Hungary has recently announced a new golden visa program aimed at attracting foreign investors interested in obtaining residency in Europe. This initiative, known as the Guest Investor Program (GIP), presents an opportunity for individuals to secure residency by investing in real estate.
Overview of the Guest Investor Program
The GIP requires a minimum investment of €250,000 into a real estate fund or €500,000 directly into real estate. While there is also an option for a €1 million donation, this is not expected to be popular among potential applicants. The specifics of whether the program will allow for open market purchases similar to those in Turkey or Spain, or if there will be restrictions to particular districts in Budapest, are still to be clarified.
Background on Hungary’s Residency Programs
Hungary has a history of relatively easy residency requirements. Previously, individuals could obtain permanent residency through investments such as purchasing bonds for €300,000. However, this program was dismantled after it was misused by individuals sanctioned by the U.S. Despite this setback, Hungary has maintained its appeal with low corporate taxes (9%) and no inheritance or wealth taxes.
Current Options for Residency
Prior to the introduction of the GIP, potential residents could establish a company in Hungary and purchase property through it. By investing in two apartments worth €240,000, they could generate rental income taxed at the corporate rate. This approach effectively functioned as a golden visa.
Streamlining the Process
The new program aims to simplify the process for obtaining residency. Currently, approvals can be inconsistent based on nationality and other factors. The GIP intends to standardize these approvals and increase the investment threshold to €500,000, allowing individuals more freedom in their property choices.
Additional Routes to Residency
There are alternative methods for gaining residency in Hungary. For instance, purchasing an apartment worth over €100,000 and renting it out can also lead to residency approval. Similarly, opening a business that contributes economically can yield residency benefits.
Hungary’s Immigration Stance
Hungary is known for being selective about its immigration policies, favoring high-net-worth individuals while being less accommodating towards refugees or those seeking government support. The government’s approach under Viktor Orban has been to attract wealthy immigrants while resisting external pressures from organizations like the OECD and EU.
Future Prospects
The GIP is set to launch in September 2024, with expectations of significant interest from investors globally, especially from countries like China and the U.S. Notably, this program offers a 10-year residency permit, which is among the longest available in Europe.
Tax Implications
Importantly, applicants will not become tax residents merely by obtaining residency through this program unless they choose to live in Hungary. This allows investors to maintain their financial advantages while enjoying European residency.
As Hungary prepares to roll out this new initiative, it positions itself as an attractive option for those looking to invest in Europe while gaining access to the Schengen area and benefiting from favorable tax conditions.
