Changes to Hungary’s FDI Rules – Foreign Investments in Hungarian Companies to Become Simpler

Two regimes, twice the uncertainty

Hungary currently operates two parallel foreign direct investment (FDI) screening regimes. The first, adopted in 2018 and in force since 2019, focuses primarily on sectors considered sensitive from a national security perspective, such as defence and certain utilities, financial services and telecommunications activities. A second, considerably broader screening regime was introduced alongside it in 2020, during the Covid-19 pandemic. This second regime remains in force under Act L of 2025 until the end of 2026.

The second regime extended well beyond traditionally strategic sectors: activities ranging from manufacturing and trade to the food industry could trigger a notification requirement, even if they appeared in the company’s commercial register entry only as ancillary activities. For certain transactions, a value of just HUF 350 million and the acquisition of a 10% shareholding could be enough to trigger the procedure. The rules also covered acquisitions by certain EU investors.

In practice, this meant that even the sale of an ordinary, medium-sized business could require a separate FDI assessment, notification to the authorities where applicable, and a delay to closing. The differing scopes and procedures of the two regimes were hardly a model of predictability.

What would change?

The recently published draft legislation would abolish the special regime, which was originally due to expire on 31 December 2026. It would instead amend Act LVII of 2018 to introduce a new, considerably narrower category of transactions requiring notification. All of the following conditions would have to be met for the new rules to apply:

• the investor must be a citizen of, or an entity registered in, a country outside the EU, the EEA and Switzerland;
• the investor must acquire direct majority control of a company established in Hungary by acquiring a shareholding;
• the target company’s registered principal activity must fall within one of six specified sectors; and
• the target company’s net turnover in the previous financial year must be at least HUF 180 billion, or the transaction value must be at least HUF 10 billion.

The six sectors concerned are:

• manufacture of coke and refined petroleum products;
• manufacture of chemicals and chemical products;
• manufacture of basic pharmaceutical products and pharmaceutical preparations;
• manufacture of fabricated metal products, except machinery and equipment; and
• electricity, gas, steam and air conditioning supply.

Importantly, the two financial thresholds are alternatives: meeting either one would be sufficient. For transactions in the new category, control could be acquired only after receipt of confirmation that the notification had been acknowledged.

Fewer notifications, but not complete freedom

The difference is substantial: the HUF 350 million transaction value threshold would be replaced by a HUF 10 billion threshold; principal activities, rather than ancillary activities, would determine whether the rules apply; and the new regime would target acquisitions of direct majority control rather than minority shareholdings in general. These changes are expected to take a wide range of mid-market transactions outside the special FDI screening procedure.

However, simplification does not mean the end of FDI screening. The original national security-based rules under the 2018 Act would remain in force, with their own scope as to the investors and activities covered. The wording of the new provision also raises questions of interpretation: what exactly does “transaction value” mean? How should indirect acquisitions through holding companies be treated? And which rules will apply to transactions signed in 2026 but completed in 2027? These questions will need to be assessed in light of the final wording of the legislation and any transitional provisions.

How long will the new era last?

Nor is this necessarily the final chapter. Further Hungarian legislative changes are expected by 2028 in response to the new EU FDI rules, so the relaxation now taking shape may be adjusted again later. The draft is currently open for public consultation, with comments due by 12 November 2026. The final rules may still change.

Overall, however, the proposed direction is welcome: state scrutiny could focus on genuinely sensitive and more significant transactions, while other investments could proceed with less administration and a more predictable timetable. If enacted in its current form, the draft could indeed mark the end of an era for Hungary's M&A market - in a positive sense.