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EU Asks Member States to End Investor Citizenship Schemes

EU Asks Member States to End Investor Citizenship Schemes

Hungary
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In its recommendation issued at the end of March 2022, the European Commission urges Member States to immediately end their investor citizenship schemes and ensure strict controls to address the security, money laundering, tax evasion and corruption risks of investor residence programs.

Investor citizenship schemes, under which nationality is granted in exchange for a pre-determined payment or investment and without a genuine link with the Member State concerned, have implications for the European Union as a whole, as every person holding the nationality of a Member State is at the same time a citizen of the Union. Similarly, obtaining a valid residence permit via an investor residence scheme grants certain rights to third-country nationals, including to travel freely in the Schengen area.

As the current Russian aggression against Ukraine highlights these risks once again, the recommendation is part of the Commission’s wider policy to take decisive action on investor citizenship and residence. Currently there are 9 Member States (Spain, Portugal, Greece, Italy, Austria, Belgium, Germany, Bulgaria, Ireland) offering investor residence programs and there is only one Member State that has an investor citizenship program (Malta).

The Commission also ordered the Member States concerned to report by the end of May 2022 on the implementation of the recommendation presented and to keep the Commission regularly informed thereafter.

Previously, between 2013 and 2017 Hungary also had an investor residence program, under which almost 20 thousand foreigners obtained residence permits. The 6500 and investors and their 13000 family members came from 59 countries, most of them (81%) coming from China, Russia (7%) and Iran (2%). Currently Hungary does not have any investor citizenship or an investor residence scheme, and in light of the above it will likely remain so in the foreseeable future.

By Gabriella Galik, Partner, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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