The challenges of the Guest Investor Program: The unanswered questions and obstacles behind a stuttering start
The Guest Investor Program, which has been known to many as the „Golden Visa”, which has been the subject of considerable interest and several amendments since its announcement, has been officially launched on 1 July 2024, giving third country investors the opportunity to apply for a guest investor visa and, on the basis of that, for a 10+10-year guest investor residence permit.
Despite of the legal provisions, investors are forced to wait for the effective launch of the program and before making their investments, the reasons and circumstances of which dr. Martin Gortva, Head of the Global Mobility Practice Group of our Kapolyi Law Firm will try to explore and describe in the paragraphs of this article.
The guest investor program
As a first step in the analysis of the situation, it is necessary to have a brief review of the main rules of the program, which has been amended several times. The main condition for obtaining the guest investor residence permit, in addition to meeting other, mainly technical and (national) security requirements, is that the guest investor makes one of the following investments, as defined by law:
- acquisition of real estate fund shares of a minimum value of EUR 250 000 in a fund registered with the National Bank of Hungary and managed by a fund manager that meets and complies with certain requirements; or
- acquisition of a residential property in Hungary, registered in the land register with and under its own topographical lot number worth at least EUR 500 000;
- making a financial donation of at least EUR 1 000 000 to support educational, scientific research or artistic creation to an institution of higher education maintained by a public trust with a public-service mission.
A third-country national wishing to obtain the guest investor residence permit must first apply for a guest investor visa with a validity of 6 months, the precondition of which is the implementation of one of the investments set out above or, alternatively, a submission of a written commitment and declaration to carry out at least of the investments within three months of the issuance of the guest investor visa.
Based on the above, it would appear that everything is in place to ensure that third country investors who wish to obtain a guest investor residence permit and who meet the investment requirements can take advantage of the opportunities offered by the program, however, in practice, the individuals wishing to invest in the first two categories are faced with the fact that the actual launch of the scheme has yet to take place, the circumstances and causes of which we will try to reveal in more detail.
Circumstances regarding investments in real estate funds
The relevant legislation and implementing regulations set out specific rules and requirements – which have been amended several times since the draft legislation was first published and adopted – for both fund managers wishing to participate in the scheme and the real estate funds they manage. One of these significant conditions is that only the acquisition of units distributed by a real estate fund whose fund manager is listed on the so-called “list of qualified market operators” maintained by the Constitution Protection Office is eligible for the scheme. Registration on the list of qualified-market operators is subject to a special preliminary qualification procedure carried out by the Constitution Protection Office and its conclusion with a positive result, which includes an examination of the company, the examination of the persons affiliated with the company and an examination of the economic operator’s field of activity. The procedure itself is quite time-consuming, but the detailed rules and requirements regarding the special list of qualified market operators and the expectations for fund managers to be included in the list were only published in May 2024, just weeks before the official launch of the program. The combination of such circumstances has resulted in the fact that the preliminary qualification procedures initiated by the fund managers in front of the Constitution Protection Office wishing to participate in the program were not yet completed until the official launch of the program on 1 July 2024, and in fact, significant part of such procedures are still ongoing, resulting in that currently there is no operator on the market that meets the conditions set by the legislation and has obtained the required special qualification. As a result, there is no investment fund share, “product” on the market that meets the legal requirements and that the investors can buy for such purposes. In addition to the above qualification procedures, other significant obstacles to the program are regulatory uncertainties and open issues, mainly in the areas of capital markets and real estate law, which areas were already extremely complex even before the introduction of the Guest Investor Program. The legislator sets technical and compliance requirements for funds and fund managers at several levels, the interpretation and enforceability of which, however, under the current provisions, create considerable uncertainties and raise further questions for professionals. The clarification and specification of these circumstances is still a task for the legislator and an important prerequisite for the creation of a “product” for obtaining a residence permit, in accordance with the rules of the program, and thus for the effective launch of the program. In view of the above, it is reasonable to assume that further detailed rules on the scheme will be introduced.
While it is undisputed that, in principle, the possibility is already open for third country nationals to apply to the competent authority for the guest investor visa, it is important to reiterate and highlight that, based on the current wording of the legislation, the maximum period of validity of a guest investor visa is six months, but the applicant must declare that in which investment category he or she intends to invest within three months of the issuance of the guest investor visa. However, the current lack of a suitable “product”, carries the risk that the investor will objectively not be able to complete his investment within the committed timeframe and his visa will expire before the right conditions are in place.
Investment in residential property
According to the first draft and promulgated version of the new immigration act, the option of obtaining a guest investor residence permit through an investment in a residential property of at least €500,000 was open to potential investors from 1 July 2024, similar to the option for investment fund shares, but one of the amendments to the legislation changed the applicability of this alternative to 1 January 2025, with the additional condition that only the properties acquired after this date would be recognized and eligible for the scheme.
In addition to the rules on the validity of visas, which have already been described above, the spread of contradictory and often unsubstantiated information in the real estate market is causing third-country nationals wishing to invest to wait even longer.
The most important and controversial issue of the conflicting information circulating in the market is that whether the required residential real estate investment can be achieved by building up a portfolio of several smaller properties and adding up their value, which interpretation can not be supported by neither the current wording of the relevant legislation, nor the official forms prepared to initiate the procedure for applying for a guest investor visa and residence permit.
It is also crucial to underline that only the acquisition of an already built, finished residential property, registered as a separate property in the land register, with a separate topographical lot number, is eligible for the scheme, while project properties purchased off-plan or under construction do not, which significantly reduces the range of available and suitable properties, which may cause further difficulties for those planning to invest in this category.
In conclusion, given the fact that the capital markets focused option, which requires the investment of EUR 250,000, still requires a considerable amount of (regulatory) work to be done by the legislator and the authorities in charge of classifications, which are the preconditions for the creation of a suitable “product” by the market players, and the fact that the residential property investment option will only be available from 1 January 2025, the investors will have to wait a little longer, unless they wish to participate in the program by taking advantage of perhaps the least attractive investment option, i.e. by making a donation of EUR 1.000.000,-, for which, the way is clear.
