Hungary’s new Guest Investor Programme
Csaba Magyar
Crystal Worldwide Law Firm, Budapest
The Guest Investor Residency Programme
In Hungary, this is not the first time that residency permits have been provided in exchange for investment. Under the previous programme, which ended in 2017, it was possible to obtain permanent residency by purchasing Hungarian Residency Government Bonds. Almost seven years later, the Act on the General Rules for the Entry and Residence of Third-Country Citizens (Immigration Act) has launched this a new regime.
The programme allows entrepreneurs and investors from third countries to obtain long-term residency by investing in the Hungarian economy. The programme has stimulated anticipation in the market, with stakeholders eager to learn about its regulations. This article will explain the key information.
Administration of the new Guest Investor Programme
Elements of the new Immigration Act come into force in different phases. Most of its provisions came into effect in January 2024, with the current legislative framework providing a distinction between categories of stay: specifically short-term, long-term and permanent stays. A long-term stay is any visit to Hungary exceeding 90 days within a stipulated 180-day period. Provisions on granting long-term residence permits to guest investors will be effective from 1 July 2024. Long-term residence permit under the new programme will be provided to third-country investors seeking to engage in the Hungarian economy as guest investors.
Regulations for the Hungarian Guest Investor Programme
Applicants first need to apply for a guest investor visa before obtaining a guest investor residence permit. This is granted to third-country nationals wishing to invest in Hungary. The guest investor visa facilitates an extended stay beyond 90 days and permits multiple entries within 180 days. However, the validity period of a guest investor visa cannot exceed two years and is rendered invalid once a guest investor residence permit has been obtained.
Eligibility criteria for guest investor visas
The guest investor visa can be issued to third-country nationals whose proposed stay in Hungary is deemed of considerable national economic interest. For the stay to qualify as such, applicants shall make or declare a commitment to invest in one of the designated pathways outlined by the Hungarian government.
Should the applicant choose the latter, they will be given a three-month grace period to fulfil the investment after their initial entry into Hungarian territory.
Funds used for investment must be from a legitimate source. There are three investment routes, which are designed to stimulate the Hungarian economy through direct foreign investments. These are outlined below.
Acquiring investment certificates from a real estate fund
Investing in a real estate fund regulated and registered by the Hungarian National Bank is one means of obtaining a guest investor visa. This option requires applicants to invest at least €250,000 in approved investment certificates issued by the real estate fund. The stipulations for this investment are:
the investor is required to retain possession of the investment certificate for a minimum of five years;
only a fund manager possessing a valid financial licence and adhering to a pre-determined fund management policy may establish such a fund;
the fund manager shall either hold a site security certificate or be registered with the Constitution Protection Office; and
a minimum of 40 per cent of the net asset value of the real estate fund is required to be allocated to residential real estate projects within Hungary.
Acquiring residential property in Hungary
Several conditions must be fulfilled for eligibility under this route, including:
the property’s minimum value is €500,000;
it must be strictly residential, but there is no restriction on the use of the property, such as renting it out;
the investment shall be retained for a minimum of five years (a ban on alienation and encumbrance of the property will be registered with the land registry for five years from the date of acquisition to prevent resale);
the property can be exclusively owned and registered by the guest investor or jointly with their spouse and/or minor;
the property shall not be subject to encumbrances, statutory liens, or other claims.
Donating to a higher education institution
A third-country investor can also qualify for a guest investor visa by donating at least €1 million to a state-recognised higher education institution in Hungary. The institution shall be managed by a foundation engaged in public functions.
Additional eligibility requirements for guest investor visas
Applicants must provide proof of sufficient financial resources to cover living expenses and healthcare for themselves and their dependents, if applicable. They are not permitted to be listed in the Schengen Information System (SIS) for alerts concerning expulsion or entry bans, nor should they pose a threat to public order, security, and health or national security.
It is worth mentioning that the timeframe for the adjudication of immigration applications is a maximum of 21 days, commencing on the business day following receipt.
Guest investor residence permit regulations
This permit is obtainable by holders of a guest investor visa who fulfil the conditions stipulated in the legislation. Unlike the residence permit obtained via state bonds from 2013-2017, the guest investor residence permit does not afford permanent residency.
Instead, it allows the applicant to:
stay in Hungary for a long period, typically up to ten years, which may surpass the validity period of the applicant’s travel document;
extend the permit’s validity period only once and for the same duration (ten years) and purpose as the initial application;
engage in entrepreneurial and business activities; and
act as a company’s executive officer.
These benefits extend to the applicant’s immediate family (spouse and minors).
Eligibility for the guest investor residence permit
As stated, the applicant must have a valid guest investor visa to qualify for a guest investor residence permit. Investors can only apply after arriving in Hungary, and are required to submit the application within the first 93 days of entry.
Applicants are also required to submit proof of investment within the three-month grace period if they have only declared commitment to invest via one of the designated pathways. Permit holders are not required to enter or stay in Hungary during the ten-year period.
Eligibility for guest investor residence permit renewal
A holder of a guest investor residence permit may qualify for a single ten-year extension of their original permit if they:
fulfil conditions specific to their initial investment option;
have not been found guilty of any criminal offences or broken any immigration regulations during their stay in Hungary; and
can provide evidence of sufficient financial resources to cover living expenses and healthcare for themselves and their dependents, if applicable.
There are a few issues to consider regarding the initial investment. If the investment is via a real estate fund, the investment certificate need not be the same as initially submitted but of an equivalent or greater value. If the real estate acquisition was direct, the applicant must have a stake of at least €500,000 in the original property. A new and sufficient investment is required if the original property has been resold or has depreciated in value. Applicants whose initial qualification was through a donation may be eligible for an automatic renewal of their permit.
Qualifications for the national residence card
Permanent residency is available via national residence card. Any holder of a guest investor residence permit is eligible for the national residence card if they have lived and maintained themselves in Hungary for at least three years before the application date. The guest investors are not required to stay in Hungary but in the case of their intention to obtain a permanent residency, the applicant is required to reside there.
The threshold for interruption of stay is considered to be four months at any one time, but the aggregate duration of such breaks may not exceed 270 days during the three years. Applicants must also demonstrate their ability to continue supporting themselves and meet the conditions for social cohabitation.
Hungarian citizenship regulations
Once approved for the national residence card, the applicant must hold their residence permit and live in Hungary for further five years before applying for Hungarian citizenship by naturalisation.
In addition to the national residence card, applicants must provide proof of livelihood and not have a criminal record. They must also sit for and pass an exam in basic constitutional knowledge using Hungarian language skills.
Tax implications
Holders of guest investor residence permits are not considered tax residents if they spend less than 183 days in Hungary during any 12-month period. This means that holders of guest investor permits are not automatically subjected to Hungarian taxation but are subject to specific tax laws based on their initial investment. Acquisition of residential real estate under eligibility requirements will involve a four per cent property transfer tax, calculated on market prices in effect at the time of acquisition. Should a guest investor decide to rent out their property, they will be subject to a 15 per cent personal income tax on rental income.