Major steps of green field investments
The cheap and skilled labour force, tax allowance, bridge-role between Western and Eastern Europe facilitates green-field investments in Hungary. To avoid the oversteppings of time limits the financial, material and legal processes must be handled together. This document is sketching the most important legal steps in the process, sequence and some elements may vary on the characteristics of the project.
Foundation of project company
After the business decision on the investment has been made and the forming of the financial structure first step is to register a company in Hungary. Almost all foreign investors choose to register a Hungarian company due to tax considerations.
The minimum capital requirements for company forms with limited liability are 500.000 HUF (2.200 EUR) for Limited Liability Company and 5.000.000 HUF (22.000 EUR) for Company limited by Shares.
Concluding contracts with the management of the company, bookkeeper, auditor is necessary at the foundation of the company.
Making contract with the actors of the investment
Several actors appear in a green field investment varying on specific circumstances, the major actors may be: lendor, patent licensor/concessor and investor. There are further actors such as construction project manager, environmental consultant, planner, building contractor (depending on the competency of project manager), etc. All the contracts with these actors must be handled consistently as a contractual system. The appropriate selection of the type of the construction contract (design-built, turn key) is a very important task. The project organization ?if formerly hasn`t been founded - is also has to be set up with the appropriate document.
Application for tax allowances and subsidies
Some form of development allowances and subsidies must be applied for before the starting of the investment. Allowances also can be resorted for training etc. The negotiations with municipality before the selection and acquisition of the land is also considerable in order to negotiate on allowances from local taxes.
Selection of the region of the country to build facilities
In the selection of the area of the land to build facility on it is an important aspect that in several areas of Hungary investments related to facilities and creates job are supported with special allowances compared to basic tax allowances provided for investment in other areas of the country.
Acquisition of the land
the selection of concrete location the land and its surroundings must be examined in the light of environmental law of the manufacturing of processing activity willing to pursue in the facility to build also in the light of the architectural requirements of the facility.
The owners of the lands often do not have these examinations done so the buyer have to do it having regard to the needs of the facility and the activity. At this point the buyer doesn`t know if the land is appropriate, but during the examination/licensing an other buyer can buy the land.
There are restrictions in Hungary on the acquisition of agricultural land by legal persons, so the official status of agricultural land first must be changed to exempted form crop by applying at the competent Land Office. The procedure can take 30-60 days.
The best solution could be the conditional contract: the contract on acquiring the land with the owner should contain that it come into effect after the change of the official status, but the condition on the change of status can be void, so first acquisition by a trusted natural person can be the solution for the period before the change of status and after the change the company can buy the land from the natural person.
There are four major licensing procedure generally has to be carried out during the realization of a greenfield investment in Hungary: building permit, occupancy permit, site permit and environmental licensing.
Generally the construction works arise in connection with a green field investment is always subject to building permitting procedure and occupancy permit is required to apply for after finishing the construction.
Certain activities may be pursued only at premises licensed by the municipality and building control authority. Such activities are manufacturing machinery, precious metal, concrete, plastic, etc.
The necessity and the dept of the environmental licensing procedure and number of co-authorities depends on the activity. Some of the activities are not subject to licensing, some of them depends on the consideration of the authority and some of them are required to pass the most profound procedure including the assessment of environmental effects. (eg.: cellulose manufacturing, railway station, chemical manufacturing, oil processing).
Send this article in e-mail
illing our form You can send our article 'kvglaw' to Your friend or to Your own e-mail address.
If You want to send this article to Your own e-mail address, please fill the fields 'Your name' and 'Your e-mail address'.
If You want to send the article to one of Your friends, please fill 'Recipient's name' and 'Recipient's e-mail address' fileds.