In brief
Hungary currently operates two parallel FDI screening regimes. The broader regime commonly referred to as “FDI 2” was originally introduced as a COVID-19 emergency measure and was subsequently retained under Act L of 2025. It has significantly expanded foreign investment screening and become an important feature of the Hungarian M&A landscape.
The Hungarian Government is now proposing to repeal Act L of 2025 with effect from 1 January 2027 and introduce a watered-down version of FDI 2 by amending Act LVII of 2018, which also governs Hungary's other FDI regime (referred to as "FDI 1"). If adopted, the proposal could significantly reduce the number of M&A transactions requiring notification under Hungary’s FDI 2 regime.
In more detail
The proposed changes to the FDI 2 regime include:
- EU, EEA and Swiss investors excluded: the proposed regime would not apply to acquisitions by investors from the EU, the EEA or Switzerland.
- Share deals only: asset deals would fall outside the scope of the regime.
- Majority acquisitions only: minority acquisitions would no longer be covered.
- Direct acquisitions only: indirect acquisitions would be excluded.
- Fewer sectors covered: the scope of affected activities would be reduced from 63 sectors to six: (i) manufacture of coke and refined petroleum products; (ii) manufacture of chemicals and chemical products; (iii) manufacture of pharmaceuticals; (iv) manufacture of basic metals; (v) manufacture of fabricated metal products; and (vi) electricity, gas, steam and air conditioning supply.
- Higher financial thresholds: a transaction would meet the financial thresholds only if either (i) the target’s net revenue in its latest closed financial year is at least HUF 180 billion, or (ii) the transaction value is at least HUF 10 billion.
Key takeaways
- FDI 2 would be significantly watered-down with effect from 1 January 2027. Watering down the broader screening regime introduced during the COVID-19 pandemic could significantly reduce the number of Hungarian M&A transactions requiring mandatory FDI notification.
- FDI 1 would remain in force. Transactions caught by FDI 1 regime remain subject to notification and approval.
- The proposal is currently under consultation. Until the amendment is adopted and enters into force, transactions should continue to be assessed under the existing FDI 1 and FDI 2 regimes.
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Cristina Victoria Tapia-Soto, Associate, has contributed to this legal update.