The updated Guidelines clarify, supplement, and refine the 2025 draft, providing more detail on when and how the Commission assesses foreign subsidies.
Why this matters for Hungarian subsidiaries
The EU FSR applies not only to non-EU parent companies, but also to their Hungarian subsidiaries if:
- the Hungarian subsidiary engages in economic activity within the EU, and
- the corporate group has received financial contributions from a non-EU country (e.g., China, USA, UK) in the last three years.
👉 Importantly, the subsidy does not need to be granted directly to the Hungarian subsidiary; the Commission explicitly considers cross-subsidisation within the corporate group.
What counts as a foreign subsidy?
Broadly, this may include:
- direct cash contributions or equity injections;
- preferential or subsidized loans, state guarantees;
- tax exemptions, tax credits, or reliefs;
- government contracts on non-market terms;
- R&D or investment support outside the EU that benefits EU operations indirectly.
Reporting thresholds – key values for Hungarian subsidiaries
1️⃣ M&A notifications
Pre-notification is required if both thresholds are met:
- the acquired EU entity (e.g., the Hungarian subsidiary) generates at least EUR 500 million in EU turnover, and
- the corporate group has received at least EUR 50 million in foreign subsidies over the past three years.
📌 Typical Hungarian scenario:
A non-EU parent acquires or injects capital into an existing Hungarian subsidiary.
2️⃣ Public procurement
Notification is triggered if:
- the contract’s estimated value is EUR 250 million or more, and
- the bidder (or its group) received EUR 4 million or more in foreign subsidies from the relevant non-EU country in the last three years.
📌 Note: Subsidies may come from:
- a non-EU government;
- a group entity;
- a main subcontractor or supplier within the group.
Key updates in the Guidelines
🔹 Assessing market distortion – Hungary-specific
The Commission evaluates whether a foreign subsidy:
- improves the competitive position of the Hungarian subsidiary, and
- negatively affects competition in the internal market.
High-risk scenarios include:
- subsidies enabling aggressive pricing in Hungary;
- subsidies covering investment or R&D risks;
- advantages in acquisitions or public procurement.
🔹 Public procurement: advantage is more than price
An “unduly advantageous” bid may manifest in:
- lower price,
- higher quality,
- faster delivery,
- better payment terms,
- sustainability or innovation benefits.
⚠️ If a foreign subsidy causes an abnormally favorable bid, the contracting authority must notify the Commission rather than conduct its own assessment.
🔹 Balancing test
The Commission compares, case by case, the negative effects of the subsidy with any positive effects, e.g.:
- addressing market failures,
- EU policy goals (environment, R&D, innovation).
Other stakeholders can now submit arguments in favor of a subsidy, and multiple subsidies may be assessed cumulatively. Strategic sectors like economic security or defense are explicitly included.
🔹 Call-in powers for below-threshold cases
The Commission may request pre-notification even if M&A or procurement falls below reporting thresholds, if the transaction:
- is strategically significant, and
- could impact the EU internal market.
This is particularly relevant for Hungarian subsidiaries in energy, infrastructure, technology, or defense sectors.
Next steps for Hungarian subsidiaries
✔️ Map all tax and non-tax foreign subsidies at group level;
✔️ Review all foreign financial contributions in the last three years;
✔️ Conduct FSR pre-screening for M&A and procurement plans;
✔️ Establish internal reporting and compliance processes.
📩 If your group has received foreign subsidies and operates a Hungarian subsidiary, it is critical to prepare in advance for EU FSR compliance.
Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)
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Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-1106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
Mobil: + 36 70 344 0388
Fax: +36 1 700 27 57