History, Business context,the culture and a deep dive on relevant SAP Finance localization topics.

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1  Hungary, a country with most Nobel Prize winners per capital

Jó Napot! [Hungarian for good day!] Hungary is a country that has survived the pass of the time. Its foundation dates the year 895 Common Era (CE), first called the Principality of Hungary. Hungary is a central European country, it has almost 10 million habitants, and it is believed that another 3 million live abroad. Hungarian is the official and national language of the country, but it is not a surprise to encounter Hungarians speaking fluent English and German, with 16% and 11%, respectively.

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It is a country with most Nobel Prize winners per capita; fifteen Nobel laureates for a country of only ten million. In the 2023 edition of the world’s most prestigious award, two more Hungarians were granted the prize: Ferenc Krausz in Physics, and Katalin Karikó in Medicine. Karikó was recognized for her contribution in mRNA vaccine, a key step to fight COVID-19.

Hungary is also the birthplace of one of the world’s most famous toys: the Rubik’s cube, invented by Ernő Rubik in 1977, aswell as the ballpoint pen invented by László Bíró.

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2  Business – a central location within Europe

As a member of the European Union since 2004, Hungary is a dynamic hub of business activity. It is a country that has not yet adopted the Euro as the official currency, although Hungarians broadly use it in daily basis transactions. Their official currency is called Forint (HUF),and it has a long history that goes back to the thirteenth century (EC, 2012).

According to the European Union (2023), “The most important sectors of Hungary’s economy in 2020 were industry (23.5%), wholesale and retail trade, transport, accommodation and food services (17.7%) and public administration, defense, education, human health and social work activities (17.5%).”

Leveraging its EU membership, Hungary has streamlined administrative processes to attract startups, positioning itself as an attractive destination for entrepreneurs. The country is also a logistic hub joining Europe-China, due to its location in the center of Europe. A concrete activity is for example that the Chinese car manufacturer BYD is building a state-of-the-art passenger car factory in Szeged, Hungary. (BYD, 2024)

The government is currently working on making major changes to improve the competitiveness of all enterprises by providing refundable and non-refundable incentives to those coming to invest or expand their business. In addition, Hungarian are “highly skilled and highly educated labour force, particularly in the engineering, IT, pharmaceutical, economics,mathematics, physics, and professional services sectors. Around two-thirds of the workforce in Hungary has completed a secondary, technical, or vocational education” (EUgo, 2023, par. 3).

With a wide range of benefits for doing business, its geographical location, their membership to EU, and its highly educated labour force, Hungary is growing its worldwide business profile.

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3  Culture – write your last name first and be punctual  

Understanding Hungarian business culture is key to forging successful partnerships. Here is a small summary that a foreigner should consider before doing business.

Dos

• Hungarians value building relationships before starting business, socializing, so to speak is a pre-phase of doing business,and it is an important part of the relationship-building process.
• Hungarians are fluent in English and in German, but not always specially with the elder, they will rely on translators. At the same time, Business cards are expected to be exchanged, “Out of courtesy, it is advised to have one side of the card translated into Hungarian” (CulturalAtlas, 2023). Contrary to most western countries, Hungarians write their last name first, followed by their first name.
• Hungarians feel very proud of their food and wine, they are the largest exporter of pepper, approaching these topics in acomplementary fashion would help building a better environment for business.

Don'ts

• Two points to consider first: punctuality and the way to address business people. Punctuality, as in most countries, is very important for Hungarians. It helps to create the right business environment.“If you are going to be late, inform your counterpart and offer an explanation”(Cultural Atlas, 2023). The way to address people is by their surnames and it is advised to follow the hierarchical structure of the organization.
• If you have closed a deal with a Hungarian partner, and there is a toast to celebrate it, please never clink glasses, Hungarians do not do that. It has a historical explanation that goes back to 1849, when Austrian generals were celebrating the execution of revolutionary Hungarians; after this episode Hungarians decided not to clink glasses while toasting.
• There is a sort of skepticism for international linfluences in Hungarian economic performance, particularly for American influences; the topic can be address in a manner that Hungary is a hub of opportunities rather than a dependent of international.

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4  SAP localization for finance

The previous section was an overview on Hungary’s culture and business landscape. In this section, we turn the attention to explore how to successfully implement SAP in Hungary, with country-specific requirements and business practices.

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4.1  Introduction Hungarian Accounting Standards

In Hungary, the Hungarian Accounting Act (Act C of 2000 on Accounting) governs the national accounting standards. It is based on EU directives and requires companies to prepare financial statements, including a balance sheet, income statement, notes, and management report. The Act is closely integrated with Hungarian tax laws. The taxable income is often derived from the financial statements, with necessary adjustments as required by tax legislation.

Key features include detailed regulations on the valuation of assets and liabilities, as well as specific local rules such as reserve requirements andtax adjustments. Accounting can be done in Hungarian Forint (HUF) or another foreign currency. Companies with subsidiaries are required to prepare consolidated financial statements unless exempted. For companies operating in Hungary, SAP has a localization package that tailors the ERP system to local legislation and business requirements.

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4.2  General Ledger Accounting (FI-GL)  - local Chart of Account

In Hungary companies are obliged to report in a local defined financial statement structure. Therefore in SAP you can use the function of the alternative chart of account. Usually this requires high involvement of the finance business department in order to execute the mapping of the operating chart of accountand the local G/L Accounts.

For the SAP configuration you have to assign the defined Chart of Accounts according to Country legislation in the global company code data (TA: OBY6).

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4.3  General overview of Bank Accounting (FI-BL)

Bank Accounting (FI-BL) is an SAP feature designed to manage bank transactions of both incoming and outgoing payments in foreign currency, as well as track of cash journals. It provides support in accordance with the Hungarian regulations focused on exchange rate calculations. For example, in order to generate the currency translation for outgoing payments, it is necessary to take the historical exchange rate generated in the incoming payments in foreign currency:

• Calculate Exchange Rates for Cash Journals: The application helps calculate a weighted average of exchange rate every working day for cash journals.

• Display Historical Data of Exchange Rates for Cash Journals. The application stores all the calculations of weighted average of exchange rates, making it possible to use them in the outgoing payment.

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4.4  Audit Report

Within the SAP Document and Reporting Compliance (SAP DRC, formerly known as SAP S/4HANA for advanced compliance reporting) component you can use the audit report for Hungary. According to legal requirements in Hungary you must be able to provide the tax authority with a comprehensive list of issued invoices. Depending on your SAP Release it is necessary to validate the current report version. The Report RFIDHU_AUDIT_REPORT is set to obsolete with release: On Premise 1610 FPS1 (Date: 28.02.2018).

For an comprehensive overview SAP provides the Note: 2480067 - Replacement of Existing Legal Reports with 'SAP Document and Reporting Compliance - Statutory Reports'. This note provides information about the legacy ABAP legal reports that are being succeeded by statutory reports provided with SAP Document and Reporting Compliance framework.

Following a screenshot of the overview of the Compliance Reports view in SAP DRC:

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4.5  Tax Reporting Date and Tax Fulfillment Date

To accommodate validations issued by the Hungarian tax office, companies must ensure that the tax fulfillment date and tax reporting date are recorded in all journal entries of tax-related transactions. These dates are essential for generating accurate VAT reports, as they determine the period in which the tax liability is recognized and reported to the authorities.

Tax reporting date:

• The date on which the tax must be reported to the authorities. This date is never earlier than the tax fulfillment date.

Tax fulfillment date:

• The date on which the tax becomes chargeable, for example, the date on which goods or services are supplied.

To use these fields in VAT reporting, ensure that the Tax Reporting Date is activated in the Global Parameters for all relevant company codes. When the Tax Reporting Date field is enabled, the system will automatically activate the Tax Fulfillment Date field. Upon posting a document, the system will automatically set both the Tax Reporting Date and Tax Fulfillment Date. For example, the Tax Reporting Date will be set to the posting date, while the Tax Fulfillment Date will be set to the document date for journal entries.

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Proper configuration and maintenance of these dates in SAP help companies remain compliant with Hungarian tax laws and avoid potential penalties or discrepancies in VAT reporting.

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Reference List:

European Commission. (2012). Europeans and their Languages. Retrieved from https://web.archive.org/web/20160106183351/http://ec.europa.eu/public_opinion/archives/ebs/ebs_386_en.pdf

EUGO.(2023). Doing business In Hungary. Retrieved from http://eugo.gov.hu/doing-business-hungary

CulturalAtlas. (2023). Hungarian Culture. Retrieved from https://culturalatlas.sbs.com.au/hungarian-culture/hungarian-culture-do-s-and-don-ts#hungarian-culture-do-s-and-don-ts

SAP.(February 7, 2024). Telephone Invoices. Retrieved from https://help.sap.com/docs/SAP_S4HANA_ON-PREMISE/d266c51af49d463abcc0b6603fddd13c/4c76d0531d8b4208e10000000a174cb4.html

BYD.(Access on: 14.07.2024) https://www.byd.com/eu/news-list/BYD_to_Build_A_New_Energy_Passenger_Vehicle_Factory_in_Hungary_for_Localised_Production_in_Europe.html

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