Foreign Investors Still Welcome in Hungary

Effective January 1, 1991, amendments to the Hungarian Foreign Investment Law mean that investments by foreigners in Hungarian companies no longer require government approval. The amendments further eliminate the prohibition against firms with foreign ownership investment owning a majority of other Hungarian companies. Notwithstanding Hungary's heavy debt burden and balance of payments deficit, the government has decided to give up its veto right on foreign investments while it continues to guarantee repatriation of profits at the same time that it has lifted virtually all import restrictions. The Law's most attractive incentives are granted to companies with foreign investment engaged in manufacturing or the operation of hotels and are only slightly tightened by the amendments. The amendments eliminate the Law's loosest incentive, which permitted any firm with foreign investment of at least 20% or HF5 million to benefit from a 20% income tax reduction.