For entrepreneurs and investors seeking European residency, the traditional Golden Visa and other immigration programs may appear tempting. However, for those looking for a more strategic and financially sound choice, company formation in Budapest stands out as a superior alternative. Not only does it offer the promise of residency, but it also allows you to actively participate in one of Europe’s most attractive economies. Here’s why businessmen are increasingly favoring this approach:
1. Lower Initial Investment with Higher Return Potential
Golden Visa programs generally require a large upfront investment in assets like real estate, often starting at €250,000 and going up to over €1 million, depending on the country. While this offers residency, the investment is typically locked into passive assets with limited growth potential or liquidity.
By contrast, forming a company in Budapest requires a substantially lower investment. Instead of passively investing in real estate, you can inject capital into a business with real growth potential. Hungary’s favorable tax policies, competitive labor costs, and central location offer substantial opportunities for return on investment. The initial setup costs and capital requirements for company formation are minimal compared to Golden Visa schemes, allowing you to channel funds into growing a revenue-generating venture rather than tying them up in non-liquid assets.
2. Favorable Corporate Tax Rates
Hungary boasts the lowest corporate tax rate in Europe, at just 9%. Compare this to countries like Spain or Portugal, where corporate tax rates can exceed 20-30%, and it’s clear why Hungary is becoming a preferred destination for entrepreneurs.
Additionally, Hungary has tax treaties with numerous countries, reducing the risk of double taxation and making cross-border business more attractive. If you are setting up an international business or regional headquarters, this low tax environment significantly reduces your operational costs, increasing your margins and overall profitability.
3. VAT and Tax Advantages
Hungary’s Value Added Tax (VAT) rate is 27%, one of the highest in Europe, but there are numerous VAT exemptions available for certain types of goods and services. Businesses, especially those exporting services or operating in sectors like technology, manufacturing, or logistics, may find VAT exemptions beneficial.
Entrepreneurs benefit from the well-established system of tax incentives, which the government offers to companies that contribute to local job creation, technology innovation, or infrastructure development. These incentives further reduce tax burdens and help businesses scale more efficiently.
4. Efficient Use of Capital
One of the main drawbacks of the Golden Visa is that the investment is often sunk into fixed assets, like real estate, that might not yield substantial returns or could be subject to market fluctuations. Moreover, these assets are often illiquid, meaning it can be hard to recover the investment quickly if the need arises.
With company formation, you are not only gaining residency but also investing in a potentially scalable business. Instead of parking capital in static investments, you can deploy funds strategically to grow your business, tap into local and international markets, and generate continuous cash flow.
5. Labor Cost Advantage
Hungary is a competitive destination when it comes to labor costs. While the workforce is highly skilled, particularly in sectors like technology, engineering, and services, the average labor cost in Hungary is significantly lower than in Western European countries. For a business owner, this means you can hire top-tier talent without incurring the high salaries typical in countries like Germany, France, or the UK. Whether you’re setting up a manufacturing unit, a tech startup, or a service center, this cost advantage can significantly enhance your bottom line.
6. Strategic Location and Infrastructure
Budapest’s location at the heart of Central Europe provides businesses with unparalleled access to the entire European market. The country’s infrastructure, including its transportation network (road, rail, and air), is well developed, making it easier to manage supply chains and access key markets in Western Europe, the Balkans, and beyond. Moreover, Hungary is a part of the European Union and the Schengen Area, which provides ease of doing business across borders and access to over 500 million potential customers.
For entrepreneurs considering expansion, Hungary’s location and trade agreements provide an ideal hub for regional operations. This level of access, combined with low operational costs, makes it an attractive alternative to more expensive Western European countries.
7. Simplified Immigration for Entrepreneurs and Families
Golden Visa programs, while offering residency, come with various stipulations, including hefty residency requirements, maintaining the investment, and often complex bureaucratic processes. On the other hand, company formation in Budapest offers a streamlined process for both obtaining residency and operating a business. Not only can you apply for residency as a business owner, but your family members also qualify under this structure, allowing for easier relocation.
In many Golden Visa programs, there are minimum stay requirements, sometimes up to 180 days a year. Company formation in Hungary is more flexible; once your business is established, you can enjoy residency without the need for prolonged physical presence, giving you the freedom to operate globally.
8. Access to EU and Schengen Residency
By forming a company in Budapest, you not only gain access to Hungary but also to the entire Schengen Area. This provides the flexibility of visa-free travel to 26 European countries, making it easy for business owners to travel for meetings, expand operations, or attend conferences and events across Europe.
Moreover, residency through company formation is typically more secure than through a Golden Visa. Many countries are revising their Golden Visa programs, adding uncertainty to the longevity of such routes. However, a business-backed residency is more stable and offers a clearer path to long-term residence and eventual citizenship.
9. Better Control and Flexibility
Unlike Golden Visa programs, where the investment is largely static and your return is based on market performance (such as the value of real estate), business formation provides you with direct control over your investment. You can influence the growth of your company, pivot strategies, expand to other markets, or even sell the business if the need arises.
As an active investor, you also benefit from the potential growth of your business, which could far exceed the return from a Golden Visa-related investment. The flexibility of company formation allows you to shape your financial future more dynamically.
Conclusion: A Business-Savvy Path to European Residency
For entrepreneurs and investors who want more than just a residency permit, company formation in Budapest is a far more appealing option than the Golden Visa or other immigration pathways. By leveraging Hungary’s business-friendly environment, low tax rates, skilled labor force, and central location, you can grow a successful business while securing residency for yourself and your family. With more control over your investment and the potential for high returns, company formation offers a smarter, more strategic approach to gaining European residency.