Beside the offshore regime, Hungary attracted the foreign investors with stable economic and political position, good infrastructure, low costs, skilled workforce, duty-free zones and several tax incentives. In addition, the foreign exchange legislation has been totally liberalized as of 2002. As a consequence, companies started to set up operations, move headquarters and other distribution and logistic centers to Hungary. Giant manufacturing companies also recognized the advantages of the country and established factories in developing areas. These companies received special tax holidays and incentives from the Hungarian government and also the local municipalities.

At present, unfortunately, one of the burning issues is the above mentioned tax holidays that currently apply to a number of multinationals that have established manufacturing operations. EU seems very firm to force Hungary to withdraw these tax holidays, although not only Hungary but EU also may lose those multinationals, which may move to other places outside the EU. Another key issue connecting to the matter of keeping the manufacturing companies in Hungary, is the labor costs. It would seem reasonable that the payroll-related taxes that have been increased in the last years and are high by international standards should be decreased.

Considering the Hungarian tax regime in the light of the expectations of the EU, Hungary is doing well. It has created a stable, standard system with correct principles. Hungary was the first Central European country to start harmonization with the EU law. The corporate tax law is almost the standard piece of the classic European Union legislation, and the VAT law is in compliance with the European Union directive on VAT. However, the standard rate, at 25%, is very high and hurts the cash flow positions of the companies. As of January, 2003 the government reclassified a range of products and services and lifted them into categories with normal rates instead of the 12% discount rates to satisfy the EU requirements.

Hungary also has a wide double tax treaty network. It means that Hungary concluded treaties on avoiding double taxation with almost sixty countries with unique characteristics. One of the main peculiarities of the Hungarian regime that the treaty benefits are enjoyed also by the offshore companies. This is not the case in several other law-tax countries, which are strongly considered in the international tax planning industry (e.g. Cyprus, Malta, Luxembourg). The synergy of the offshore and treaty benefits provides additional advantages to Hungary.