Proposed Tax and Legal Changes for 1996

The following is a summary of proposed taxation and legal changes in Hungary for 1996. A more detailed description of the changes will follow in due course.

Foreign Exchange Law

A new foreign exchange law to take effect January 1, 1996 will take the Hungarian forint a big step closer to convertibility, and considerably ease financial transactions between Hungarian and foreign entities. For example, under current law a wholly-owned Hungarian subsidiary of a foreign company must obtain a permit from the National Bank of Hungary in order to borrow money from the parent company. This requirement will be removed for loans of over 12 months duration. Furthermore, under the new law foreigners working in Hungary will no longer be restricted to converting only half of their Hungarian forint earnings into hard currency; expatriates will now be able to convert all their forint salary into hard currency. Another aspect of the new law allows Hungarian companies to acquire equity in foreign