The Hungarian Ministry of Finance has drafted a new customs duty law which, if passed by the Parliament, would become effective from 1 March 1996.

The current Hungarian customs duty regulations are based on a 1976 Law Decree which has been amended several times since its introduction.

The proposed law is in line with EU legislation and adopts GATT regulations concerning such items as customs valuation methodology.

One of the more important features of the proposed law is that it will terminate the current customs duty concession available to Hungarian companies in relation to:
a)	Contributions-in-kind of plant and equipment to equity capital by the foreign shareholder(s); 	and

b)	Imports by the Hungarian company from hard currency equity capital contributed by the 	foreign shareholder(s).
Currently, imports under both a) and b) are free from Hungarian customs duty, customs clearance fees (total of 4%) and the customs surcharge of 8% introduced earlier this year as part of the Government's austerity package.

A number of bodies representing the interests of foreign investors are lobbying heavily in order to preserve the customs duty concession in some form or another. For example, the Government has announced that the concession may be retained, however, if this is the case its application will be limited to specific types of imports.

The Government has also announced that a transitional measure may be adopted whereby companies which submit documents to the Court in 1995 indicating an increase in capital based on a) or b) above will be entitled to import the equipment on a customs duty free basis in 1996 under the old regulations.

Accordingly, Hungarian companies with plant and equipment imports planned for 1996 should begin planning now in order to maximise the benefits of the current concession wherever possible.

The new customs duty law is expected to go before the Parliament later this month or in December. It may be that the effective date of the new law is deferred from 1 January until later in 1996 in order to allow Hungarian companies time to adjust to the new law. However, this is not currently known at present time.

The content of this article is intended to provide general information on the subject matter. It is not a substitute for specialist advice.

If you require any further information on Hungary, please call Peter Gerendasi at Price Waterhouse, Budapest: tel: ++ 36 1 269 6910 fax: ++ 36 1 269 6938
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