the notice and takedown procedure to remove infringing content from the internet. This procedure is set out in Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market and in Act CVIII of 2001 on certain issues of electronic commerce services and information society services. According to this procedure, any rights-holder whose copyrights or trademark rights have been infringed by information made accessible online by an intermediary service provider can request the removal of such information. 

Limitations

In certain cases, a compulsory licence can be requested for patents. For example, if a patent has not been used/licensed or prepared for use to satisfy domestic demand, a compulsory licence could be granted upon request. Furthermore, the SZTNH can grant a public health compulsory licence to meet domestic needs in a public-health emergency.

Furthermore, according to Act LXXVI of 1999 on Copyright (the “Copyright Act”), AI-generated works are not protected by copyright, as these are not created by natural persons, who qualify as authors under the Copyright Act.

In practice, this limitation is relevant in the IT sector where AI is heavily used in software development. There are no clearly established best practices to address the lack of copyright protection for AI-generated works, but some market players indicate where software source code is generated by AI in order to clearly identify where copyright protection does not apply (AI watermarking). Furthermore, from a transactional perspective, trade secret (including know-how) protection of software source code becomes more and more valuable as trade secret protection is the main IP right that can currently offer protection for AI-generated works.

Relevant Data Protection Laws and Regulations in Place

Data protection issues are regulated in general by Regulation (EU) 2016/679 (GDPR) and Act CXII of 2011 on the Right to Informational Self-Determination and on the Freedom of Information, the latter of which applies in areas that fall outside the scope of the GDPR or where member state deviations are permitted by the GDPR. In addition, there are several sectoral laws that are relevant for data protection compliance, such as laws regulating the area of e-commerce, advertising, healthcare, security services and CCTV monitoring, employment, telecommunication and banking.

Extra-Territorial Scope of Data Protection Laws

The GDPR may apply to companies even without a business presence in Hungary if the company targets anyone in the territory of the EEA with its services or monitors their behaviour. Each sectoral law complementing the application of GDPR has its own scope of application, but many times they include a similar scope as outlined in the case of GDPR. For example, the relevant sectoral laws are applicable to all businesses that target Hungary with their information society services, telecommunication services, healthcare services and security services, irrespective of their place of establishment. 

Enforcement

GDPR violations are subject to a two-tier administrative fine, the higher tier being fines up to EUR20 million, or up to 4% of the total worldwide annual turnover of the company in the preceding financial year. The Hungarian data protection authority decides on the amount of the fine, at its discretion, by taking into account the circumstances of the case, such as the gravity, the intentional or negligent character of the violation, actions taken to mitigate the damage caused and relevant previous infringements by the same company. The fines imposed by the Hungarian data protection authority generally range from EUR200 to EUR2,000 while the highest fine to date was EUR605,000. Most of the time, the authority’s action is triggered by complaints from the concerned individuals. Approximately 50-60 cases per year end result in the imposition of a fine. The Hungarian data protection authority normally takes into account the sectoral laws when deciding on a case and interprets them in light of the GDPR.