HUNGARY TRENDS AND DEVELOPMENTS Contributed by: Pál Szabó, Barnabás Simon, Eszter Katona, Ádám Simon, Mihály Harcos, Karim Laribi, Gábor Kutai and István Szalay-Csala, Bird & Bird
this position as obstructive, contributing to Hunga - ry’s growing isolation within EU decision-making and reducing its leverage in negotiations over cohesion and recovery funding. Hungary’s reluctance to comply with the judgment of the European Court of Justice in relation to illegal migration is also causing tensions. In June 2024, Hungary’s failure to implement changes to its policy on handling migrants and asylum seekers at its borders resulted in the European Court of Justice ordering Hungary to pay a penalty of EUR200 million, as well as a penalty of EUR1 million for each day of delay in complying with its judgment. However, the Hungarian government refuses to pay the penalty as, in its view, the ruling is contrary to applicable provi - sions of EU law. Hungary’s relationship with the USA saw positive developments in 2025, highlighted by the Trump– Orbán summit in early November, signalling strength - ened economic and cultural ties. At the same time, tensions related to the ongoing Russia-Ukraine armed conflict have affected Hungary, particularly around oil and gas supplies, which the Hungarian government is actively addressing through high-level discussions with the US government. These talks focus on secur - ing energy stability in the face of US-led sanctions on Russia, balancing Hungary’s energy needs with broader geopolitical dynamics. The new direct flight to major US cities and ongoing diplomatic efforts demonstrate Hungary’s desire to deepen ties with the USA while managing challenges posed by the regional conflict and energy security concerns. In parallel, disagreements persist around taxation issues between the USA and the EU, impacting Hun - garian companies engaged in cross-border trade and investment. The termination of the double taxation treaty between Hungary and the USA, effective from 2024, has not been resolved, generating complica - tions in profit repatriation and increasing the tax bur - den for multinational enterprises operating in Hungary. These fiscal tensions contribute to a broader climate of legal ambiguity and added cost, particularly in sec - tors such as technology and manufacturing, where US investors have historically been significant players. The Hungarian government and business community continue lobbying for clearer frameworks and bilateral
negotiations to alleviate these impediments but face a challenging path forward. If the EU’s proposed ban on Russian fossil fuel imports goes into effect at the end of 2027, or if there is an intensification of regional conflicts, higher energy pric - es could put another layer of pressure on Hungary’s external and fiscal balances. The Hungarian Government’s Response to Challenges In response to ongoing global and regional pressures, the Hungarian government has continued – and in some areas expanded – interventional measures first developed in previous years. The following remained pivotal policies in effect throughout 2025. • Maintaining exemption from EU and US sanc - tions on Russian oil imports to avoid disruptions to domestic energy supply, while simultaneously exploring alternative sources to stabilise supply and prices. • Maintaining “extra profit” taxes on financial institu - tions, with plans to double their yield in 2026. The tax increase includes higher rates and reduced deductions for government bond purchases, reflecting efforts to stabilise public finances without raising debt levels. • Postponing certain public investment projects, notably in infrastructure and non-strategic devel - opment, to cap government spending and man - age heightened debt levels. The government has indicated that further reviews are possible should fiscal risks increase. • Updating the Foreign Direct Investment (FDI) screening regime, retaining the state’s pre-emption right in solar power plant transactions, while recent reforms have simplified general FDI reviews and removed the state’s pre-emption right in relation to other transactions, enhancing deal flexibility but maintaining state oversight in strategic sec - tors. The 2018 FDI Act and the 2025 FDI Act apply in parallel; if an investment triggers both regimes, two separate notifications must be filed and prior approvals from both ministries must be obtained before completion.
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