In Hungary, a foreign investor can get business residence on the same terms as anyone else if they can provide evidence that they own a Hungarian company offering goods or services or they are investing at least €155,000 in real estate. Additionally, once the company is set up, they receive a low 9% corporate tax rate on profits.
You should also know that, as an applicant, your family members are also eligible for residence during the same period. Residence permits may be renewed, but it is advised to spend a couple of months in Schengen countries out of the last six months before you apply to renew your residence permit.
This information often brings up a lot of questions for those interested in the process. For this reason, we spoke with Dr Csaba Magyar, TEP, LLM, who is a managing partner of Crystal Worldwide Law Firm (Hungary), which has more than 30 years of experience in the corporate, tax planning and immigration fields. His insights will help you on your way to Schengen immigration through investment.
Can you tell us a little about the Hungarian ‘Residency by Investment’ program that is currently active among Schengen countries?
The Hungarian ‘Residency by Investment’ program allows investors to obtain a three-year or five-year resident permit in Hungary. Because Hungary is one of the 27 countries in the Schengen Area, having a residency permit for Hungary gives the permit holder freedom of movement throughout all Schengen countries. This means you can easily travel between these countries without much hassle. However, it also means you need to understand the process and what the tax implications are for you.
What are the requirements of the Hungarian residence permit by investment?
There are two main options for taking advantage of the Hungarian residence permit by investment.
- Company formation in Hungary. The first option is to create a company in Hungary that either trades goods or provides services. This investment makes you eligible for a Hungarian residence permit for business for maximum of three years
- The second option is a direct investment of at least €155,000 in real estate. This option entitles you to a Hungarian residence permit for a maximum of five years. There is no restriction on the type of real estate; it can be either a residential or a commercial property. The investor is allowed to rent out the real estate.
For reference, according to the latest data from the Hungarian Central Statistical Office, the average price for new homes in the country is about €145,000.
How does the Hungarian immigration procedure work in practice?
In practice, you would start by either establishing your company in Hungary or buying real estate (spending at least €155,000). From there, you can apply for and get a residence permit for three or five years. The application for the residence permit is fairly simple and can be started at the Hungarian consulate of your country of residence.
Because Hungary is one of the 27 countries in the Schengen Area, having a residency permit for Hungary gives the permit holder freedom of movement throughout all Schengen countries.
After the individual investor has their residence permit, family members can apply for their own permits. When the residence permit is set to expire in three or five years, you renew the permit. Keep in mind that, to renew the permit, you must spend at least 90 of the most recent 183 days in the Schengen Area. Basically, this means you need to spend two or six months (but non-consecutively) in the area to apply for the renewal of the residence permit.
What opportunities does the ‘residence permit by investment’ open for HNWIs in foreign nations?
The scheme gives foreign investors the ability to easily invest in real estate or a business in Hungary. It also gives them access to travel throughout the entire Schengen area.
On top of that, business owners get to take advantage of Hungary’s 9% corporate tax rate on profits. This is the lowest corporate tax rate on profits you will find in the European Union. This is part of what makes having a business in Hungary so attractive, especially to outside investors.
What are the travel freedoms and other benefits that come from residing in the Schengen Area?
The biggest benefit of residing in the Schengen Area is the freedom to travel between the 27 countries. There is no passport or border control between the countries and your Hungarian residency gives you the freedom to enter any other Schengen Area country from a country outside the zone.
Are there any significant legal or financial pitfalls to watch out for during this process?
The biggest pitfalls are failing to meet deadlines, not making a large enough investment, or not ensuring you meet all of the requirements for opening a business or making a real estate investment. You also have to make sure you meet the requirement to spend 90 days in the Schengen Area before renewing the permit. Those looking to see several locations while travelling love this condition.
What are the advantages of starting a business in Hungary?
Starting a business in Hungary lets you obtain residency in the country, which is part of the Schengen Area. As such, you can travel to any other Schengen Area country without any problems. In fact, you will not even need a passport.
You also get to take advantage of the lowest corporate tax rate on profits in the European Union of just 9%. Hungary also has tax treaties with 80+ countries, so you are unlikely to deal with double taxation. This makes the option attractive to a host of different types of investors.
Additionally, the area is full of quality real estate that is perfect for investing in. This is another aspect that makes immigration by investment attractive to many people.
Business owners get to take advantage of Hungary’s 9% corporate tax rate on profits. This is the lowest corporate tax rate on profits you will find in the European Union.
Why is it a good idea to retain a competent immigration and tax lawyer during this period?
Retaining a competent lawyer will ensure that the entire process goes smoothly. When questions pop up, you will have someone at ready to answer them correctly. You will stay on top of deadlines and file all paperwork correctly. This can be difficult, especially if you have not done this before.
Competent immigration and tax lawyers will use their decades of experience to guide the process for you. They will help ensure you don’t miss deadlines and that you know what fees must be paid. They will also help you understand what documents are necessary for the process. They will help you with administrative tasks and other tasks like opening a bank account.
Moreover, these lawyers will help ensure you are doing what is necessary with your taxes and paying what you need to in a timely fashion, so you do not run into issues. If you are purchasing real estate, they will help protect you here as well. From making sure you are buying something legally to getting it properly insured, an immigration and tax lawyer helps you make sure you are on the right side of the law, regardless of what country you are in.
In addition to their knowledge of the legal and administrative process, your immigration and tax lawyer can also help you overcome language barriers. If you are not fluent in Hungarian, their assistance will be crucial. They will also help make sure you have a translator anytime they cannot be present and they may even help you get language tutors if needed. Not letting language hinder you is a big part of the process of attaining immigration by investing in the Schengen area.
Tax and immigration lawyers can even help you find real estate investments that not only give you residency but are also smart investments. Some will even offer services such as serviced offices for your business. Other services you might see offered may include tax services, filing paperwork, assessing the legal end of your business and providing contacts for other goods or services needed.
In addition to their knowledge of the legal and administrative process, your immigration and tax lawyer can also help you overcome language barriers.
We hope this gives you a better understanding of what the process of immigration by investment looks like for those looking to come to the Schengen area. With the freedom to move freely around the 27 countries forming this area attracting more and more investors, there is little doubt the population of the area will continue to grow and businesses will continue to thrive.
The right services will provide you with financial, tax and legal guidance from a place of experience. They will competently help you get the right piece of real estate for your needs. During the process, your lawyer will represent your best interests and aid you with administrative work. They will provide accounting and corporate services where needed as well as banking aid.
Finally, you will have attention to detail, assistance with language barriers and the same contact person helping you with your needs. These reasons and many others make it important to get an experienced lawyer to help you with your journey to Schengen Immigration by investment. This is not a process you want to do a lot of guesswork, and you want to make sure to get the process right from the start to save time and money.
Dr Csaba Magyar, Managing Partner
Tel: +36 1 383 0333
Dr Csaba Magyar is Managing Partner at Crystal Worldwide Law Firm. His practice specialises in international wealth and tax planning, including handling complex transactions and managing cross-border taxation and investment issues successfully for both corporate and individual needs. Dr Csaba Magyar provides client-focused fiduciary solutions and immigration by investment services for HNWIs.
Crystal Worldwide Group is is an international business consulting firm specialising in tax planning, asset protection and second citizenship. During our more than 25 years in operation, the firm has offered its clients professionally sound and lawful solutions for tax savings and asset protection, together with fast and timely services provided at the highest level of discretion.
