Notification requirements for foreign direct investment (FDI)

Conditions for FDI notification

The notification obligation depends in each case on:

• the nationality of the investor (third country, EEA, EU, Switzerland),
• the type of legal transaction,
• the proportion of influence acquired,
• the activities of the Hungarian company (whether it operates in a key strategic or strategic sector), and
• the value of the investment.

1. Nationality of the investor

The notification obligation applies not only to investors from outside the EU, but in certain cases also to investments from EU countries (if their indirect owner is from a third country).

If a majority influence is acquired in a strategic company under the temporary regime, EU, EEA, or Swiss citizens, or legal entities registered in these countries, are also subject to the notification obligation as foreign investors.

2. Type of legal transactions subject to notification

In addition to the acquisition of shares (quotas), the notification obligation may also arise in the case of several other legal transactions, such as the establishment of a company, the establishment of a branch, the addition of a scope of activity, a capital increase, a transformation, and even in the case of gratuitous transactions if the “investment value” involved in the transaction exceeds HUF 350 million.

Even reorganization or asset transfers within a corporate group may trigger the notification obligation. A transaction may be reportable even if it does not result in a change of actual ownership.

3. Proportion of influence acquired

The threshold of notification depends, on the one hand, on the nationality of the investor and, on the other hand, on the extent of the influence acquired in the target company.

Under the permanent regime, investors' acquisitions exceeding 25% are subject to ministerial notification. Under the temporary regime, in addition to the notification obligation for EU, EEA and Swiss investors in the event of a controlling influence being acquired, notification may also be mandatory in the case of acquiring 3% of the company’s shares.

4. Activities of the Hungarian company

The obligation only applies to Hungarian companies operating in strategic or sectors of strategic importance as defined by law.

Strategic sectors – and thus subject to the permanent notification obligation – include, among others, military technology, energy, telecommunications, insurance, and public water utilities.

Sectors of strategic importance – and therefore subject to the temporary regime notification obligation – include retail, wholesale, electrical equipment manufacturing, food production, and catering services.

5. Investment value

The temporary regime sets a value limit of HUF 350 million for transactions subject to notification. No such value limit has been set in the permanent regime.

6. Competent authority and legal consequences

Under the permanent regime, the competent authority is the Cabinet Office of the Prime Minister, while under the temporary regime, it is the Ministry of National Economy.

At the end of the notification procedure, the competent authority either (i) acknowledges the legal transaction or (ii) issues a prohibitive decision.

If someone disregards the notification obligation or, despite a prohibitive decision or in the absence of acknowledgment, applies for the registration of the legal transaction in question with the Court of Registry, they may not only face fines, but also risk the legal transaction being declared null and void, i.e., legally invalid.

Notification deadline

Under both FDI regimes, the notification must be submitted to the competent ministry within 10 days of the conclusion of the legal transaction. The notification must include, among others, a detailed description of the legal transaction and must be accompanied by documentation supporting the transaction and the acquisition of foreign influence.

Deadline for assessing the notification

The competent ministry has 30 working days from the date of receipt of the notification to assess it, which may be extended by a further 15 days.

Legal considerations and preliminary examination

Due to the strict deadlines imposed by law, it is essential to conduct a legal examination prior to the transaction to evaluate the existence of the notification obligation in order to minimize risks. The tightening of regulations related to the FDI mechanism further justifies companies seeking expert support to navigate the complex legal environment.