Does the concept of a 'permanent establishment' apply when a foreign person invests in real estate and, if so, how much does it cost to set up such a permanent establishment, how long does it take and what corporate governance requirements apply?
A direct investment in a real estate can be made in Hungary either as:
Any direct investment by a foreign entity may create a permanent establishment in Hungary.
A branch office is part of a non-resident entity’s organization that has economic independence, but no separate legal personality, and may carry on business activities in Hungary, sign agreements and undertake obligations. A commercial representative office is also part of the organization of a foreign company, however it is not permitted to carry on business activities and may only be engaged in preparing and concluding contracts and providing information to clients on behalf of the foreign company. Both branch offices and commercial representative offices are registered by the Court of Registration in the commercial register. In the absence of an international treaty or mutual reciprocal arrangements between the relevant countries (eg the bilateral agreement between Hungary and Switzerland), permission is required for a foreign company to acquire ownership of real estate through a Hungarian branch office or a Hungarian commercial representative office. If a branch office or commercial representative office is dissolved, the foreign company must dispose of its real estate within one year unless the original acquisition did not require authorization from the relevant administrative office or a specific exemption was granted when the branch office or commercial representative office was registered.1
The set-up costs of a branch office or commercial representative office are:2
The time available for the Court of Registration to decide on registration is usually 15 working days. An application for registration may only be submitted to the Court of Registration electronically through a lawyer.3
The representative of a branch office and the representative of a commercial representative office must be employed, under contract or have a long-term service agreement, and must be resident in Hungary.4
1Act XCIII. of 1990 on duties and fees, 45.§ (1) f-g; and Decree of Minister of Justice 22/2006 on publication and fees of publication in the Gazette, 5.§ (1)
2Act V. of 2006 on Public Company Information, Company Registration and Winding-up Proceedings., 46.§ (7)
3Act V. of 2006 n on Public Company Information, Company Registration and Winding-up Proceedings., 46.§ (7)
4AAct CXXXII of 1997., 6.§ (2), 26.§ (3)
