Japanese Companies and Investments in Hungary

The existence of Japanese countries in Hungary is increasing observed the last few years, as a result of that became Japan one of the biggest investors in Hungary, and Hungary became one of the most important partner of Japan in Central-Eastern Europe.

About Hungary

Hungary is one of the most dynamic economies situated at the very heart of Europe. After the historic political changes in Central Europe in 1989-90 and the financial crisis in 2008 Hungary, it can be considered as an unusual success story. In 2015-2016, Hungary gained one of the highest growth rates in the region, as investors especially from the Far Eastern countries “rediscovered” the country. Low oil and gas prices combined with low rates such as superb infrastructure and highly educated workforce provide an appropriate choice to invest in Hungary. The country offers diverse investment benefits to all business. Automotive industry, SSC, ICT, electronics industry, medical technology, logistic, renewable energy, food, or space industry? Hungary have a wide variety of opportunities. Since the country located at the centre of Central-Eastern Europe, enables easy access to all parts of Europe: major European ports are afar that makes the country a regional distribution centre. Additionally, Hungary is member of the European Union since 2004 that provides further facilities to the investors.

The Hungarian Investment Promotion Agency (HIPA) supports high value-added investment projects in the country that enables that appr. 80% of the GDP by the private sector, and especially by foreign ownership companies was achieved.

Japanese companies in Hungary

Hungary is a key investment destination for Japanese companies looking for access to European Union. Based on the annual survey of the Japan External Trade Organization in Budapest (JETRO Budapest) Japan was the most important Asian greenfield investor in Hungary in 2016. 151 Japanese companies operate in Hungary in this time, Bridgestone, Alpine, Nissan, Suzuki, Sony, or Sanyo has chosen this country to settle their branches down. These companies are providing jobs for more than 30.000 people in the country, furthermore they exceeded 5% of the total Hungarian export in 2015. The corporation between the two countries, allowed by the new foreign and economic policy strategy of Hungary called “Eastern Opening”, can create opportunities in the renewable energy and information technology sectors, such as in the dynamic automotive sector. Since 2014, Japanese companies continue to recognize Hungary as a safe country to invest thanks to the supportive legislative environment.

Prosperous legal and tax system

This is reflected in the major key numbers of the Hungarian economy. According to the Hungarian Central statistics Office, the unemployment rate was 5,1% in 2016, the GDP growth was 3,1% in 2015, moreover the annual inflation was 0,4% in the year of 2016. Another important aspect is the competitive tax system of Hungary. The former progressive system has replaced by the flat corporate system in 2017. The new tax rate amounts are 9%. The VAT rates are differently determined: the general VAT rate is 27%, but reduced rates are for some specific products prescribed, e.g.: 18% for bread, dairy products, or commercial accommodation services or 5% for books, journals, medical appliances and district heating services. There are some VAT-exempt services, especially banking, insurance or investment-related services, furthermore sale or rental of real estate, which are as VAT-exempt services considered. Our Government provides various grants to foreign investors regarding to tax exemptions on certain investments. The tax exemptions are typically granted on a certain minimum sum of investment. Mandatory is, that there is no discrimination between local and foreign investors, foreign companies enjoy the same benefits as the locals.

Aside from the prosperous tax system in the country, is the foundation of a company neither difficult to accomplish. The only additional requirement for a foundation of a company by a non-citizen in Hungary is a visa that enables to enter the country, the remaining legal provisions are the same requirements as for the citizens. Further important obligation is that an authorized representative must be charged to receive the notifications in Hungary.

It is clearly visible that Japan is one of the most important greenfield investors in Hungary. As a result of that had closed the Hungarian Government various strategic cooperation agreements with several Japanese companies. These agreements enable easier investments in the Central-Eastern European country.

Do you have some more questions regarding to the process flow of investments in Hungary? Contact us!

Dobos István attorney at law (ügyvéd; Budapest)

E: dobos@doboslegal.eu

T:+3630 3088151