HUNGARY Law and Practice Contributed by: Szabolcs Mestyán, John Fenemore, Balázs Rokob and Nóra Kertai, Lakatos, Köves & Partners
2. Aircraft and Engine Leasing 2.1 Overview 2.1.1 Non-Permissible Leases
2.1.6 Licensing/Qualification of Lessors The CAA does not currently require a licence from a lessor if the relevant lease agreement provisions in respect of the aircraft set out that the lessee is respon - sible for all obligations in relation to operation of the aircraft. The CAA has the discretion to alter its future requirements in this regard. The provision of financial leases is a regulated finan - cial service in Hungary. Providers of financial leases should seek appropriate advice on the regulatory framework for providing financial leases in Hungary. 2.2 Lease Terms 2.2.1 Mandatory Terms for Leases Governed by English or New York Law The lease should adequately identify the parties, the leased assets and the consideration for the lease. The lease should also contain valid governing law and jurisdiction clauses. English and New York law-governed leases customar - ily used in the market typically satisfy the mandatory terms required by Hungarian law without amendment. 2.2.2 Tax and Withholding Gross-Up Provisions No withholding tax applies to lease fees or similar payments under the currently applicable Hungarian tax laws. However, should the lessee be required at any time by law to make any deduction or withhold - ing, provided that the laws implementing this payment obligation would not introduce a comprehensive new structure to such transactions, the gross-up provision of the lease should be recognised and enforceable in Hungary. 2.2.3 Parts Installed or Replaced After a Lease’s Execution Hungarian law distinguishes between “components” and ”accessories”. As a matter of Hungarian law, components installed or replaced after the execution of the lease will become part of the aircraft or engine upon installation. Accessories will, in the absence of a contrary agreement between the parties, not automat - ically become the property of the lessor as a matter of Hungarian law. The parties are free to stipulate that the terms of the lease cover any replacement parts
Most types of operating, wet or finance leases are per - missible including separate engine leases. Providing credit is a regulated activity in Hungary and appropri - ate advice should be sought in relation to any finance lease. 2.1.2 Application of Foreign Laws Hungarian law will generally recognise and enforce a lease if it is governed by a non-Hungarian law (see 3.4.3 Application of Foreign Laws ). The fact that one of the parties to the lease is a non-Hungarian resident (eg, the lessor) should in itself satisfy this requirement. Therefore, the parties to the lease may validly enter into contracts governed by and interpreted in accord - ance with any other (non-Hungarian) law. As an exception, there are restrictions in relation to certain state-owned assets: if an aircraft is owned by the Hungarian state or an emanation thereof, Hungar - ian law may need to be applied. 2.1.3 Restrictions Concerning Payments in US Dollars There are no material restrictions imposed on domes - tic lessees making rent payments to foreign lessors in US dollars. 2.1.4 Exchange Controls There are no (central bank or other) exchange controls or prohibitions on remitting or repatriation of proceeds in force in Hungary. Therefore, no Hungarian regulato - ry approval or other consent is required for any (lease or other) payments to be made by the lessee under a lease, in either Hungarian forints or a foreign currency. 2.1.5 Taxes/Duties Payable for Physical Execution of a Lease No transfer tax, stamp duty or similar charges shall be payable upon the physical execution of a lease. The fact that the contract is brought into Hungary does not in itself give rise to a tax liability.
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