8. April 2020

Hungary: Main changes in Hungary due to the announced state of emergency

8. April 2020
act legal Hungary

Since the World Health Organization (WHO) declared the rapidly spreading coronavirus a pandemic, people are increasingly affected by government, employers and many other decisions.

Due to the COVID-19 disease, the government declared a state of emergency in the territory of the Hungary on March 14, 2020. In the state of emergency, the Hungarian government has ordered extraordinary measures to prevent the health and life of the Hungarian people from the now pandemic coronavirus.

Exceptional measures led to create the 47/2020 (III.18.) and 61/2020 (III.23.) Government Decrees, which aim to ensure economic performance and survival of the small and medium-sized enterprises in Hungary.

  • Loan moratorium

Government Decree 47/2020 (III.18.), on the measures to protect the national economy, has been published in the Hungarian National Gazette. The decree contains the details of the loan moratorium announced by the Prime Minister previously. Furthermore, it declares provisions to reduce the burden on the sectors most affected by the effects of the COVID 19 epidemic.

Under the decree, all the debtors – whether businesses or individuals – will be deferred until December 31, 2020 in respect of payment obligations arising from loan, loan or financial lease contract entered. During the moratorium, the debtor is not obliged to pay any capital, interest, or other charges arising from such contracts, as the deadline extended.

The payment extension period modifies the period of completion and the maturity, meaning that the terms of these contracts are extended from March 18, 2020 to December 31, 2020. Thus, it is not to be expected that the banks will eventually seek a lump sum repayment during the moratorium, but the contracts (and all repayment installments) will be extended by approximately 9 months. Of course, the debts will continue to yield interest, but this additional cost is expected to be included by the banks in the future installments.

  • Temporarily the Government exempts low-income enterprises and individuals from paying their taxes

In addition to the credit moratorium, another major change came into force by the 47/2020 (III. 18.) decree. The Government exempted the „low-income” entrepreneurs such as taxi drivers, passenger transport companies, from taxation. (In Hungary this tax type is named ’KATA’, hereinafter: „KATA”).

The 61/2020 (III.23.) Government Decree clarified the scope of the activities which „benefit” from the tax and contribution concessions granted by the decree. This recent decree has significantly extended the scope of activities which do not have to pay KATA until the state of emergency. It means that, at the moment hairdressers, personal trainers, painters, dentists, hospitality practitioners, waiters/waitresses etc., whose income is mostly affected by the epidemic, do not have to pay their taxes in this period.

  • Suspension of executions

One of the other changes which came into force by the 60/2020 (III.23.) Government Decree is the suspension of the executions and tax executions from March 24, 2020, until the 15th day after the state of emergency has ceased. In fact, if the end of the state of emergency occurred during the fall or winter, then the evictions could only continue next April, in 2021.

Until the end of the state of emergency, an on-the spot procedure, and an auction may not be held and no on-site procedural action may be taken. These procedures and actions can only be done once the state of emergency has ceased, with the time limit for taking the procedural action restarting on the 15th day after the cessation of the emergency.