Hungary has made the transition from a centrally planned to a market economy, with a per capita income one-half that of the Big Four European nations. Hungary continued to demonstrate strong economic growth and acceded to the European Union in May 2004.

Key benefits in investing in Hungary

There are several key benefits in investing in Hungary including:

• High Productivity/Wage Ratio
  Hungary’s population is highly educated and highly skilled. Hungary has great traditions and high standards in many areas including engineering, medicine, economics, and sciences. Many foreign employers have found Hungarian workers extremely flexible, highly motivated and very efficient.
  Foreign manufacturers with factories in Hungary have taken full advantage of the flexibility of the local workforce, and its ability to learn new skills. There has been an annual 10% rise in productivity during the last ten years.
  Wages in Hungary are significantly lower than those of Western Europe, additionally, Hungary has the lowest earnings for highest productivity in Central and Eastern European region.
• Access to EU markets
  With its recent membership to the EU, Hungary is making many positive changes. The EU membership allows total free movement of capital, goods, people and services within the 25 EU member states. Hungary is now becoming a major part of the European and global business environment.
• Investment Incentives
  Hungary welcomes foreign direct investment and implements policies to encourage it. Tax incentives, which are in accordance with EU regulations on government subsidies, are available on a per case basis through a permit issued by the Ministry of Finance. The corporate income tax may be reduced by up to 80% under the title of investment tax benefit. The incentive is available within ten years. The most important terms of the tax incentive:
  • Investments over HUF 3bn (approx. EUR 12m), investment over HUF 1bn (approx. EUR 4m), the investment has been installed and operated in preferred regions
    • or settlements belonging to a small region; or
    • investment up to a limit of HUF 100m (EUR 400,000) if used for environment protection (self-contained investment), broadband Internet service, provision of food-hygienic conditions, film and video making, as well as basic research, applied research, or experimental development. In such cases, investments must be implemented and operated in an area managed by an academic institution or a research institution (research site) founded by the Hungarian Academy of Sciences.
  • For a period of five years following the first incentive year the company must also meet additional terms. The recipient of the tax holiday has three options:
    • to increase the number of employees by at least 100 (or 50 in underdeveloped regions)
    • to increase the wage costs by at least 600 times (or 300 times in underdeveloped regions) the annual minimum wage
    • to procure minimum 30% of its supplies from firms qualifying as small- and medium-sized enterprises.
    In case of job creation investments the number of employees must be increased by at least 300 (or 150 at medium-size enterprises, 30 at small enterprises), 150 in underdeveloped regions (75 at medium-size enterprises, 15 at small enterprises), in addition at least 20% of new jobs must be filled by school leavers.
  • The investment is financed at least up to 25% of own resources, at least 30% of the investment project must include new facilities or assets and renovation cannot exceed 20% of the investment costs.