The Hungarian residency bond program

Investing in Budapest and getting an EU citizenship via the special purpose „Residency permit” bond programme.

Global property investment in Europe is an emerging real estate opportunity taking a hold with many non-EU nationals. A poplar additional benefit of such an investment, besides the standard appreciation of the real estate and making a high yield, is the possibility of holding a dual citizenship. Budapest, commonly known as “Paris of the East”, is one of Europe’s most popular capital cities, with huge numbers of expatriates, students, tourists, and – international investors.

During the last couple of years, there has been a surge in the number of Chinese investors that make Budapest their prime interest for real estate opportunities. Budapest’s low property prices which has shown stability over the course of the years and a steady increase in rent prices is considered a solid investment by many Chinese investors.

With all that said, possibly the most valuable benefit of Chinese investors in Budapest is the option to take part in the Hungarian residency bond program, which can assist Chinese buyers with obtaining an EU citizenship within a very short period of time of around 6 months. Once holding a citizenship of the EU, the ability to travel, work and live in other countries in Europe is granted at almost no effort, which has tremendous value for Chinese business people interested to access Central European markets, as well as for upper and middle class investors interested in expanding their investment portfolios or personal career options in Europe.

A growing number of Chinese investors also chose to reside in Budapest, which is a safe city, located within easy reach of many important hubs across Europe, and that has a world renown higher education system, an enviable quality of life, and a mixture of classical culture, elegance, and bustling nightlife scene in the level of other much bigger cosmopolitan cities.

 

In the guide below you will find useful information regarding the Hungarian residency bond program, related costs and companies that can support you in submitting the paperwork to the proper way. It is of course possible for investors to purchase a property in Budapest without joining this program (which requires an additional purchase of bank bonds). In that case, you should get familiar with the different districts of Budapest, a list of which you can find in this Budapest area guide for investors.

Who can apply for this type of residency permit in Hungary?

This type of Hungarian residency permit can be obtained by any third country citizen who’s willing to invest in the Hungarian economy. As part of a national economic interest stimulation program, a third country citizen can apply as a private entity for this type of Hungarian Residency permit by purchasing a minimum nominal value of 300.000 EUR[1] worth of the Special Purpose “Residency Government Bonds” which has a minimum tenur of 5 years. Family memebrs of the applicant (spouse and children under the age of 18) will also be entitled for this type of residence permit under the definition of „Family union”.

 

Residence permit in Hungary

Foreigners living in Hungary need to have at least one of the following certifications:

  • Temporary residence permit
  • Permanent residence permit
  • Hungarian citizenship, which can be obtained after 8 years of continual residence in Hungary

The Immigration and Citizenship Office of Hungary issues Temporary residence permits to applicants who buy property and provide proof of holding financial means. Having a registered address in Hungary is mandatory for the process. The temporary residence permit has to be renewed every few years depending on the purpose of the stay (for example if you study in Hungary, work in Budapest, etc.)

Submitting a request for a residency permit in Hungary requires:

  • Proof of renting/owning a property in Hungary
  • Completed application
  • Criminal record check
  • Medical insurance
  • Bank account with deposited funds

 

After 5 years of continual legal residence in Hungary, individuals can apply for a permanent residency permit. The first day of a continual stay in Hungary is counted from the day an application for the residence card is initially submitted. In case of family reunification or marriage to a citizen of Hungary, permanent residence permits are issued immediately.

 

The alternative to this process is the Special Purpose Residency State Bond, established in 2012, which offers various advantages for non-EU citizens.

 

Why choose the Special purpose Residency State Bond?

Non-EU nationals who receive a Residency permit via purchasing Residency State Bonds in Hungary can:

  • Enter the territory of Hungary freely, without any limitation
  • Stay in the territory of Hungary freely, without any limitation
  • Enter the territory of the EU and stay in other Schengen member countries for a period of up 90 days continuously

The main benefit of this type of residency permit is that it takes only 6 months after purchasing the Special purpose residency bonds to upgrade the temporary residency permit to a permanent residency permit. (A change which otherwise, in the standard procedure, requires a period of 5 years residency in Hungary).

 

The permanent residency permit, which is unlitmited in duration, allows non-EU nationals to live, work and attend public schools in Hungary, as well as to travel, stay and work in the other countries of the European Union. However, a proof of Hungarian residence (e.g. property ownership) is mandatory for maintaining the permanent residence.

An Hungarian permanent residency permit offers the benefits that citizens enjoy in Hungary, excluding the right to vote in national government elections. Permanent residency card holders are obligated to pay social benefit tax only if they stay in Hungary more than 182 days in a 12-month period of time.

 

Who can offer Residency State Bond to third country nationals?

The Residency State Bond can be subscribed by several licensed companies that invest exclusively into Residency State Bonds and have signed an agreement with the Government Debt Management Agency (“ÁKK Zrt.”). According to present law, only these companies – that have this permit – are entitled to purchase the Residency State Bond for non-EU nationals. The State Bond is issued by the Hungarian Treasury and the Hungarian State guarantees to pay back the bond’s nominal value to the applicant at the end of its 5 years tenur duration. During this period of time, the State Bond is registrated and handled by the authorized organization – KELER Zrt. in Hungary.

 

What is the process of applying for the residency permit state bonds?

  • After contacting one of the licensed copmanies authorized by the goverenement to deal with these typs of bonds, the applicat sends personal documentation (passport identification, etc.)
  • After signing a contract with the company, the applicant has to transfer the price of the state bond (300.000 EUR) and the administrative fee of 60.000 EUR into the company’s deposit account.
  • The company issues a declaration of covenant to the applicant in which the applicant guarantees that after recieving the residency permit, the copmany will finalize the purchase of the state bond on behalf of the client within 45 days.
  • The application form should be handled in Budapest or at a Hungarian consulate where the applicant lives. For this purpose the client is entitled to apply for a visa to enter Hungary (with the aforementioned declaration of covenant).
  • The client and the related family members appear in front of the Office of Immigration and Nationality, where the application is handled and biometric identification taken.
  • The Office of Immigration and Nationality of Hungary will consider the application and will issue a final decision regarding the permit within 2 weeks.
  • The promissory note of the state bond is handled over to the client
  • After 6 months, the applicant can apply for the permanent residency permit, which is valid for an indefinite amount of time.

 

The applicant has to:

  • Be a citizen of a non-EU country and have a valid passport
  • Be able to invest EUR 360.000 either in their capacity as a private individual or via a business in which they are shareholders
  • be able to pass a national security check by the Hungarian authority, verifying that the applicant is:
  1. Not subject to expulsion or an entry ban in Hungary
  2. Not subject to an alert in the SIS (Schengen Information System) for the purpose of refusing entry; and
  3. Not considered to be a threat to public security or to the national security of Hungary.

 

Buying property in Hungary as part of your investment:

The Hungarian capital is without a doubt the most popular place in Hungary among foreign investors. With its stunning architecture and lively atmosphere, it is considered to be the cultural centre of Hungary and a major city in the entire region. It’s importance and attractivness for investors can be seen in the steady rise in prices of properties in Budapest, and it’s booming real estate market, in which prices soared in about 20% over the last couple of years alone.

The rise in the value of real estate in Budapest, alongside Budapest being strategically located geographically and relatively cheap for living, had made Hungary’s capital one of the leading locations in Europe for real-estate investments. Although sales and rental prices in Budapest tend to be higher than in other towns of Hungary, they are still considerably lower than in other capitals of Central and Eastern Europe (e. g. Prague, Warsaw, Zagreb and Bratislava).

 

Reference:

 

[1] http://www.akk.hu/en/page/government-securities-issuance-and-trading

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