Form of Company Preferred By Foreign Investors

The most common for foreign investors are the company limited by shares (Rt.), which may be public (Nyrt.) or private (Zrt.), and the limited liability company (Kft.)

Form of Establishment Preferred By Foreign Investors

The most common for foreign investors are the company limited by shares (Rt.), which may be public (Nyrt.) or private (Zrt.), and the limited liability company (Kft.)

Main Foreign Companies

General Electrics, Audi, Nokia, Sanofi-Aventis, Strabag AG, E-ON, Philips, Tesco, T-Com, Suzuki.

Sources of Statistics

KSH, Eurosat

Strong Points

- Hungary is widely considered to be the gateway to Central and Southeast Europe, which makes it an attractive market for foreign investment.
- Hungary's labour force is highly educated and skilled with a particular emphasis on engineering, medicine and economics. As of 2015, there is a 99.1% literacy rate.
- Despite briefly slowing in 2015, Hungary continues to be one of the fastest growing EU economies. Its financial system is one of the most well-developed in the region.
- Its infrastructure, workorce and the framework of its regulations are of high quality with notable supply chain opportunities in the automotive and electronic industries. Since 2004, EU funds have continued to further develop this infrastructure.
- Integration in the EU reinforces its political and economic stability, while the support of large international organisations has reduced the effects of the crisis.
- As part of the 2014-2020 National Development Plan, EUR 6 billion have been allocated for further tourism, healthcare, infrastructure and environmental protection programmes.

Weak Points

- From 2011-2014, the Hungarian Government successfully decreased the 81.0% high debt to GDP ratio to 76.9%. However, in order to do so, several new taxes have been introduced that mostly affect the banking, energy and telecommunications sectors. These changes have been criticised as short-sighted in terms of producing long-term structural reforms.
- The country's openness is dependent on the economic situation of its main EU trade partners.
- The population has called for loans in foreign currency and the inflation which has followed the crisis has made these loans difficult to repay for the Hungarian borrowers.
- Banks have suffered great losses from the financial crisis due to debt repurchase and speculative investments.
- Despite recent improvements, the currency has lost its value since the financial crisis.
- Since March 2015, most large retails stores are prohibited to open on Sundays, which may result in a setback in turnover and revenue.

Government Measures to Motivate or Restrict FDI

Attracting foreign investment is a priority for the Hungarian Government. The Government established the Hungarian Investment Promotion Agency (HIPA) with the aim to provide professional help to foreign companies intending to invest in Hungary.

In 2013, following a succesful return to the global financial markets, Hungary paid the remaining portion of its 2008 Euro financial stabilisation package. In March 2014, the GOH released USD 3 billion in dollar bonds. Given the economic recovery, Standards and Poor's raised Hungary's long-term sovereign debt to stable in March 2014.

In the context of the international crisis, the State implemented measures to maintain the country's appeal including: special loans and guarantee programmes to compensate for the difficulties of banks in granting loans, the improvement of the administrative situation and the reduction of formalities and the facilitated acquisition of building permits. Additionally, the exchange rate has made Hungary less expensive than before; whereas productivity, which was already high, has remained at the same level. Because of this, a number of international companies have maintained their investments in the country and have outsourced entire departments such as accounting or call centres.

In mid-2012, the Government announced its plan to sign 'strategic cooperation agreements' with key investors engaged mainly in production, with the aim that they continue operations in Hungary, and thereby contribute to growth and employment.

Protection of Foreign Investment

Procedures Relative to Foreign Investment

Freedom of Establishment

Guaranteed

Acquisition of Holdings

Up to 100% foreign ownership is permitted with the exception of designated 'strategic' holdings in some defence-related industries. The current Government’s renewed privatisation concept is opening some of the strategic holdings to private participation. Foreigners investing in financial institutions and insurance must officially notify the Government but do not need advance authorisation. Foreign financial institutions may operate branches and conduct cross-border financial services in Hungary, in keeping with OECD commitments. Currently, foreign firms control 2/3 of manufacturing, 90% of telecommunications and 60% of the energy sector.

Obligation to Declare

For contact information at national customs authorities, please visit the European Union website or the Hungarian Customs Office.

Competent Organisation For the Declaration

Hungarian National Tax and Customs Administration

Requests For Specific Authorisations

To determine if a licence is required for a particular product, check the TARIC.

Hungary, like many EU Member States, maintains its own list of goods subject to import licensing (arms, precious metals etc.)

Learn more about Foreign Investment in Hungary on Globaltrade.net, the Directory for International Trade Service Providers.

Office Real Estate and Land Ownership

Possible Temporary Solutions

Rentals of factories and offices.

The Possibility of Buying Land and Industrial and Commercial Buildings

Under the Investment Act, a company incorporated in Hungary may only acquire real estate "required for its economic activities," but this has been broadly interpreted and has not prevented foreign entrepreneurs from engaging in property development. Only private Hungarian citizens and EU citizens resident in Hungary and engaged in agricultural activity can purchase farmland, while others may lease it. Restrictions on foreigners buying land will remain in force for seven years following EU membership and it is possible they could be extended for an additional three years

Risk of Expropriation

Almost none. In cases of acute national concern, immediate and full compensation is to be provided to the owner.

Investment Aid

Forms of Aid

Performance requirement/incentives are available to all enterprises registered in Hungary, regardless of the nationality of owners or location of incorporation, and applied on a systematic basis. To comply with European Union rules, the government of Hungary no longer grants tax holidays based on investment volume.

Privileged Domains

The incentive system is compliant with EU regulations on competition and state aid and is administered by the Hungarian Trade and Investment Agency and managed by the Ministry of Development and Economy.

Privileged Geographical Zones

The following subsidy rates are allowed by region:
- North Hungary, North Great Plain, South Great Plain, Center Transdanubia, and South Transdanubia: 50%,
- West Transdanubia 45%,
- Pest county 40%,
- Budapest 35%.

Free Zones

Currently no company operates in customs free zones and all of them transferred their assets and continued operation following customs handling of their assets. The Finance Ministry plans to nominate customs free zones, but currently there seems to be little demand for this service. Possible sites could include Székesfehérvár, Győr, Kecskemét, Miskolc, or Szombathely.

Organizations Which Finance

Magyar Fejlesztési Bank

Investment Opportunities

The Key Sectors of the National Economy

Automotive, computer technology and tourism.

High Potential Sectors

Environment, housing.

Privatization Programmes

Railway and energy. The Hungarian State Holding Company (MNV) became the legal successor to the Hungarian Privatisation and State Holding Company (APV) in 2008, and is responsible for managing and privatising state-owned properties. With most state-owned companies now privatised, the pace of privatisations has slowed considerably in recent years.

Tenders, Projects and Public Procurement

Ted - Tenders Electronic Daily, Business opportunities in EU
Tenders Info, Tenders in Hungary

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors

Post, public transport.

Finding Assistance For Further Information

Investment Aid Agency

Hungarian Investment Promotion Agency

Doing Business Guides

Hungary Doing Business Guide - The U.S. Embassy in Hungary
Hungary Doing Business Guide - British Department for International Trade