Using Euro for Business Transactions in Hungary
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With rising inflation and and the weakening of the forint, the possibility of using the euro in the Hungarian economy is an increasingly common topic. Since August, for example, corporate tax can be paid not only in HUF, but also in euros or U.S. dollars. In this context, experts at Taylor Wessing have gathered information on the other cases where it is possible to pay in foreign currency instead of HUF under the current rules in Hungary.
Paying wages in euros may seem an attractive option for many, but under the current legislation, this is not possible - as a general rule - and must be paid in forints. However, exceptions to this rule are made for so-called "managerial employees" and for those working abroad. Although the law also states that legislation (e.g. a government decree) may provide otherwise, there is currently no legislation in force that allows for wages to be paid in a currency other than forint in other cases.
For companies, it may also be a reasonable option to conclude transactions and invoices in foreign currency. This is possible under Hungarian law even in relations between Hungarian companies.
"However, when settling accounts in a foreign currency, it is important to bear in mind the rules on financial matters, such as the VAT Act," warns Torsten Braner, head of the Budapest office of Taylor Wessing.
In contrast, the rules are more nuanced when it comes to consumers. Under the consumer protection rules for companies doing business with consumers, the selling price and - with the exception of cross-border services - the price of the service must be indicated in forints. The rule is explicit on the indication of the price but does not deal with payment. Thus, payment in foreign currency is not excluded in transactions where the consumer has the possibility to negotiate the terms individually.
Consumer protection rules also apply to real estate, so the above also applies to consumer real estate transactions. As the possibility for the parties to individually negotiate the terms of the transaction is typically given in the case of real estate, it is in principle possible that, for example, in the case of real estate, the buyer could pay the purchase price in euro.
However, in private-to-private relationships, strict consumer protection rules do not apply, given the balance of power between the parties. The rules applicable in such cases are permissive, as the parties are free to agree on the purchase price and the currency in which it is to be paid. If no agreement is reached, the underlying legal rules will apply, i.e. the currency of the place and time of performance will apply.
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