Thanks to Susan for the summary points on Doing Business in Hungary. You can visit the Susan HayesCulleton website here
On Wednesday 15th July, I was invited to facilitate an Irish International Business Network and Irish Hungarian Business Circle discussion about doing business with the Central European country of Hungary. The panelists were Ambassador Ronan Gargan, Irish Ambassador to Hungary, Pal Jalsovszky, managing partner at Jalsovszky Law and Matty Ryan, managing director at Vistra.
According to the OECD, Hungary has a population of 9.8 million people, a GDP per capita of US $33,875 and tax on personal income equates to 5.2% of GDP.
- Ronan opened the discussion by explaining that Ireland is seen in a positive light in Hungary. We share EU membership and there is an admiration of the business model we’ve built in the economy. As people “knock on the Embassy’s door” from a commercial point of view, they are looking for help with understanding the business environment, overcoming the language barrier and developing a network in the local market.
- Pal spoke about how Hungary offers a very attractive tax environment. While its VAT rate of 27% is significantly higher than other EU countries, rates of tax on personal income, corporation tax and others are very competitive.
- Matty highlighted that it’s critical to get the structure right because the penalties can be very high. For example, if you don’t put the proper things in place, then you may not be able to avail of the opportunity to not pay withholding tax. If you don’t meet the tax authorities’ deadlines, it can be deemed a criminal offence.
- Ronan cautioned that as more Brexit deadlines beckon, the cost of doing business will rise with the UK. Therefore, it’s prudent to look at ways to diversify one’s operations and maintain competitiveness.
- There is a significant flow of students from high quality education into the labour market. In fact, many Irish students choose Budapest to study medicine, dentistry etc. As Matty says “Hungary is good at the subjects that we find hard at school”.
- The Irish Hungarian Business Circle has 100 members including both corporates and individuals. Matty pointed out that the raison d’etre of the organisation is to facilitate business and social links among the Irish in Hungary.
- Enterprise Ireland can help companies interested in doing business in the area. It’s regional office is in Prague and a representative is active in the building with the Irish Embassy.
- Pal pointed out that real estate has already seen declining prices of up to 5% and may possibly be more in the coming months, but this offers contrarian investors some opportunities. It may be the case that some properties that were available for AirBnB rentals will no longer be allowed to use their space in this way and thus changes are afoot on the rental market in terms of supply and price.
- Ronan highlighted that there is over a billion euro of trade between the two countries each year and in May 202o, Irish businesses sold €16 million worth of goods into the country.
- Ronan mentioned that the expected impact of Covid 19 on the Hungarian economy is expected to be in the range of 3 – 6% in 2020. I commented that this is much lower than the 8.3% expectation for the EU average as well as the 8.5% prediction for Ireland.
- The panel shared their thoughts on the sectoral opportunities. The automotive industry is poised for growth. The country has developed a supply chain of smart hygiene products. It has an appetite for innovation and is interested in new ideas. It may be wary of companies seeking to come in and compete against incumbents in the market. Also, due to the divergence in our respective currencies, a stronger euro opens up the potential for good value acquisitions in the market.
- Hungary does face a challenge of employment retention and has some initiatives in operation to bring their own local people back into the domestic workforce.
- Both Ronan and Matty commented that there are direct flights now between Dublin and Budapest as well as Cork and Budapest offering the air connectivity needed to build business relationships and foster tourism links.
- Matty said that it’s definitely worthwhile to talk to the Hungarian Investment Promotion Agency (HIPA) for some supports to build your business particularly if you’re willing to locate outside Budapest and employ more than 100 people.
- Matty detailed that at its peak, if you wanted to hire a staff member and for them to receive 100, you would need to pay 133. That has now reduced to 117 on July 1st 2020 and that staff member can keep 66.5% of their income.
If you would like to reach out to any of our speakers, please do so through a personalised LinkedIn message.
We have lots of other summaries of IIBN virtual events including “Doing Business in New Zealand”, “Ireland’s Cybersecurity Challenge” and “Olympic Medalist Cian O’Connor’s take on Determination, Pressure and Success”.