Mandatory discounts to fight inflation in Hungary
As another measure aiming to reduce inflation, Hungary is now introducing mandatory discounts for retail stores selling food, groceries, and the like. The first discounts under this scheme must start on 1 June 2023. Will this affect your business? Read on to find out.
The relevant decree can be found here (in Hungarian).
Are the mandatory discounts relevant to your Hungarian business?
The mandatory discounts are relevant to your Hungarian business only if your main activity is retail sales in non-specialized stores with food and beverages (as defined by code 4711 in NACE), and if the net revenue of the business was above HUF 1 billion (ca. 2.7 million EUR, check with your accountant). The regulation is relevant to both physical and online stores.
From 1 June to 30 September 2023
The first discounts under this regulation must start on 1 June 2023, and the regulation remains in force at least until 30 September 2023. However, there is a chance for an extension, as happened in the case of price caps too. The government expects that the inflation will decrease by the end of September enough that these measures may be revoked. (At the same time, it should be noted that analyst expect the decrease of the inflation by the last quarter, due to several other measures and other factors in the global economy, see more here. In contrast the mandatory sales promotions might have some adverse effects, as indicated here.)
10% discount on specific items from Thursday to Wednesday
While the regulation is in force, concerned stores must offer 10% discount on specific items in weekly periods. Such periods should last from Wednesday midnight to Wednesday midnight (so starting from 00:00 on Thursday and ending Wednesday evening) – mostly because this is the standard sales promotion period for most stores. However, retailers are allowed to apply other periods too if they are 168 hours long, and if discounted products are available at all times while the regulation is in force, for 168 hours each. These alternative periods must be reported to the ministry in advance.
The same product may be discounted for two consecutive periods but cannot remain discounted for a third one. This way, the same product can be discounted for at most 336 hours.
The 10% discount is to be calculated from the full gross price of items (because in Hungary, shops normally display prices including taxes). This full price is the lowest price for which the given item was available for in the preceding 30 days, not counting discounts related to its expiry (applied 72 hours before expiry).
Mandatory discounts in 20 categories
The 10% mandatory discounts must be applied to one product in each product category every week. In this sense, product means a specific item from a specific brand and size. E.g. the discounted product is not “100% orange juice”, but “[Brand name] 100% orange juice, 200 ml”.
At the same time, a retailer does not have to choose a product from a category where they do not have at least 5 different products in the same category.
The 20 categories are as follows:
- Poultry
- Pork, beef, and other red meat
- Fish, including canned fish
- Meat preparations
- Milk, sour cream, and substitutes
- Yoghurt and other fermented goods
- Other dairy products
- Cheese
- Butter, margarine and preparations thereof
- Other fats and oils (vegetable and animal)
- Bread
- Pastries
- Dried pasta, rice, and other cereals
- Flour, sugar, preserved flour and meal
- Fresh vegetables
- Fresh fruit
- Fruit and vegetable juice
- Prepared dishes, spices, condiments
- Coffee and tea
- Mineral water and soft drinks.
Compliance with mandatory discount rules
The Consumer Protection Authority has the right to check whether your business applies the mandatory discounts properly. If your business is found to be at fault, serious penalties apply. Moreover, originally it was mentioned that an online database will be created where both customers and authorities check the discounts available at each retailer. At this point (30 May), there are no recent news of this database. If there is a development, we will update this article accordingly.
Precise data are essential for compliance
To mandatory discounts properly, you need to always keep a precise track of your prices. Similarly, precise bookkeeping lets your business remain compliant with tax regulations, so you can not only avoid fines but also create accurate reports to support your decision-making procedure.
The Helpers Finance team offers accounting, payroll administration, and tax advisory to companies operating in Hungary, with a special focus on working with foreign owners of small and medium-sized businesses. With our support, you can more easily remain on the top of your finances.
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