Labor safety

The compliance deadline (January 8, 2017) defined in the amendment (Act 79 of 2016 on the harmonization of the employment legislation) of the Act 93 of 1993 on Labor Safety (Mvt.) which brought significant changes regarding the workers’ representatives, will expire soon.

Since Juli 8, 2016 a workers’ representative for occupational safety shall be elected at all employers with at least twenty workers [Mvt. par. 70/A. subpar. (1) point a)]. In companies, where an employer employs less than twenty employees the election of a workers’ representative for occupational safety is initiated by the local branch of the trade union or the shop steward, or failing this, by the majority of employees [Mvt. par. 70/A. subpar. (1) point b)]. In both cases, the conditions for the election and conducting the election is the employer’s responsibility.

Should you have any questions, do not hesitate to contact our colleague Dr. Miklós Molnár.

What can we do for effectiveness of EU law?

In all areas of business, numerous provisions of EU law confer direct and indirect rights and obligations on businesses and enterprises of the Member States. The law of the European Union has become an integral and equal part of the national legal systems of the Member States. The authorities in each Member State – among them in Hungary – are primarily responsible for implementing EU law into national law and enforcing it correctly.

If an individual or business entity considers any measure or practice attributable to a Member State incompatible a provision or a principle of EU law or a national authority may not ensure the full effectiveness of Union law, they can lodge a written complaint to the European Commission.

The complaints and correspondence submitted will always be examined by the services and departments of the European Commission. Any complaint should be as complete and accurate as possible, particularly as regards the facts complained of in relation to the Member State in question and as far as possible the provisions of EU law which you consider to have been infringed by the Member State.

The Commission will not disclose the identity of the complainants unless they have given it their express permission to do so.

If the Commission that the complaint is well-founded and there may be an infringement of Union law which may require the opening of an infringement procedure, it addresses a letter of formal notice to the Member State concerned. In the light of the reply or the absence of a reply from the Member State, the Commission may decide to issue a reasoned opinion to the Member State and calling on the Member State to take the necessary measures to comply with Union law within a specified period.

If the Member State fails to comply with the reasoned opinion, the Commission may decide to bring the case before the Court of Justice of the European Union. At the close of the procedure, the Court of Justice will deliver a judgment stating whether there has been an infringement of Union law. After announcement of the judgement the Member State concerned has to take all necessary measures to comply with Union law as decided by the Court of Justice. If the Member State does still not comply, the Commission may again bring the matter before the Court of Justice seeking to have periodic penalty payments or a lump sum payment imposed on the Member State.

However, please note that the national authorities and courts in each Member State are primarily responsible for implementing European Union law into national law and ensuring that it is enforced correctly. Therefore, it is essential that the complainants seek redress from national administrative or judicial authorities.

A well-prepared, complete and accurate complaint is essential for being regarded as well-founded for initiation an infringement procedure against a Member State.

Do you have any further questions? We can help. Please contact us.

Changing corporate laws

As of March 1, 2012 regulations of corporate law have been changed again by the legislator. We would like to briefly summarize the most remarkable corporate law changes for the companies’ decision makers:

Szécsényi/Vágvölgyi: new publication

Eastlex, on of the leading CEE legal journal just published an article by László Szécsényi and Balázs Vágvölgyi on the final settlement of FX loans in Hungary. You can read the article (in German) here.

Compulsory energy performance certificate

From 1 January 2012, an energy performance certificate has to be obtained by the developer, the owner or the landlord when buildings are sold or let.
The certificate will remain valid for 10 years (although in certain cases new certificates will be required.) and it must be prepared by a duly authorised engineer or professional company.

The requirement of the energy performance certificate has been introduced in order to implement a relevant EU directive. According to the Government Regulation of 176/2008. (VI. 30.),  this requirement applies to certain buildings when – if it is a newly-built building – it starts to be used; if it is an existing building, it is bought or sold or is let for a term of more than one year; if it is a state-owned building with more than 1,000 m2 of usable floor space.

A certificate is not required when ownership is transferred before the occupancy permit (“használatba vételi engedély”) is granted, or when a co-owner acquires an ownership share.

The buildings affected by this requirement are buildings with 50 m2 or more of usable floor space.

Currently, there is a confusion around the implementation and especially the enforcement of this new requirement. According to the media communication of the Ministry of the Interior, a violation against the energy certificate requirement constitutes a general infringement of  Section 31 (1) a) of the Government Regulation 218/1999. (XII. 28.) and a penalty with a maximum amount of HUF 50.000,― can be imposed against the violator. On the other hand, the relevant EU-directive lays down that the penalties provided for must be effective, proportionate and dissuasive. The Hungarian government has the possibility of introducing more effective and dissuasive penalties until 9 January 2013 at the latest, therefore we expect that the maximum amount of the above fine will be increased in order to have a deterrent effect.

New rules for payment order procedure

Pursuant to Act No. 50 of 2009 on the payment order procedure (fizetési meghagyásos eljárás), from the 1st of June 2010, it is a notarial power to enforce due pecuniary claims in payment order procedures. The goal with the new regulation was primarily to relieve the ordinary courts, since more than 400 thousand of these non-litigious procedures were conducted in front of the courts in every year.

According to the new regulation, if the amount of the claim does not exceed over one million forints the due pecuniary claims are to be enforced only through payment orders, provided that the obligor has a known place of domestic residence, a seat or a local representative, and the claim does not arise from employment or other similar relations.

The Chamber of Civil Law Notaries (MOKK) provides a computer system for the notaries to complete their new tasks. They pursue automatic data procession and certain conducts can be done automatically.

As natural persons we can lodge our request for issuing a warrant of payment orally or using the paper-based submission form, whereas the legal persons or natural persons acting through their legal counsel may do so only electronically. The electronically submitted applications are distributed automatically and equally between the notaries, the ones submitted orally or in a paper based form will belong to competence of the notary they were presented in front of. All notaries have the power to act nationwide.

As an important novelty, the deadlines have been reduced, as the aim was also to have quick and efficient proceedings. The documents received are recorded in the MOKK’s system in 3 working days at most. If there is no rejection or transmission of the request, and no need for completion or the requested documents are already completed, the notary will issue the warrant of payment in 15 days (or 3 days in case of electronically submitted request) calculated from the day the request was presented – without the opponent having been heard.

The defendant has 15 days (as of the delivery) to present his/ her opposition, and hence, the opposition presented in time will transform the non-litigious payment order procedure into a lawsuit before the court. On the other hand a payment order without being contradicted has the same effect as a final, legally binding judgment.

The client requesting the above non-litigious procedure has to pay a court fee for MOKK calculated a rate equal to the amount indicated in the pecuniary claim and with a rate of 3 or 1% depending on whether it is a main proceeding or a procedure for permitting postponement or payment in installations. A stamp fee does not have to be paid except when the case is brought to the court.

Anita Bartal
Do you have more questions? Please contact us.

EXPO REAL – Stand A1.022

Our firm will participate also in this year as exhibitor on EXPO REAL in Munich.

During EXPO REAL between 4th and 6th of October, 2010 you may find our colleagues in Hall A1 Stand 022.

If you would like to arrange a meeting with our lawyers in advance you may find our contact details here.

REAL VIENNA – stand C0609

Our law firm will be represented also in this year as exhibitor on Real Vienna from 18th to 20th of May 2010.

Our colleagues would be pleased to greet you on our stand C0609. Please visit us.

Checkliste – Liegenschaftskauf in Ungarn [Csekklista – ingatlan-adásvétel Magyarországon], Eastlex 2008/Heft 2, 65-66.o.

Our publications available only to registered users.

Registration

Baurecht in Ungarn [A magyar építési jog], Eastlex 2008/6, 212-216. o.

Our publications available only to registered users.

Registration

Reugeld und Vorkaufsrecht im Konkursverfahren [A bánatpénz és az elővásárlási jog a felszámolási eljárásban], Eastlex 2009/4, 184. l.

Our publications available only to registered users.

Registration

Aktuelle Änderungen des ungarischen Gebührenrechts [A magyar illetékszabályok aktuális változásai], Eastlex 2009/5, 184. kk. l.

Our publications available only to registered users.

Registration

Eigentumsvorbehalt als Sicherungsmittel bei internationalen Finanzierungsgeschäften in Ungarn [A tulajdonjog fenntartása mint a nemzetközi finanszírozási ügyletek biztosítéka], ZfRV 2007, 64-70. o. (ZfRV – Zeitschrift für Rechtsvergleichung, Internationales Privatrecht und Europarecht)

Our publications available only to registered users.

Registration

Significant changes in construction law

The main reason of the changes on the construction activity and construction contracts is to provide higher administrative control over construction projects which are financed by state sources. The new provision shall also apply for private projects.

The provisions of the new government decree are compulsory, this means that the parties may not deviate from it. The main goal of the decree is to control the payment of sub-contractors, the calculation of the contactor’s fee, the scope of the employer’s, designer’s, construction supervisor’s, contractor’s duties and set forth the mandatory elements (in details) of a construction and design agreement. As of October 1, 2009 agreements on construction works pursued as business activity have to be made in writing, while those falling under the scope of the Public Procurement Act have to be countersigned by an attorney or in-house council.

If the parties agreed that the contractor’s fee is a lump sum the contractor may not claim the consideration of the additional works (többletmunka). In this case the contractor may be remunerated only in respect of the extra works (pótmunka) if any. The decree set forth the definition of additional works (works contained in the construction documents but not considered in the contractor’s fee) and extra works (works not contained in the construction documents). The additional works may be invoiced only (i) in case the contractor’s fee is calculated based on the bill of quantities (i. e. itemised settlement of account) and (ii) the contractor certifies with the priced bill of quantities that the given additional work was not included in the budget.

In order to put an end to the debt chain in the construction industry, the payment in larger project will be controlled and made via an external third party (i.e. bank). It will involve the investor/employer, the contractor and the subcontractors to sign a special contract through an external party, such as a bank or other financial institution. The payment manager will handle on the one hand the funds provided by the employer and on the other hand the performance securities provided by the contractor. The engagement of a ‘safe hand’ is compulsory if (i) the investment falls under the scope of the Hungarian Procurement act and its value exceeds HUF 90 million or (ii) the value of the investment exceeds the European value threshold for public construction works (currently EUR 5.150.000,-). In the later case the value of the investment will be established based on the calculation method published in the regulation on construction fine (and not the amount specified in the general contractor’s agreement).

The provisions on the payment management agreement – inter alia – set forth that the (i) the completion protocol issued by the construction supervisor (műszaki ellenőr) and (ii) the payment to the general contractor(s) or subcontractor(s) of the amount specified in the invoice issued based on the completion protocol.

The employer must certify that the funds (in form of cash, credit, loan, etc.) covering the entire project are available at the entry into effect of the general contractor’s agreement. Until the date of commencement of the given work phase at the latest, the employer must (i) provide the consideration of the given phase, work part etc. is available on the payment manager’s account or (ii) must ensure that the funds covering the value of the given phase work part is under the exclusive control of the payment manager, in both cases The payment towards the contractor or subcontractors is conditioned to the approval of the completion protocol by the construction supervisor. Therefore, the employer does not have any control over the payments. The amount of the (partial) contractor’s fee may be covered by means of the following sources: (i) treasury bonds/bills issued by one a member state of the EU, (ii) securities, (iii) national or EU funds, (iv) loans or credits or (v) cash deposited on the escrow account of the payment manager.

The payment manager is entitled to retain from the amount payable to the general contractor the consideration due to the subcontractor if the general contractor failed to fulfil its payment obligation towards the subcontractors. Practically, the payment towards the general contractor is conditioned by the subcontractor’s confirmation of receipt. The fee of the payment management and all costs related to the payment management is payable by the employer.

If the involvement of a payment manager is compulsory, the subcontractors will be registered in an electronic registry forming a part of the construction diary (log book). The general contractor will enter the data on each subcontractor in the electronic registry. The payment manager will be entitled to retain the amounts due to the subcontractors from the payments towards the general contractor. If employer does not provide the payment manager with the required funds within the pre-agreed deadline, the contractor is entitled to suspend the works for 30 days. If the employer fails to certify that it has ensured the required funds during the time of the suspension the contractor may rescind the general contractor’s agreement.

The new regulation provides inter alia for or changes the compulsory content of the construction documents, construction diary, the design, contractor’s, subcontractor’s and payment management agreement. In addition, if the involvement of a payment manager is compulsory than the employer has to commission a construction supervisor as well. The changes also affect the hand over procedure.

 

 

Daniel Kellner

Do you have more questions? Please contact us.

On the CEO’s discharge of liability

Not available in English.

Amendments to the Condominium Act

As one of the most interesting changes of the Hungarian Condominium Act from a real estate developer’s aspect, the condominium representative (közös képviselő) may not act in the name and on behalf of the condominium during the various proceedings of the building authority. As a consequence, in the future the building authority shall notify each condominium member having a client status in the building/occupancy permit proceeding separately and thus the period opened for the appeal or waiver of the right to appeal will commence at different dates in case of each owner.

Due to the amendments the operation of the condominiums is placed under the judicial oversight proceedings of the Hungarian Prosecution Service. It is though questionable whether the Prosecution Service possesses the necessary manpower and financial background to deal with its new duty or – in lack of resources – such judicial oversight proceedings will remain an un-exercised right (same as the judicial oversight proceedings of the courts of the courts of registration).

In order to strengthen the transparency of the financial operation, condominiums with a yearly turnover exceeding HUF 10 million or having more than 50 apartments are obliged to appoint a certified public accountant to check the yearly financial report.

The amendments introduce the presumption of receipt: the condominium member being in arrears with the payment of common costs may not delay or avoid the payment by refusing to take over the payment notice. According to the new provisions on the eight business day reckoned from the second unsuccessful attempt to deliver the payment notice it will be deemed as delivered to the debtor even if the letter returns from the (postal) address of the member with the mark ‘did not look for it’. As a consequence the order of payment procedure may be commenced even if lack of delivery of the payment notice or the condominium representative may initiate the registration of the mortgage on the debtors’ individual condominium unit, provided that the registration is allowed by the bylaws of the condominium.

The Act on Condominiums as amended clarifies the rules on the alienation of the parts of a condominium jointly owned by the condominium members and altogether aims to align the provisions of the Act on Condominiums as to ensure the compatibility with the Act on the Land Registry.

Balázs Vágvölgyi
Do you have more questions? Please contact us.

New taxation on the cafeteria system

The benefits in kind (cafeteria) system has been subject to significant changes as of 2010. Even if most of the changes have an unfavourable impact on the employees (and vice versa: the changes will probably lead to an increase of the state budget), professionals consider that the employers still should implement some sort of cafeteria system instead to pay the amounts allocated for such purpose as part of the base salary.

It is beneficial though that the former yearly limit of the benefits in kind (HUF 400.0000,-) has been abolished and instead each benefit will have its individual limit provided that in all cases the amount exceding the given limits subjects the tax of 98,79%. Also, the circle of the fund allowances (amounts paid by the employer to mutual or pension fund account of the employee) wasn’t limited.

The most unfavourable novelty is the change of the former tax (and social security) exempt status of several benefits to a taxable benefit in kind category. As most probably the employers will not takeover such taxes the employees may select the elements of the package from three categories having different tax rates.

The allowance to employees using the Internet at home, life assurance respectively the housing allowance keep their tax (and social security) exempt status and there is no upper limit  thereof (first category).

The elements in the second category may be given up to a certain limit and subject to a ‘preferential‘ tax of 25%. The employer may dispense the lunch (hot meal) voucher up to HUF 18.000,-/month, the school allowance up to the 30% of the amount of the yearly statutory minimal salary, local travel pass as per the tariffs of the local public transportation company, the holiday voucher up to the yearly amount of the statutory minimal salary, the voluntary pension fund allowance up to 50% statutory minimal salary/month respectively the voluntary health fund up to 30% statutory minimal salary/month. The reimbursement of the tuition fees of any training is limited to amount of the statutory minimal salary multiplied with 2,5 and is taxable with 25% only (i) if it has been ordered by the employer and the training offers professional knowledge related to the business activity of the employer (ii) the curricula of the training is related to the given position. Please note that if the value of the certain benefit exceeds the threshold above the difference is subject to a tax of 97,89%.

The elements of the third category (cold meal voucher, culture voucher and gift voucher) do not have an upper limit (but the cafeteria package regulation will provide for such limits) and may be disbursed subject to a normal tax of 54% nevertheless, adding all payroll burdens (levied either on the employer or the employee) it increases to 98,79%.

Benefit Limit Tax
Internet unlimited 0%
Housing allowance HUF 5 million 0%
Life insurance unlimited 0%
Cold meal (lunch) voucher HUF 18.000,-/month 25%
Holiday voucher 73.500,- /month 25%
Transporation pass Unlimited 25%
School allowance 22.050,-/year 25%
Voluntary health fund premium 22.050,-/year 25%
Voluntary pension fund premium 36.750,- /month 25%
Training 183.750,- 25%
Cold meal voucher, gift voucher, culture voucher Unlimited 98,79%

Linda Horváth

Do you have more questions? Please contact us.

Amended rules of land transfer tax

With the effect of 1st January, 2010 the Hungarian legislation has adopted amendments to the Act XCIII of 1990 on Duties. The latest amendments intend to eliminate the loopholes of the provisions concerning the new land transfer tax payable upon the sale of the real estate-companies.

The original provisions (Act LXXVII of 2009) prescribe that a purchase of a company that owns directly a real estate in Hungary (“share deal”) is subject to the same land transfer tax as a regular asset deal (the general rate is 4%, and, over 1 Billion asset value, 2%). According to the initial version of the new regulation the share acquisition of the affiliated companies in the company that owns directly a real estate in Hungary shall be accumulated. A duty obligation is arisen in case the acquirer’s accumulated shareholding is increased on at least 75 % in the company that owns directly a real estate in Hungary.

This regulation may be easily circumvented as according to the original regulation the purchase of a holding company having an ownership ratio of 100% in the project company owning real estate was not subject to the land transfer tax. The explanation was clear stating that the acquired holding company did not own directly a real estate in Hungary.

The new provisions define the “company owning a real estate in Hungary” (“SPV”) and – compared to the original provisions – extend the affected share deals significantly as not only the direct real estate owner companies are concerned. A SPV means henceforward (i) a company owning directly a real estate in Hungary, (ii) a company having at least 75% ownership ratio in the company defined in clause (i), or (iii) a company that indirectly owns an ownership ratio of at last 75% the company defined in clause (ii). The indirect ownership ratio is calculated according to the ownership ratio(s) of the affiliated companies between the purchased company and a company owning a real estate directly in Hungary.

The new regulations intend to eliminate the loopholes mentioned above but may not correspond with the logic of the original provisions and there is still some inconstancy. In light of the new provisions the collateral share acquisition of the affiliated companies shall only be accumulated if a SPV-purchase might be identified.

We think that with some creativity of the counsellors and appropriate transaction structure there is a possibility to avoid the payment of the land transfer tax according to the law.

We take the view that system of land transfer tax  payment obligation still offers some possibility for investors to optimise their intended transactions.

For more information please contact us.

László Szécsényi