Hungary

Report Topics:

1:- General Information

2:- Cooling-off Period

3:- Pyramid Schemes

4:- Multi-Level Marketing

5:- Prohibition on Products

6:- Credit Restrictions Country

7:- Money Collections

8:- Licenses

9:- Status of Direct Sellers

10:- Earnings Claims

11:- Taxes and Fees

12:- Social Security

13:- Others

General Information

selling in Hungary is governed by the government decree 213/2008 (VIII.28) on off-premises contracts. This act entails the main rulings for direct selling contracts, such as consumers’ right to rescind from the off-premises contracts within 8 working days.

The government decree 133/2007. (VI. 13.) defines the list of products, the retail of which is banned through direct selling. What is rather unique in Hungary is that food and food supplements may not be sold to consumers through direct selling channels for reasons of public health.

Further important legislation is the Act XLII. of 2008 Consumer Protection; the Act XLVII. of 2008 on the Prohibition of Unfair Commercial Practices, and the Commercial Act (Act CLXIV of 2005).

Cooling-off Period
Consumers may exercise their right of withdrawal within 8 working days from a) the day the product was handed over to the consumer b) the day the contract for providing a service has been concluded.

In the event that the consumer rescinds from the contract within the said cooling off period, the consumer may demand to have the purchase price refunded upon returning the product to the seller or to have the proportionate fraction of the value of the service not yet performed to be refunded.

The consumer, if unable to return a received and undamaged product or if the value of the product has been substantially reduced, or if the consumer has used the services in full, shall not be entitled to withdraw from the contract.

A consumer may not validly waive his right of withdrawal.

Pyramid Schemes
The Act on the Prohibition of Unfair Commercial Practices entails a black list of the actual unfair commercial practices: pyramid schemes are indicated on the said list and are defined as promotional schemes where a consumer gives consideration for the opportunity to receive compensation that is derived primarily from the introduction of other consumers into the scheme rather than from the sale or consumption of products.

Multi-Level Marketing
There is no legal definition of MLM in Hungary. There are no laws against multi-level marketing, which is regarded as a form of organising direct selling.

Prohibition on Products
The government decree 133/2007. (VI. 13.) defines the list of products the retail of which is banned through direct selling.
The following products may not be sold through direct selling channels:

drugs and psycho-tropic substances, or any other goods classified as such;
pharmaceutical products, substances and preparations classified as hazardous, also pesticides, substances for plant protection and crop improvement purposes and veterinarian products and preparations;
foodstuffs (including mushrooms), with the exception of fruits and vegetables;
sowing seeds and plant propagation materials;
highly flammable and explosive substances and substances listed under the flammable and explosive fire-hazard category;
hazardous wastes, and remnants and derivative materials containing hazardous components;
gem stones;
precious metal objects and products made of precious metal;
excise products;
the goods for the sale of which law requires a special license, or those banned by law or allowed to be sold only in stores (market).
Credit Restrictions Country
It was the Act CLXII of 2009 on consumer credits that implemented the Consumer Credit Directive (98/7/EC) in Hungary. The Act applies to all consumer credits and financial leasing constructions and sets out rules on the information requirements regarding the conclusion of the contract, the credit rate percentage and other related costs of the credit.

The consumer is entitled to rescind from the contract within 14 days from the day the consumer credit contract is concluded.

The act also lays down the conditions of prior redemption privilege.

Money Collections
No legislation.

Licenses

Act IV of 2006 on business associations lays down the legal framework for the functioning of business associations. As the majority of direct sellers run their own businesses, their status is governed by the said act.

Hungarian legislation permits the payment of compensation for any work performed in the framework of either an employment contract or a temporary assignment contract (“megbízási szerzodés”), therefore direct sellers are required to have some form of business licence so as to enable them to invoice companies for their bonuses & commissions.

Direct sellers are accepted by local legislation as independent business partners.

Under a new ministerial decree on the compulsory training of those exercising industrial and commercial activities, direct sellers are obliged to obtain commercial diplomas until December 31, 2011. However, it is currently uncertain what diploma(s) direct sellers are to obtain under the current decree, furthermore many direct sellers are to obtain two diplomas even.

Status of Direct Sellers
Some salespeople are employees but most of them are private entrepreneurs / independent or self-employed distributors. Their statuses are also defined by the contract concluded with the direct selling company.

Given the relatively high monthly fix costs to run a business in Hungary (approx. HUF 100,000 or approx. Euros 330 per month minimum) and that the Direct selling companies are not allowed to pay bonuses to private individuals, only those direct sellers formalize their business with an official business license whose monthly revenues (either from direct selling or from any other business venture) surpass this level.

Earnings Claims
No legislation.

Taxes and Fees
Hungary’s taxation of an individual’s income is flat.
In 2011 the tax rate in Hungary for an individual is 16%. The 16% rate is imposed on a wider tax basis of 1.27, bringing the effective tax rate to 20.3%.
There are reduced rates of tax for certain income earners.
Corporate tax in Hungary in 2011 is fixed at 19%.
Corporate tax for income up to HUF 500 million is 10%. (HUF 250 million in 2010).

Relevant acts:

Social Security

Others
Section 1

This Decree shall apply to the contracts concluded in a fair, market or market hall, outside of seller’s place of business or premises, or in the absence of such, particularly in the residence or work place of a consumer, except the conclusion of the contract is initiated by the consumer.
The provisions of this Decree shall also apply to the cases when the consumer proposes to the seller to have a contract concluded under the circumstances described in Subsection 1.
This Decree shall not apply to:
buildings contracts;
contracts for the acquisition of real properties or other rights pertaining to real properties;
insurance contracts;
securities transactions;
contracts for passenger transportation on road or taxi services.
For the purposes of this Decree:
consumer: a natural person being one party to a contract, falling under the scope of this Decree, outside the sphere of business or professional activities, or is presenting an offer to the seller to conclude such contract;
seller: a natural person who, as a private entrepreneur acting in his own behalf, or acting as a representative, salesman or employee of a business organisation to conclude a contract, falling under the scope of this Decree, for the sale of merchandise or for the provision of services;
door to door sales: the activity based on which the seller sells a merchandise or provides services to a consumer based on a contract concluded under the circumstances described in Section 1.
Section 2

By way of door to door sales activities only the goods that are for a commonly known purpose in unopened industrial packaging may be sold to consumers.
See Section V – Prohibition on Products