Discusses pricing formula and other fees, value-added tax (VAT), etc.
Last Published: 8/6/2019

Hungarian businesses tend to be price conscious. Success for U.S. exporters requires a flexible pricing strategy, by working with Hungarian representatives to keep import costs low. With Hungary’s accession to the European Union in 2004, Hungary adopted the EU’s common external tariff (CXT) rates. Tariff assessment and all other customs procedures take place at the first port of entry into the EU.

Hungary’s Value Added Tax (VAT) sharply increases the price of U.S. exports for Hungarian consumers. The Value-Added Tax (consumption tax) is 27% on most products and services. There is a reduced 5% VAT on certain meat products such as pork and dairy products.

The rate of inflation was 0.4% in 2016, followed by 2.4% in 2017 and 2.8% in 2018.  Fluctuations in the exchange rate of the Hungarian Forint to other currencies make planning very difficult. Much of the population was indebted in foreign currencies (mainly EUR and Swiss Franc), so the weakening of the Forint also significantly raised the burden of debtors including households, the business sector, as well as the government.  The government’s effort to increase exports by weakening the Forint seems to have stabilized expectations in the future.
Foreign companies operating in price-regulated sectors, such as telecom, energy, pharmaceuticals and retail suffered decreased margins due to sector taxes and other austerity measures, as well as government delays over the past few years.
After joining the EU, the numerous EU-oriented reforms have removed price controls on most utilities. By the early 2000s, the Government of Hungary has largely deregulated utilities and have brought up, or at least come closer, to EU pricing levels for electricity, gas and wastewater prices, which resulted in a significant price increase both for households and businesses.  However, as of January 2013, the Government of Hungary introduced a 10% decrease in retail utility prices to consumers for electricity and gas heating and another 10% retail price decrease in July 2013 on water and sewage services as part of the country’s public utility rate cut program and that of protecting arable land in the country.  Most utilities were re-nationalized including electricity, gas and water to provide favorable rates to consumers.  In other sectors such as telecommunications, cable or digital TV services, and internet services, stiff competition continues.
TI and other anti-corruption watchdogs have highlighted EU-funded development projects as one of the largest sources of corruption in Hungary.  A TI study found indices of corruption and overpricing in up to 90% of EU-funded projects.  A 2016 study by the Corruption Research Center Budapest based on public procurement data from 2009-2015 revealed that the massive influx of EU funds reduced competition and increased levels of corruption risk and overpricing in public procurements.  According to the study, EU-funded tenders perform poorly in regard with corruption risks, competitive intensity, and transparency, compared with Hungarian-funded tenders. Besides their positive impact on GDP growth and development, EU funds in Hungary contribute to the system of political favoritism and fuel crony capitalism, the study concluded.  Find more at EU Pricing

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