The Guidelines clarify when, under what conditions, and on the basis of which methodology the Commission assesses the distortive effects of subsidies granted by non-EU states on the EU internal market, including the Hungarian market.
Why is this particularly important for Hungarian subsidiaries?
The EU FSR may have a direct impact not only on non-EU parent companies, but also on their Hungarian subsidiaries, if:
- the Hungarian subsidiary carries out economic activity within the EU, and
- the corporate group has received financial contributions from a non-EU state
(e.g. China, the USA, the Middle East, the United Kingdom)
within the last three years.
👉 The subsidy does not need to be granted directly to the Hungarian subsidiary:
the Commission expressly examines the possibility of “cross-subsidisation” within the corporate group.
What does the Commission consider a foreign subsidy?
The concept is extremely broad and may include, inter alia:
- direct financial contributions or capital injections;
- preferential or interest-subsidised loans, state guarantees;
- tax exemptions, tax incentives, tax credits;
- public contracts awarded on non-market terms;
- R&D or investment support granted outside the EU that indirectly benefits EU operations.
When is notification mandatory? – Key thresholds
1️⃣ Concentrations (M&A)
Prior notification is mandatory if both of the following conditions are met:
- the EU undertaking being acquired (e.g. a Hungarian subsidiary)
generated at least EUR 500 million in EU turnover, and - the corporate group(s) received at least EUR 50 million in foreign financial contributions
in total during the last three years.
📌 Typical Hungarian example:
A non-EU investor acquires a Hungarian company or injects capital into an existing Hungarian subsidiary.
2️⃣ Public procurement
A notification obligation arises if:
- the estimated value of the public procurement is at least EUR 250 million, and
- the bidder (or its group) has received at least EUR 4 million in foreign financial contributions
during the last three years from the third country to which the subsidy is attributable.
📌 Important:
The subsidy may originate from:
- a public authority independent from the parent company;
- another group entity;
- a main subcontractor or supplier.
What changes under the new Guidelines?
🔹 Assessment of market distortion – from a Hungarian perspective
The Commission examines whether the foreign subsidy:
- improves the competitive position of the Hungarian subsidiary, and
- thereby places EU competitors at a disadvantage.
The risk is particularly high if the subsidy:
- enables aggressive pricing in Hungary;
- effectively eliminates investment or R&D risks;
- provides an advantage in acquisitions or public procurement procedures.
🔹 Public procurement: price is not the only factor
An “unduly advantageous tender” may take the form of:
- a lower price,
- higher quality,
- faster delivery,
- more favourable payment terms,
- sustainability-related advantages.
⚠️ If there is a suspicion of a foreign subsidy,
the Hungarian contracting authority may not decide autonomously – the case must be referred to the Commission.
🔹 “Call-in” powers: no safe harbour below the thresholds
The Guidelines confirm that the Commission may:
- require prior notification even for below-threshold M&A or public procurement cases,
- if the transaction is of strategic importance
(e.g. energy, infrastructure, technology, defence).
This may be particularly relevant for Hungarian subsidiaries operating in strategic sectors.
What should Hungarian subsidiaries do now?
✔️ Prepare a group-level map of subsidies (tax and non-tax);
✔️ Review all foreign financial contributions received in the last three years;
✔️ Conduct FSR pre-screening of planned M&A transactions and public procurement procedures;
✔️ Establish internal reporting and compliance processes.
📩 If your corporate group has received support from non-EU sources
and operates a Hungarian subsidiary, it is advisable to prepare in a timely manner for compliance with the EU FSR requirements.
Dr. Géza Katona, LL.M., attorney at law (Rechtsanwalt / attorney at law)
Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-1106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
Mobile: +36 70 344 0388
Fax: +36 1 700 27 57
g.katona@katonalaw.com
www.katonalaw.com