Benefits of Hungarian trust and foundation opportunities for global investors
Hungary, located in Central Europe, is immensely popular among international financial investors. The country’s favourable legal landscape and transparent regulatory framework have attracted the interest of many. Learn more about Hungarian trust and foundation opportunities to uncover all the possibilities that await you.
Unique features and obligatory rules of the Hungarian trust system
Although Hungary has had a continental legal system, it implemented the English-type trust in its legal system. The Civil Code contains the trust section and the Trustees Act deals with the detailed rules of the trustees’ activities and responsibilities. The main characteristic of the Hungarian trust is that the trustee is the legal owner of the managed asset, however, based on the law, the trustee owns it for the benefit of the beneficiaries.
The trust is regulated as a contract, therefore, it is a very flexible legal solution. The trust rules are mainly dispositive; therefore, the settlor may differ from the rules except for a few obligatory rules. The obligatory rules of the Hungarian trust system are as follows:
- The trustee can’t be the sole beneficiary;
- The separation of the trust assets from the trustee’s assets and other managed assets;
- The settlor and the beneficiary can’t instruct the trustee;
- The trust period can’t be longer than 50 years.
Benefits and tax considerations for Hungarian trusts
The Hungarian trust system promises many potential advantages for those who want to keep their assets safe. Learn more about the available options!
Benefits of the Hungarian trust system:
- Asset protection: The trust asset is completely separated from the trustee’s asset and other managed assets, the creditors and the successor of the trustee cannot claim anything from the trust asset. The trust may be revocable or irrevocable, and discretionary as well. It is allowed for the settlor to be the trustee. The trust may be set up with private or public documents. The trust may be for private purposes, charity, or both. The trust asset may be anything, cash, tangible or intangible asset, rights, or claims.
- Privacy: While wills are considered public documents in many legal systems, trusts can provide a higher level of privacy. Sensitive details of the trust, like terms and beneficiaries, are usually not publicly available.
- Easily manageable probate process: By allocating your assets to a Hungarian trust, you can transfer them to the preselected beneficiaries outside of the probate process.
- Tax advantages: The trust is a Hungarian corporate taxpayer, it is taxed on its worldwide income. From a tax perspective, the same rules are applicable for trusts, as for Hungarian companies however the trust shall not pay corporate tax unless the settlor and the beneficiaries are individuals and the trust assets are constituted by financial instruments (cash, shares, bonds, receivables, crypto, certificates, etc.). Professional trust service providers are obliged to be licensed by the Hungarian Central Bank.
Hungarian Foundation: private asset management in the heart of Europe
In essence, the asset management foundation is a legal entity, separate from its founder and from its administrating officers, of which the founder may be a dominant member. Asset management foundations shall have at least one founder and one counsellor. The main decision-making and managing body of the Hungarian Foundation is the council, which must consist of at least one natural person. The foundation shall have one Hungarian auditor. It may have beneficiaries and as such may prove to be a great tool against the fragmentation of family estates through inheritance.
It is also separate from the beneficiaries, who may receive various types of financial benefits from the foundation in a regulated way as provided for by the founder. The right to revoke a foundation and to transfer the assets back to the founder as well as the founder’s capability to become a beneficiary are also ensured. The foundation is subject to corporate tax in Hungary however there is no tax liability unless the founder and the beneficiaries are individuals and the assets are constituted by financial instruments (cash, shares, bonds, receivables, crypto, certificates, etc.).
Requirements for Hungarian Asset Management Foundations
There is a minimum capital requirement of HUF 600 million (approximately EUR 1,600,000). These assets – which can be provided either in cash or in kind – have to be defined in the statutes in sufficient detail to enable their identification. To provide the greatest safety for the founder’s assets.
Founders may transfer their rights to the foundation’s council or other organs. If they do so, a protector shall be appointed, whose most important tasks are to oversee whether the management of assets is in accordance with the statutes and to monitor the exercise of the founder’s rights.
How can we help?
Crystal Worldwide Group is an international business consulting firm that specializes in tax planning, asset protection, and second citizenship. Our services include:
- Legal, tax, and financial assistance throughout the whole process of company formation in Hungary
- Representation in the course of administrative procedures
- Corporate and accounting services
- Assistance in bank account opening
- Multilingual, prompt administration with the dedicated contact person