Investment climate in Hungary

Hungary positions itself as a hub of innovation, sustainable development, and economic growth. The country is a beacon of opportunity for global investors, boasting numerous factors that make it an attractive business destination. As the economy matures, Hungary's strategic location, skilled workforce, advanced infrastructure, and government initiatives create a favorable investment environment.

Why Hungary

• Central location as a gateway to Central/Southeastern Europe

Hungary's geographic location serves as a strategic bridge connecting Central and Southeastern Europe. This central location not only facilitates access to regional markets but also positions Hungary as a logistics hub for companies expanding their presence throughout Europe. Thanks to a well-developed transportation network and trade routes, investing in Hungary opens doors to a large consumer base and lucrative business opportunities throughout the region.

• Skilled workforce and developing second-tier cities

Hungary boasts a highly educated and skilled workforce with the skills needed to drive innovation and increase productivity. Emerging second-tier cities, characterized by strong educational potential and a growing pool of talented professionals, offer untapped potential for businesses seeking to leverage diverse skills and knowledge. Along with Budapest, these cities offer fertile ground for growth, providing access to a skilled workforce and the resources needed to expand and grow businesses.

• Reliable Infrastructure and Supply Chain Opportunities

Hungary's commitment to infrastructure development and supply chain efficiency makes it an ideal location for investment in industries such as manufacturing, automotive, and electronics. Thanks to a well-developed transportation network, modern facilities, and government support for innovation, businesses can leverage Hungary's infrastructure to streamline operations, reduce costs, and gain a competitive advantage in global markets.

• Government Focus on Innovation and Technology

The Hungarian government prioritizes innovation and high-tech, positioning the country as a center of advanced research and development. Through initiatives such as "Invented in Hungary," With significant EU funding allocated to innovative projects, businesses can take advantage of opportunities to collaborate with local partners, access financing, and foster technological progress across various sectors.

• Renewable Energy and Climate Initiatives

Hungary's commitment to renewable energy and climate-friendly initiatives offers lucrative investment prospects in the energy sector. With significant growth in solar photovoltaic capacity and ambitious carbon reduction targets, Hungary offers a favorable environment for renewable energy projects and sustainable development initiatives. By leveraging the synergies between solar and nuclear energy, businesses can contribute to Hungary's transition to a greener, low-carbon economy while simultaneously capitalizing on emerging opportunities in the renewable energy sector.

• Government Support for Clean Transport and Electromobility

Hungary's proactive approach to clean transport and electromobility positions it as a leader in sustainable mobility solutions. With a well-developed network of charging stations, government incentives for electric vehicle adoption, and investments in infrastructure expansion, Hungary provides an ideal ecosystem for businesses involved in electric vehicle production, charging infrastructure, and related technologies. Beyond reducing carbon emissions, investments in Hungary's clean transport sector align with global trends in sustainable mobility and offer long-term growth prospects.

• Strategic Partnerships and Collaboration Opportunities

Hungary's strategic partnerships and joint initiatives enhance its attractiveness as an investment destination. Projects such as the Zala Zone, a public-private partnership focused on vehicle testing and autonomous vehicle solutions, demonstrate Hungary's commitment to fostering innovation through international collaboration. Through such partnerships, companies gain access to the expertise, resources, and market insights needed to drive innovation and maintain leadership in a rapidly evolving global economy.

Hungarian Investment Law

In Hungary, foreign direct investment (FDI) controls are currently structured around two parallel regimes that differ in their objectives, investor base, and subject matter. These regimes are: the General Foreign Direct Investment Regime (Act No. LVII of 2018, applicable since 1 January 2019) and the Special Foreign Direct Investment Regime, currently based on Act L of 2025 (initially introduced in 2020 in response to the emergency situations caused by the COVID-19 pandemic and the Russian-Ukrainian war). However, this regime has now become indefinite, regardless of the existence of a state of emergency.

The two foreign direct investment regimes operate in parallel, but have different coverage, rules, sanctions, and enforcement authorities.

The general foreign direct investment regime does not apply to investors from the EEA (European Economic Area) and Switzerland, unless they are controlled by an investor from a third country.

The special foreign direct investment regime distinguishes between different categories of foreign investors, but the acquisition of a controlling stake in a Hungarian strategic company is subject to notification, even if it is carried out by investors from the EEA or the Swiss Confederation, provided that the value of the investment exceeds HUF 350 million (approximately EUR 897,000).

Under the general foreign direct investment regime, the scope of strategic sectors is quite limited. It includes, among other things, the production of weapons and ammunition, dual-use goods, the provision of financial and insurance services, certain critical energy and electronic communications services, and certain IT services provided to certain categories of clients.

In contrast, under the Special Regime for Foreign Direct Investment, the list of "strategic" sectors is quite broad: it includes, among other things, most manufacturing enterprises, retail and wholesale trade, and certain service sectors.

The two-tier system of foreign direct investment control that has emerged in Hungary reflects a qualitative transformation in the state's approach to regulating investment processes. While the general regime replicates the traditional European model of investment screening, focused on protecting national security in a narrow sense, the special regime marks a shift to a broader and more comprehensive concept of investment control, integrated into an overall economic management strategy.

The general regime for foreign direct investment is characterized by a relatively high degree of legal certainty, a clearly defined range of subjects and objects of regulation, and limited discretionary powers for government agencies. Its application is primarily aimed at preventing risks associated with the participation of third-country investors in sectors critical to sovereignty, defense, and the functioning of vital infrastructure. In this sense, the general regime serves as a reactive instrument, ensuring the minimum necessary level of state protection from external threats without significant interference in market mechanisms.

In contrast, the special regime for foreign direct investment reflects a different regulatory logic, in which investments are viewed not only as a source of capital and economic growth, but also as a factor potentially influencing the structural stability of the economy, control over strategic assets, and the balance of power in domestic markets. The expansion of the scope of control beyond classical national security, as well as the ability to apply the regime regardless of the investor's origin, indicate a shift in emphasis toward the concept of economic sovereignty. Under this model, the state is empowered not only to prevent unwanted investments but also to actively influence the ownership structure in key economic sectors.

Thus, the dual-regime system of foreign direct investment control in Hungary can be characterized as a compromise between the desire to maintain the openness of the national economy and the need to strengthen state control over strategically significant assets. In the long term, the effectiveness of this model will depend on the ability of Hungarian lawmakers and law enforcement agencies to strike a balance between protecting public interests and maintaining a stable, transparent, and competitive investment environment consistent with both domestic development priorities and the country's obligations within the European legal order.

International Regulatory Aspects

All EU regulations and decisions enter into force in Hungary immediately, without the need for additional domestic measures, while directives must be adopted by Hungarian law. If Hungarian law conflicts with EU law, EU law takes precedence. Legislation in the areas of labor, environmental protection, health, and safety is consistent with EU regulations. Hungary follows the EU's trade and investment policies, and all trade rules comply with EU law. Hungary participates in the WTO as an EU member state.

Expropriation and Compensation

The Hungarian Constitution provides protection against expropriation without compensation, nationalization, and any other arbitrary action by the Hungarian government, except in cases of threat to national security. In such cases, the owner must be provided with immediate and full compensation.

Dispute Resolution

Hungary is a party to the International Centre for Settlement of Investment Disputes (ICSID Convention) and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958 New York Convention). Apart from two domestic laws implementing the New York Convention and the ICSID Convention, there is no specific legislation providing for the enforcement of these awards.

Investment treaties between foreign enterprises and the Hungarian government often include provisions on the settlement of investment disputes. Hungarian law allows the parties to determine the jurisdiction of any court or arbitration court. The law allows investors to negotiate dispute resolution through foreign arbitration institutions, such as the International Centre for Settlement of Investment Disputes (ICSID), the UNCITRAL Permanent Court of Arbitration (PCA), or the Vienna International Arbitration Centre. In Hungary, foreign parties may resort to the Arbitration Court of the Hungarian Chamber of Commerce and Industry, which has its own rules of procedure, and in financial matters, to the Arbitration Court of the Financial and Capital Market. Local courts recognize and enforce foreign or domestic arbitral awards. An arbitral award may be annulled only in limited cases and under specific conditions.

Local courts recognize and enforce foreign arbitral awards against the Hungarian government. Domestic courts do not give disproportionate preference to state-owned enterprises. Investors can expect a fair trial, even if state-owned enterprises are involved, and in the event of an unfavorable decision, they can take the case to the European Court of Justice.

Investment Incentives

One of the competitive advantages of doing business in Hungary compared to other countries in the region is the government's strong commitment to streamlining business processes and enhancing the competitiveness of small and medium-sized enterprises, as well as large companies, in Hungary. To achieve this goal, Hungary offers a wide range of incentives—both refundable and non-refundable—to promote foreign direct investment and reinvestment by local companies. The main types of business incentives in Hungary are:

• Cash subsidies (either from the Hungarian government or EU funds)
• Tax incentives
• Low-interest loans
• Special incentives in free enterprise zones
• Most business incentives in Hungary are available regardless of industry.

Hungary offers a wide range of tax incentives for new investments and R&D. Hungary provides tax incentives for holding structures, capital gains from the sale of shares and intellectual property are exempt from tax under certain conditions, and a 50% tax exemption is provided for royalty income. Dividends, interest, and royalties paid by a Hungarian company to a foreign company are not subject to withholding tax. Hungary has an extensive international treaty network, comprising more than 80 double taxation agreements.

The maximum aid intensity is 60% in certain areas of Northern Hungary and Southern Transdanubia; 50% in the rest of Northern Hungary, the Northern and Southern Great Plains, and the rest of Southern Transdanubia; 30% in Western and Central Transdanubia; and 0% or 50% in the Central Hungarian Region. Some areas in Central Hungary are not eligible for any funding because their development indicators are much closer to the EU average. The maximum available aid intensity is reduced if the investment is large (i.e., exceeds €50 million).

In Hungary, the government has discretionary grants. The Hungarian government prioritizes investment in assets, research and development projects, and the creation or expansion of business service centers. These grants are aimed at promoting the implementation of high-added-value projects in Hungary.

One of the main goals of the post-financing grant system is to promote research and development (industrial research and development) of large enterprises and the establishment of research and development centers in Hungary, in line with the "Invented in Hungary" investment objective. This allows grants to be provided for research and development projects throughout the country with a maximum aid intensity of 50%.

Hungary also provides tax incentives for development during the post-investment period, which means a partial exemption from corporate income tax for 13 years after the commissioning of a project. In any given tax year, the tax relief is available for up to 80% of the tax payable, up to the state aid intensity limit. The minimum investment amount depends on a number of circumstances and ranges from HUF 100 million to HUF 3 billion.

Additional available subsidies include:

• Subsidies for the establishment and development of workshops
• Training subsidies
• Subsidies from EU funds
• R&D tax relief
• Energy efficiency tax relief.