Are Russian Nationals Restricted from Real Estate Transactions and Investments in Hungary?

Purchasing Real Estate in Hungary as a Russian Citizen

In Hungary, Russian nationals are permitted to purchase residential real estate for obtain the guest investor status, as Hungary’s laws do not specifically ban foreign nationals from buying property. However, as a non-EU citizen, a Russian buyer must apply for permission through the Hungarian authorities. This regulatory step is a standard process and involves some legal and administrative paperwork. Here are the key points:

• Application for Permission: Non-EU nationals, including Russians, are required to apply for a permit to purchase property in Hungary. This is a routine check to ensure compliance with local laws and is not restricted solely to Russian nationals.
• Compliance with Sanctions: Any advice or legal service provided to Russian buyers by Hungarian lawyers must not aid in circumventing EU sanctions or involve restricted financial transactions.
• Practical Requirements: The permission process is generally straightforward, but applicants should expect to provide identification, proof of funds, and a description of the intended use of the property, as well as other required documentation.

Investment in Hungarian Real Estate Funds: Rules for Russian Nationals

Investing in Hungarian real estate investment funds (REIFs) can be the cheapest option for Golden Visa seekers. However, Russian nationals need to be aware of specific limitations that stem from EU sanctions. Particularly relevant is Article 5 of Council Regulation (EU) No 833/2014, which prohibits certain financial transactions involving specific Russian financial institutions and securities. Here’s a closer look at what Russian investors should consider:

Permissible Investment: Russian private individuals are generally allowed to invest in Hungarian REIFs. However, investments involving Alternative Investment Funds (AIFs) or other funds with complex financial structures may be subject to further restrictions.

Prohibited Financial Transactions: According to EU sanctions, any investments involving sanctioned Russian entities or financial products linked to these entities are prohibited. These restrictions aim to prevent financial flows that could bolster Russian state-linked institutions.

Restricted Securities and Instruments: The EU bans dealings in certain securities, money-market instruments, and other financial assets associated with major Russian banks and financial institutions that are majority-owned by the Russian state. These include well-known entities like Sberbank and Gazprombank. Any real estate investment fund that involves these institutions, even indirectly, would fall under these restrictions.

Scope of Restricted Financial Products: Sanctions target “transferable securities and money-market instruments” with a maturity of over 90 days. These are financial assets that can be traded on capital markets, such as shares, bonds, and treasury bills.

Can Russian Private Individuals Denied to be Served?

Yes, Russian private individuals can be denied services, particularly in sectors like real estate transactions and investments. The main relevant EU framework is Council Regulation (EU) No 833/2014, introduced in response to actions destabilizing Ukraine. This regulation prohibits both direct and indirect transactions with sanctioned Russian institutions, extending to entities listed in Annex III of the regulation. Even when an investment does not directly involve a sanctioned entity, compliance requirements prevent Hungarian service providers from indirectly facilitating such engagements, leading to heightened caution - since in Hungary, compliance with these EU sanctions is mandatory.

Hungarian law also adds layers of scrutiny. Hungary’s Anti-Money Laundering and Counter-Terrorism Financing Law requires enhanced due diligence for clients originating from high-risk jurisdictions, with Russia often classified as such under internal guidelines. This law mandates that service providers verify the legitimacy of a client’s assets and financial resources to prevent money laundering and terrorism financing. Given the complexities and challenges in thoroughly verifying these aspects, many providers may choose to avoid serving Russian clients altogether.

Therefore, while there is no blanket ban on serving Russian private individuals, the stringent regulatory environment and the associated compliance risks often lead service providers to deny services to Russian nationals.

Practical Tips for Russian Individuals

Consult a Compliance Expert: Before investing in Hungarian real estate funds, Russian nationals should seek the guidance of a legal or financial expert who understands the nuances of EU sanctions.

Long-Term Investment Outlook: If your interest is in a long-term investment in Hungarian real estate, it may be beneficial to explore tangible properties that focus on stable assets unaffected by current financial restrictions.

Final Thoughts

Hungary remains an attractive destination for Russian nationals interested in real estate investments. However, both buyers and investors need to stay informed about the evolving EU sanctions and the regulatory framework governing foreign investments. By taking these precautions and understanding the legal context, Russian individuals can make informed, compliant investments in Hungary.

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