Hungary’s regulatory climate makes it an increasingly challenging place to conduct business.  

• Since 2016, multinationals have identified shortages of qualified labor, both white and blue collar, as the largest obstacle to investment in Hungary.

• In recent years, the government introduced several new taxes which mostly target the banking, energy, retail and telecommunications sectors.  In certain industries, such as media and retail, these unpredictable, sector-specific taxes and regulatory policies have favored national and government-linked companies.  The Government in May 2022 enacted new measures to tax industries that allegedly were gaining extraordinary profits either from Russia’s war in Ukraine or from the pandemic. Hungary has been struggling with a serious budget deficit. Experts estimate the potential gap to be cca USD 7 million (HUF 3 trillion) and the total amount of new surtaxes can only cover approximately HUF 850 billion, whereas the source of the rest is not known. The government plans to institute some additional cost cutting in the amount of HUF 1.2 trillion, but this is significant considering how much the Hungarian public services have been already underfinanced.

• Hungary’s value-added tax (VAT), for most products and services, is 27%, the highest rate in the EU.

• Persistent corruption and cronyism continue to influence the public sector.  The Corruption Perceptions Index (CPI) by Transparency International slightly decreased from 44 to 43 points in 2021, indicating increased corruption.  Hungary is still regularly considered among the most corrupt EU member states. In 2016, the government withdrew from the Open Government Partnership (OGP), a transparency-focused international organization, after refusing to address the organization’s concerns about transparency and good governance. Despite strong pressure from the opposition and public, the Government has not joined the European Public Prosecutors Office. Corruption Perceptions Index.

• EU funding is a large driver of Hungarian GDP growth.  Based on the recent outcome of the 2021-2027 Multi-Financial Framework (MFF) negotiations, Hungary will be able to apply for more than USD 61.1 billion (EUR 52.8 billion) from the central budget over the seven-year term, which would mean a 35% increase compared to the previous term. However, Hungary recorded a government budget deficit equal to 6.80% of the country’s GDP in 2021. Hungary Government Budget.

• After the April 2022 national election, Prime Minister Victor Orban’s ruling Fidesz party retained its leadership for the fourth time. The Government remains focused on being an export-oriented economy facilitating Foreign Direct Investment (FDI). Hungary under PM Orban has long been at loggerheads with the European Commission in Brussels over issues such as immigration, judicial reforms, and media freedom. EuroNews.

• In 2020 the Government passed legislation which requires investors outside the European Economic Areas to request approval from the Minister for Technology and Industry for new investment exceeding a certain threshold and participation.