How to Invest and Make Money in Hungary: A Comprehensive Guide

Hungary offers numerous opportunities for individuals looking to invest and grow their wealth. From leveraging long-term investment accounts to taking advantage of favorable tax regimes, there are smart strategies for both locals and expatriates to build financial stability. Here’s a detailed guide based on two popular and highly effective methods for investing and earning money in Hungary.

1. Long-Term Investment Accounts (TBSZ)

What is a TBSZ?
The Tartós Befektetési Számla (TBSZ), or Long-Term Investment Account, is a tax-advantaged investment account available in Hungary. It allows individuals to grow their money tax-free if held for at least 5 years.

How It Works:

• Account Setup:
  • You can open a TBSZ account at most Hungarian banks and brokers, such as KBC, which has a built-in system for managing these accounts.
  • You can open multiple TBSZ accounts in a single year, even across different banks or brokers.
• Deposit Window:
  • You can deposit funds into the account during the first calendar year of opening it.
  • After the initial deposit year, no additional contributions can be made to that account.
• Investment Period:
  • You can freely trade stocks, index funds, or other assets within the TBSZ during the 5-year holding period.
  • After 5 years, you can withdraw the funds completely tax-free.
• Flexibility:
  • If you wish, you can roll over the account for another 5 years instead of withdrawing, allowing for continued tax-free growth.

How to Open a TBSZ Account:

1. Choose a bank or broker such as KBC or DEGIRO.
2. Complete the registration process, which typically includes providing personal details and verifying your identity.
3. Deposit funds and start investing in your chosen assets.

Why Use a TBSZ?

• Tax-Free Returns:
  After the 5-year period, your investment returns (capital gains, dividends, etc.) are entirely exempt from taxes.
• Flexible Investments:
  You can trade and invest in a wide range of financial instruments.
• Easy Management:
  Many brokers offer user-friendly platforms to monitor and manage your investments.

Pro Tip:

If you use a foreign broker like DEGIRO, you may need to notify the Hungarian tax authority (NAV) by submitting the necessary contracts and account details. However, ensure proper communication with NAV to avoid misunderstandings.

2. Become a KATA Sole Proprietor (KATA Egyéni Vállalkozó)

What is KATA?
The KATA (Kisadózó vállalkozások tételes adója) is a flat-tax regime for sole proprietors and small businesses in Hungary. It simplifies taxation and provides a highly favorable tax rate for individuals earning up to a certain threshold.

How It Works:

• Eligibility:
  • Available to individuals in specific fields or professions, such as freelancers, consultants, or small business owners.
  • You must register as a sole proprietor (Egyéni Vállalkozó) through the Hungarian tax system.
• Tax Rate:
  • Pay a flat fee of 50,000 HUF/month (approximately €130) for revenues up to 12 million HUF/year (around €30,000).
  • This tax includes healthcare coverage.
• Exceeding the Revenue Cap:
  • Earnings above 12 million HUF/year are taxed at 40%, making KATA less favorable for high-income individuals.

Why KATA is Attractive:

• Low Tax Rate:
  Paying only 50,000 HUF/month on significant earnings makes this one of the most cost-effective tax regimes in Europe.
• Healthcare Benefits:
  The flat fee also provides access to Hungary’s healthcare system.
• Simplicity:
  KATA eliminates the need for complicated tax calculations or filings, making it ideal for students, freelancers, or anyone new to business.

How to Register for KATA:

1. Apply online or visit your local NAV office.
2. Submit the required documents, including proof of residence and identification.
3. Choose the flat-tax payment plan and start working as a sole proprietor.

Other Ways to Make Money in Hungary

3. Real Estate Investment

Hungary’s real estate market is growing steadily, particularly in Budapest. Buying, renting out, or flipping properties can be lucrative if you have the capital to invest.

4. Start a Side Hustle or Freelancing

Platforms like Upwork or Fiverr allow you to work remotely and earn in foreign currencies. Hungary’s cost of living is lower than in many Western countries, so even moderate freelancing income can significantly enhance your lifestyle.

5. Index Funds and ETFs

For those new to investing, low-cost index funds or exchange-traded funds (ETFs) provide a simple way to diversify your portfolio. Many Hungarian brokers offer access to these funds.

How Much Can You Earn?

How to Withdraw Money from Investments or Earnings

• Local Bank Accounts:
  Open a Hungarian bank account with institutions like OTP Bank or K&H for seamless transactions.
• Brokerage Withdrawals:
  If using platforms like DEGIRO or KBC, link your local account for easy withdrawals. Ensure compliance with NAV for any taxable transactions.
• Freelance Platforms:
  Withdraw earnings from freelancing platforms directly to your Hungarian bank account or through PayPal.

Final Thoughts

Hungary provides various opportunities for making and growing money, whether through tax-advantaged investment accounts like TBSZ, starting a sole proprietorship under KATA, or exploring real estate and freelancing. By leveraging these options, you can build a robust financial foundation and secure your future while taking advantage of Hungary’s investor-friendly environment.

Remember, the key to success is consistency, discipline, and staying informed about financial regulations. Get started today and unlock your earning potential in Hungary!