Together with our partner law firm from Budapest, BUDLEGAL ATTORNEYS AT LAW, we are bringing you an overview on the legal and tax measures used in Hungary in its fight against the pandemic and its economic consequences.
Since March 11th 2020, a state of emergency is in force in Hungary. The government has the key role, as it is entitled to issue decrees which can suspend the application of laws or stipulate deviations from their usage. Decrees lose their validity once the state of emergency has ceased.
In light of the positive epidemiological development, the quarantine originally issued for the whole country was restricted, since May 4th 2020, to the territory of Budapest capital city and the county of Pest. Like in other countries, the measures strongly concern retail and catering establishments – between 3 PM and 6 AM, such premises must be closed.
In the same vein, gatherings of more persons, sport and cultural events are still forbidden. Libraries, theaters and cinemas remain closed. Pupils and students must wait until schools and universities are again open.
Residents must remain in their homes and are only allowed to leave due to necessary reasons, such as travel to work, shopping, or doctor’s visit. While returning from abroad, they must undergo an obligatory 14-day quarantine, unless they are returning from a safe country – the short list of six countries features the Czech Republic.
To countermeasure economic issues related to the pandemic, the Hungarian government has also decided for a tax relief for sectors most affected by the pandemic. The relief also applies to employer’s contributions, with the exception of health insurance of 4 % - this still remains payable, but it is possible to have its maturity postponed by up to 60 days from the termination of the state of emergency, provided that its due payment would mean a too severe burden for the entrepreneur.
The reduction also applies to other types of contributions (i.e. small enterprise tax, taxes for employees and freelancers), within the range of percentage units.
From the perspective of tax collection procedure, the VAT return period is shortened; the deadline for the filing of tax returns is postponed from May 31st, 2020 to September 30th, 2020.
Hungary is also introducing the so-called “Kurzarbeit”. The employer and employee may agree upon a temporary reduction of working hours; the remaining time is deemed to be “personal development time”. For this period, the employee is entitled to salary compensation – and for this compensation, the state shall provide a contribution of up to 70 %. However, it is necessary to prove that the restriction of working hours is related to the state of emergency. Other contributions for wages shall be provided to employers active in R&D.
Employers may also order the employee to work from home, even without his approval. Rights of employers concerning employee health inspections are also extended.
For the purpose of protection of lessors of both residential and business premises, a new act has been adopted which forbids a rental termination during the period until June 30th, 2020. Until said date, it is also not possible to increase the rent.
Currently, there is a lively discussion in the Hungarian legal community on the legal consequences of the pandemic in the area of contract performance. According to the Hungarian civil code, the contractual party that defaults on a duty, is obliged to pay damages to the other party. One of the exceptions are cases of the so-called vis maior. In cases of long-term inability to perform, it is possible to fully free oneself of such an obligation. However, the pandemic itself does not mean a vis maior per se and thus it is always necessary to assess, according to the facts of the case, whether the other party was actually capable of fulfilling the contract or not.
A certain type of limitation will also concern creditors, who are pursuing their claims by means of an enforcement procedure – all such procedures are suspended and shall be recommenced 16 days after the termination of the state of emergency.
A moratorium has been issued on all types of credits. Their maturity is postponed until December 31st, 2020, and from March 19th, 2020, it is not possible to arrange an interest rate higher than 5 % above the basic interest amount of the Hungarian National Bank.
For over 7 years, a system of credit for small and medium enterprises is available in Hungary. In connection to the pandemic, there are attempts to improve its availability for the largest scope possible. Medium and large enterprises may benefit from a one-time grant should they undertake to carry out further investments on the territory of Hungary.
This article has been prepared in cooperation with BUDLEGAL ATTORNEYS AT LAW, a prestigious Budapest-based law firm focusing on civil and commercial law. More at www.bud-legal.hu.