flag Hungary Hungary: Investing

In this page: FDI in Figures | What to consider if you invest in Hungary | Protection of Foreign Investment | Procedures Relative to Foreign Investment | Office Real Estate and Land Ownership | Investment Aid | Investment Opportunities | Sectors Where Investment Opportunities Are Fewer | Finding Assistance For Further Information

 

FDI in Figures

Hungary maintains a high per capita stock of foreign direct investment (FDI) for Central and Eastern Europe standards. However, the 2009-2010 crisis has strongly affected FDI flows to the country and since then the volume of inward FDI flows has been lower. According to UNCTAD's World Investment Report 2021, FDI inflows decreased to USD 4.2 billion in 2020 compared to USD 3.9 billion in 2019, due to large disinvestments partly triggered by the Covid-19 pandemic. The stock of FDI was estimated at USD 101 billion in 2020. The main investors are Canada, the Cayman Islands, the Netherlands, Germany, Luxembourg, and Austria. FDI are mainly oriented towards financial services, manufacturing, trade, real estate, scientific and technical activities. According to the latest figures from OECD, in the first semester of 2021, Hungary welcomed an investment inflow of USD 0.8 billion, a drastic contraction compared to the level recorded in the same period one year earlier (USD 3 billion).

The foreign investment screening mechanism, which was adopted in 2019, has been extended until the end of 2021, with the introduction of a second screening regime aimed at protecting Hungarian industries impacted by Covid-19. The first mechanism involves sectors of strategic importance, such as defence, dual-use products, cryptography, utilities, financial industry, electronic communication and public communication system. The second mechanism has a much wider scope and includes most manufacturing activities, as well as hospitality, energy and construction, among others.
Hungary has benefited in recent years from a change in direction of FDI from low-value textile and food-processing sectors to wholesale, retail trade and repair of vehicles. The country’s central location and high-quality infrastructure have made it an attractive destination for FDIs. Furthermore, it has one of the lower corporate tax rates in Europe. However, the demographic decline of the country and the slow progress of the education system impede crucial structural transformation, with several foreign companies identifying shortages of qualified labour as the main obstacle to investment in Hungary. The country ranked 52nd out of 190 countries in the latest World Bank's Doing Business report.

 
Foreign Direct Investment 201820192020
FDI Inward Flow (million USD) 6,4103,8844,169
FDI Stock (million USD) 92,00193,258100,993
Number of Greenfield Investments* 114102100
Value of Greenfield Investments (million USD) 4,8947,5153,683

Source: UNCTAD, Latest available data.

Note: * Greenfield Investments are a form of Foreign Direct Investment where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up.

 

FDI STOCKS BY COUNTRY AND INDUSTRY

Main Investing Countries 2019, in %
Canada 16.2
Cayman Islands 12.0
Netherlands 10.3
Germany 9.4
Luxembourg 8.8
Austria 5.7
Ireland 4.9
United Kingdom 4.6
Main Invested Sectors 2019, in %
Financial and insurance activities 53.2
Manufacturing 21.5
Wholesale and retail trade; repair of vehicles 5.7
Real estate 4.2
Profesionnal, scientific, technical activities and other services 3.9
Information and communication 2.6

Source: OECD's Statistics - Latest available data.

 
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, Strabag AG, E-ON, Philips, Tesco, T-Com, Suzuki.
Sources of Statistics
KSH
Eurosat

Return to top

What to consider if you invest in Hungary

Strong Points

Strong points for FDI in Hungary:

  • 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.
  • The labour force is also cheap which allows the country to optimally integrate itself within the European production chain and to be considered as an efficient production workshop.
  • Hungary continues to be one of the fastest growing EU economies. Its financial system is one of the most developed in the region.
  • Well-established infrastructure and a clear legal and regulatory framework give Hungary a favourable environment for sustainable growth.
  • Integration in the EU reinforces its political and economic stability, while the support of large international organisations has reduced the effects of the crisis.
Weak Points

Weaknesses for FDI in Hungary include:  

  • Banks suffered heavy losses as a result of debt buyback and speculative investments
  • The currency (HUF) is prone to depreciation
  • Low investments in innovation and R&D, a high level of energy dependence and a sometimes fragile banking sector (public and private) put Hungary at risk of a glass ceiling and allow some observers to be alarmed by the capacity of the country to reinvent itself and thus to be able to leave its current economic role.
  • Cronyism and corruption
  • Possibility of economic problems because of political conflict with the European Union
  • Dependency on Russian energy exports
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 of providing professional help to foreign companies intending to invest in Hungary.

The recovery from the Covid-19 crisis has been facilitated by support measures. To reform the economy and increase competitiveness, incentive measures include:
•    The improvement of the administrative situation and the reduction of formalities
•    The facilitated acquisition of building permits;
•    As part of the EU budget cycle (2021-2027), EUR 52.8 billion will be allocated to productivity, research, development, innovation, infrastructure and renewable energy;
•    To promote investment, the corporate tax rate was lowered to 9%, and the social security contributions to 13%;
•    The government provides special incentive package for investments over a certain value (generally above EUR 10 million), for investors who establish manufacturing facilities, logistics facilities, regional service centers, R&D facilities, bioenergy facilities, or those active in the tourism sector.

Return to top

Protection of Foreign Investment

Bilateral Investment Conventions Signed By Hungary
To see the list of investment treaties signed by Hungary, consult UNCTAD's International Investment Agreements Navigator.
International Controversies Registered By UNCTAD
Refer to UNCTAD's Investment Dispute Settlement Navigator.
Organizations Offering Their Assistance in Case of Disagreement
ICCWBO , International Court of Arbitration, International Chamber of Commerce
ICSID , International Center for Settlement of Investment Disputes
Member of the Multilateral Investment Guarantee Agency
Hungary is signatory of the MIGA convention.
 
Country Comparison For the Protection of Investors Hungary Eastern Europe & Central Asia United States Germany
Index of Transaction Transparency* 2.0 7.5 7.0 5.0
Index of Manager’s Responsibility** 4.0 5.0 9.0 5.0
Index of Shareholders’ Power*** 7.0 6.8 9.0 5.0

Source: Doing Business - Latest available data.

Note: *The Greater the Index, the More Transparent the Conditions of Transactions. **The Greater the Index, the More the Manager is Personally Responsible. *** The Greater the Index, the Easier it Will Be For Shareholders to Take Legal Action.

Return to top

Procedures Relative to Foreign Investment

Freedom of Establishment
Guaranteed
Acquisition of Holdings
There are no general limits on foreign ownership or control: up to 100% foreign ownership is permitted, with the exception of designated "strategic" holdings in some defence-related industries.
However, in recent years the national government announced that at least half of the banking, media, energy, and retail sectors should be in Hungarian hands. This resulted in an increased Hungarian ownership in the banking sector.
Obligation to Declare
In May 2020 a decree has been adopted, according to which investments by foreign investors acquiring an interest exceeding (i) 10 % and a value of HUF 350 million; (ii) 15 %, 20 % or 50 % irrespective of its value, or (iii) 25 % if acquired by more than one foreign investor, require the approval of the Minister of the National Economy. The scope of the decree is wide, involving investments in the following sectors: manufacturing of medicines, medical devices or other chemicals, fuel production, telecommunications, retail and wholesale (including motors and cars), manufacturing of electronical devices, machinery, steel and vehicles, defence industry (e.g. manufacturing and trade of arms and ammunition as well as technologies used for military purposes), power generation and distribution, services connected to the state of emergency, financial services (including insurance, brokering and other services), processing of food (including meat, milk, grains, tobacco, fruits and vegetables), agriculture, transport and storage, construction (including the production of building materials), healthcare, tourism (hospitality and cafeteria services), etc. Such screening mechanism was adopted in response to the COVID-19 epidemic and should be in vigour only until 31 December 2020.
Competent Organisation For the Declaration
Ministry of Interior
Ministry of National Economy
Requests For Specific Authorisations
Since 2018, a law on investment screening is in vigour, requiring foreign investors seeking to acquire more than a 25% stake in a Hungarian company in certain “sensitive sectors” (to seek approval from the Interior Ministry of Interior.  Such sectors include defence, intelligence services, electric energy, certain financial services, gas, water utility, and electronic information systems for the public administration.

Return to top

Office Real Estate and Land Ownership

Possible Temporary Solutions
Consult InstantOffices, Office Finder, CoWorker.
The Possibility of Buying Land and Industrial and Commercial Buildings
Only private Hungarian citizens and EU citizens resident in Hungary and engaged in agricultural activity can purchase farmland, while others may lease it (for up to 20 years). Furthermore, the government has preemptive rights to purchase real estate in World Heritage areas.
Risk of Expropriation
Hungary’s Constitution protects against expropriation, as it may only happen in exceptional cases where there is a public interest, with the obligation for the government to provide immediate and full compensation.

Return to top

Investment Aid

Forms of Aid
Incentive packages may consist of cash subsidies, development tax allowances, training subsidies, and job creation subsidies.
Privileged Domains
The government provides non-refundable subsidies based on case-by-case government decisions to foreign investments in less developed areas and certain sectors, including R&D, innovation, and high-tech manufacturing.
Privileged Geographical Zones
Incentives are designed to benefit investors who establish manufacturing facilities, logistics facilities, regional service centers, R&D facilities, bioenergy facilities, or those who invest in the tourism industry investments, environmental protection, and the production of films and videos.
Free-trade zones
Hungary does not operate any free zone. Incentives may be available for investments in less developed areas of the country (like the Eastern part of the country).
Development tax incentive may be claimed if certain conditions are met. Aid intensity is 25% in the Western Transdanubia region and 35% in the Central Transdanubia region. The rate goes up to 50% in the Northern Hungary, Northern Great Plain, Southern Great Plain, and Southern Transdanubia regions.
Public aid and funding organisations
Hungarian Development Bank (Magyar Fejlesztési Bank).
 
 

Return to top

Investment Opportunities

The Key Sectors of the National Economy
Agribusiness, pharmaceuticals, energy optimization, renewable energies, transport equipment and related equipment, the health and well-being industry, information and communication technologies. For further details, consult the dedicated page on the website of the Hungarian Investment Promotion Agency.
High Potential Sectors
Environment, Housing, Information and Communication Technologies. For further details, consult the dedicated page on the website of the Hungarian Investment Promotion Agency.
Privatization Programmes
The Hungarian State Ownership Company is the legal successor of the State Ownership and Privatisation Corporation. It is in charge of managing and privatizing state property. Since most state-owned enterprises are now privatised, the process has slowed significantly in recent years. Instead, the local government seemed to reverse the trend, since it has recently taken more ownership or de facto control in certain sectors, including energy and public utilities.
Tenders, Projects and Public Procurement
Ted - Tenders Electronic Daily, Business opportunities in EU
Tenders Info, Tenders in Hungary

Return to top

Sectors Where Investment Opportunities Are Fewer

Monopolistic Sectors
Post, public transport. In recent years, the government has increased its ownership share or de facto control over certain sectors, including energy and public utilities.

Return to top

Any Comment About This Content? Report It to Us.

 

© Export Entreprises SA, All Rights Reserved.
Latest Update: June 2022