Contents

• Introduction: Overview of Hungary’s business residency program and its growing appeal for investors and entrepreneurs.
• Legal Requirements: Details of the requirements for setting up a business and obtaining residency through investment.
• Business Climate in Hungary: Highlights of Hungary’s favorable economic conditions, low taxes, and strategic location in Europe.
• EU Market Access: Explaining how setting up a business in Hungary grants access to the broader European Union market.
• Application Process: Offering a detailed, step-by-step explanation of how entrepreneurs can apply for residency through business investment.

1. Introduction: Overview of Hungary’s Business Residency Program

Hungary has emerged as an attractive destination for entrepreneurs seeking to establish businesses in Europe, largely due to its favorable investment climate and unique residency-by-business-investment program. This program offers non-EU investors the opportunity to obtain Hungarian residency through setting up a business, which also unlocks access to the broader European Union. With low corporate taxes, a skilled labor force, and Hungary’s strategic position within Europe, this program has become a gateway for global entrepreneurs aiming to tap into the EU market.

By leveraging Hungary’s business residency program, entrepreneurs can not only secure a base in a growing economy but also enjoy the long-term benefits of EU residency for themselves and their families. The residency permit, which is initially valid for one year, is renewable and can lead to permanent residency or even Hungarian citizenship over time. This path has gained popularity due to Hungary’s business-friendly environment and the unique opportunity it offers for entrepreneurs to both build and expand their businesses within the EU’s economic landscape.

This article will provide a comprehensive guide on starting a business in Hungary, including the legal requirements, economic advantages, EU market access, and the step-by-step process for obtaining residency through business investment.

2. Legal Requirements for Setting up a Business and Obtaining Residency

Before launching a business in Hungary and applying for residency, it’s important to understand the legal framework governing these processes. The Hungarian government has established clear guidelines to ensure that investors comply with local laws while benefiting from the country’s business opportunities.

Company Formation

To start a business in Hungary, foreign investors must establish a legal entity, which is most commonly a Korlátolt Felelősségű Társaság (Kft), or a Limited Liability Company. Setting up a Kft requires a minimum share capital of HUF 3 million (approximately €7,700). Investors can also opt for other forms of business entities such as a joint-stock company (Zrt) or partnerships, depending on their business structure and needs.

Business Registration

The process begins with registering the company with the Hungarian Court of Registration. This requires submitting articles of association, the company’s headquarters’ address, and the list of shareholders, among other documents. Additionally, entrepreneurs must open a local bank account for the company, deposit the required share capital, and ensure the company’s financial records comply with Hungarian accounting standards.

Residency by Investment

Once the business is legally established, foreign investors can apply for a Hungarian residency permit through business investment. This program is targeted at non-EU citizens who aim to invest in and manage a business in Hungary. To qualify for this program, the applicant must:

• Be the owner or co-owner of a registered Hungarian business.
• Show evidence that the business is active and financially viable.
• Have a legitimate source of investment funds and demonstrate that the business will create economic value within Hungary.
• Rent or own property in Hungary for residential purposes.

The Hungarian Immigration Authority also requires the submission of personal documents, including a valid passport, proof of health insurance, and a clean criminal record. The initial residency permit is granted for a period of one year, and it can be renewed annually based on the continued operation of the business.

Minimum Investment Requirements

While Hungary doesn’t impose a fixed minimum investment requirement for the business residency program, applicants must demonstrate that their company is operational and has the potential to create employment or economic value. A detailed business plan and financial projections are crucial for demonstrating this during the application process.

Long-Term Residency and Citizenship

After continuously residing in Hungary for five years, foreign business owners may apply for permanent residency. After eight years of legal residency, they become eligible to apply for Hungarian citizenship. This process requires fluency in Hungarian and passing a citizenship test that includes knowledge of Hungarian history and culture.

3. Business Climate in Hungary

Hungary’s favorable business climate has drawn significant interest from global entrepreneurs, making it one of the top destinations for business investment in Central Europe. The country’s combination of political stability, strategic location, and competitive tax system creates a welcoming environment for foreign investors.

Low Corporate Taxes

Hungary boasts one of the lowest corporate tax rates in the European Union at just 9%. This has been a major draw for entrepreneurs looking to minimize operational costs while maximizing profits. Additionally, Hungary’s personal income tax rate is capped at a flat 15%, further enhancing the financial benefits for business owners and their employees.

Skilled Labor Force

Hungary offers a well-educated and skilled labor force, particularly in sectors such as technology, manufacturing, and services. The country has a long history of excellence in engineering, IT, and innovation, making it an ideal place for tech startups and industrial ventures. Labor costs in Hungary are also considerably lower than in Western Europe, providing a competitive edge for businesses looking to manage expenses efficiently.

Government Incentives

The Hungarian government provides various incentives to attract foreign investments, particularly in high-tech industries, manufacturing, and research and development. These incentives include tax credits, subsidies for R&D, and grants for job creation. Companies that invest in less developed regions of Hungary may also qualify for additional support, including reduced land costs and infrastructure development assistance.

Strategic Location

Located in the heart of Europe, Hungary serves as a gateway to the European market. With excellent infrastructure, including modern highways, airports, and a well-developed rail network, Hungary offers seamless access to major European cities and markets. This makes it an ideal base for companies looking to export goods and services across Europe, the Middle East, and even Asia.

Favorable Business Environment

Hungary consistently ranks as one of the easiest places to do business in Central Europe. The country has streamlined business registration processes, a stable banking system, and strong protection for property rights. Additionally, the Hungarian government’s proactive approach to supporting entrepreneurship has made the country an attractive option for new ventures.

4. EU Market Access

Setting up a business in Hungary does more than just grant you access to the Hungarian market; it opens the door to the European Union’s 27-member states, offering a range of opportunities for expansion and growth.

Freedom of Movement

One of the key benefits of obtaining residency in Hungary through business investment is the freedom of movement it provides within the Schengen Area. With a Hungarian residency permit, business owners and their families can travel freely across the 26 Schengen countries without the need for additional visas. This allows entrepreneurs to easily meet clients, attend business meetings, or explore market opportunities across Europe.

Single Market Access

The European Union operates as a single market, allowing goods, services, capital, and labor to move freely across member states. By establishing a business in Hungary, entrepreneurs gain access to over 450 million consumers within the EU, making it one of the largest markets in the world. This is particularly beneficial for businesses looking to scale their operations or enter new markets across Europe.

Trade and Tariff Benefits

Businesses operating from Hungary benefit from the EU’s trade agreements with countries around the globe. The EU has free trade agreements with over 70 countries, offering preferential access to markets in Asia, the Americas, and beyond. As part of the EU’s Customs Union, goods traded between member states are not subject to tariffs, and businesses can take advantage of simplified customs procedures when exporting to non-EU countries.

Supply Chain and Logistics

Hungary’s strategic location also makes it a key hub for logistics and supply chain operations. Many multinational corporations have chosen to set up distribution centers in Hungary, leveraging the country’s connectivity to Europe’s major markets. This reduces transportation costs and shortens delivery times, providing a competitive advantage for businesses with international clients.

5. Application Process: Step-by-Step Guide

Applying for Hungarian residency through business investment is a straightforward process, but it requires careful planning and adherence to legal guidelines. Here’s a step-by-step guide to the process:

1. Initial Consultation: Schedule a consultation with a legal expert specializing in Hungarian immigration law. This is to evaluate your specific situation and business plan.
2. Company Registration: Register your business with the Hungarian Court of Registration. This includes submitting the necessary documentation such as articles of association and proof of business address.
3. Open a Bank Account: Set up a corporate bank account in Hungary and deposit the required share capital.
4. Prepare Documentation: Gather personal documents such as your passport, proof of residential address, health insurance, and a clean criminal record.
5. Business Plan Submission: Submit a detailed business plan outlining the objectives, financial viability, and expected economic impact of your company.
6. Residency Application: Submit your residency application to the Hungarian Immigration Office, along with all required documentation and your business registration details.
7. Approval and Biometrics: Once approved, you will be required to submit biometrics (fingerprints, photographs) to complete the residency process.
8. Receive Residency Permit: After biometrics are processed, your residency permit will be issued, allowing you to live and work in Hungary.

By following this process and maintaining an active business in Hungary, entrepreneurs can secure long-term residency in one of Europe’s most dynamic business environments.