Company Formation 

Most investors are able to form a company in Hungary in a matter of three to five business days. You can choose from a limited liability company (Kft.), or a company limited by shares (Zrt.).

The requirements are minimal. Kft companies must have a minimum registered capital of 3 million Forints, which is approximately 7,000 Euros, a relatively small investment by international standards. None of these funds need to be available when starting the company. For Zrt companies, this minimum amount is 5 million Forints, which is approximately 12,750 Euros. You only need to pay 25% of that when establishing the company.

You must hold one general meeting every year, but this doesn’t have to include a personal presence. Your company will also need to hold a Hungarian bank account.

Additionally, some Hungarian companies should be audited. This audit only takes place if your company has at least 50 employees and earns at least 300 million Forints in the two previous financial years. You also don’t need to have any local directors.

You can create nearly any type of company, including a real estate company. Many foreign investors choose Hungarian real estate as an easy investment subject to low tax rates and a likelihood to increase in value. Read more details about company formation in Hungary.

Key Takeaways 

The following key points summarize why foreign investors choose to form companies in Hungary:

• The process can take just 3 to 5 days, within two weeks at the most
• For Zrt companies, only 25% of the startup funding is required at when the company is established
• Startup capital of just HUF 3,000,000 or 5,000,000 (about 7,000 or 12,750 Euros)
• 9% corporate tax rate
• Only one shareholder required
• Only one director required
• Director’s meetings can be held anywhere
• Relevant documentation is translated into English as necessary
• You receive a Hungarian residence permit (as does your family) 

Read more about how to get Hungarian citizenship. 

Real Estate Investment: An Alternative Path to Residence Permit

While forming a Hungarian company is straightforward and requires a minimal financial investment, some foreigners prefer to invest in real estate. If you invest at least 180,000 Euros in Hungarian real estate, you will also be eligible for a residence permit which can be valid for five years. This permit can be renewed. 

Residence Permit and Visas 

Given the low cost and quick process of establishing a company in Hungary, it is common for investors to use it as a way to get a Schengen visa. That is because simply becoming the foreign director of a Hungarian company can make you eligible for this visa. Your initial Schengen visa and residence permit will be valid for three years, with the ability to renew it. Once you have your residence visa, your family members can receive their own residence permit with the same validity period.

The only caveat to renewing the visa is that you have to spend 90 or more of the 183 days before renewal in Hungary and in the Schengen Area. Given the size of the Schengen Area and the appeal of its member countries, you are likely to do this anyway. 

Low Tax Rate 

The low tax rate in Hungary is just one of the many reasons that the country attracts foreign investors. The corporate tax rate is set at only 9%. This tax rate is the lowest within the European Union. On top of that, Hungarian companies are suited to exercising holding functions, since income from dividends and income from selling corporate shares are not taxable. There may also not be a withholding tax on the payments that leave Hungary. Additionally, personal income tax is just 15% plus a social security contribution.

No Double Taxation 

To further protect your investments, Hungary has treaties with over 60 countries to avoid double taxation. If you happen to be from one of the countries without a double taxation treaty, Hungary will still give you a credit on your Hungarian taxes of up to 90% of your foreign taxes.

Conclusion 

Foreigners and Hungarians alike can form a company in Hungary in a matter of days with a low initial investment. There are minimal requirements, including no requirement for a local presence or local directors. Moreover, forming a Hungarian business or making a significant real estate investment in the country entitles you and your family to a residence permit and a Schengen visa that is valid for two years and is simple to renew.

For further information, please contact: Crystal Worldwide Law Firm

https://crwwgroup.net

CANADA | LIECHTENSTEIN | HUNGARY | CYPRUS | DUBAI | SEYCHELLES | NEW ZEALAND

Alternative investments- Is art investment a new product?

Works of art by Andy Warhol, Banksy, Pablo Picasso, Gerhard Richter, Robert Rauschenberg, Cindy Sherman, Louise Bourgeois, Sol LeWitt, Yayoi Kusama, William Kentridge, David Hockney, Olafur Eliasson, Henri Matisse, Roy Lichtenstein, and Joan Miró. These artists rank highest on Artfacts but are they worth investing in?
A detailed review of today's art market, as well as key data and trends, are outlined. Navigating this multibillion-dollar business, it is essential to shine a light on the structure and dynamics of the blue-chip art world, as well as information on art funds. Technological advancements greatly promote the classification of art as a new asset class. Artprice S.A., Sotheby's Holding Inc., and Artnet AG are a few of the leading art funds.

What is an art fund?
A fund combines money from different investors and the fund manager invests on their behalf. On the other hand, an art fund is where you invest and own a fraction of an artwork by a renowned artist such as Man Ray, Ai Wei Wei, Marcel Duchamp, Anslem Kiefer, Marina Abramovic, Hito Steyerl, and Alberto Giacometti for example. The concept of the art fund changes the notion of what it means to own something. We own a work of art in its physical form and suddenly this abstraction means creating an art fund which entitles you to a share of the artwork. The fractional ownership in terms of real estate, the passion and emotional asset is that if you detach this from it, you must require financial returns.

Today’s art market
As new market prospects and business models emerge on the internet and digital world, such as online auction houses, online databases, online and real-time market data distribution, online catalogues and fairs, artists' websites, and new communication channels, transparency grows. According to Art Basel and UBS Global Art Market Report, “the median expenditure on art and antiques by high-net-worth (HNW) collectors surveyed across 11 markets worldwide reached $65,000 in 2022, up by 19% in 2021. The median level in the first half of 2023 was reported at $65,000, indicating a potentially substantial rise for the year if spending continues. The majority of spending in 2023 was on paintings (58%), with works on paper the second-largest component (13%). The resurgence of in-person buying continued in 2023.”

Works of art differ from other asset classes in that their returns have a limited correlation with stock and bond returns. When art is included in an investment portfolio, the lack of connection minimizes risk and volatility. Because art is a sanctuary during times of high inflation, there is an increase in value preservation. Art preserves its value even as the purchasing power of currency deteriorates.
There is an increased democratization of art investments. Investors have several new ways to make art investments, whether through direct investments or fund investments. The private equity investment fund model is a long-term commitment, and new next-generation investments are mitigating these aspects to make it more tradable and more accessible. This is acceptable to the art world which works within a relatively delicate art market that has a lot of friction and is exponentially buying. Fine art can also be used as collaterals. Banks and financial institutions are offering more financial products around market collectables. It is both a combination of a visual and more art-friendly fund with a financial underpinning.

Art generally operates in unregulated marketplaces, often there are a lot of friction points such as insider trading, and reputational risks. Incorporating art and investments into a structure has been muted and unsuccessful until now, with the advent of this form or fractionalization within this framework, it could open up to more potential. The art world through these fractional investment schemes is moved into a regulated space. The market is still in its infancy and still very young but this art investment product structure will make it more advertising for banks to involve themselves in these types of products. The digital transformation scene in the art market is moving away from the analogue world to online and the growth of crypto. To defy or decentralized finance which is an entire alternative finance industry that is built around the crypto infrastructure is expanding significantly. Many companies emerged out of the infrastructure, and even though many of these elements revert to the abnormality, the hubris is disappearing, it will need something else to be provided to the art market and art collectables to have a slightly different position in the infrastructure.
Different types of art funds:

1. Art funds backed by banks:
Description: Art funds set up by an established bank. The fund product is often part of the ‘alternative asset’ offering and is targeted to certain HNW clients of the bank.
Strengths: The bank already has a captured client base, which in practice should facilitate the fundraising efforts. The infrastructure and expertise to set up an investment fund exist in-house and the banking of the bank provides credibility to the art fund product.
Weaknesses: The unregulated nature of the art market often makes it difficult to pass through the bank's strict compliance tests.

2. Dealer-backed art funds:
Description: A dealer-backed art fund can be a way to increase the capital base and purchasing power of an existing art dealer business. The fund will act as a liquidity facility/ working capital for the dealer to take advantage of opportunities in the marketplace.
Strengths: This could be an effective way of participating directly in the art market. The closeness of the dealer to the market means short-term opportunities can be capitalized on.
Weaknesses: The reputation and track record of the dealer are critical. The success rests solely on the expertise of the dealer.
Suitability: Investors that have already been buying and selling works through the dealer and trust their abilities. It offers the investors an opportunity to invest in a ‘talent’ and to help the dealer grow the business. Dealer-backed art funds are common in the sense that, they normally do not feature as public funds. They typically operate under the radar. They are structured as a private equity structure or mutual funds structure, with various shareholders that are investors.

3. Artist incubators
Fund or angel investors whose main purpose is to provide artists with financial support, mentoring, adequate working space, public exposure and introductions to leading galleries and collections. They work in a balance between patronage, support and financial. This provides a philanthropic approach where there is an initial acquisition of a body of early works and supports the production of new artworks, to ensure adequate working space, providing mentorship, and sponsoring the production of various marketing collateral. This model has a philanthropic approach.

Friday 10th November 2023 - 11:50 GMT

Trading bots have exploded in popularity due to the promise of automated profits. But like any technology, bots are far from foolproof. System failures, connectivity issues, and unforeseen market events can all cause algorithms to fail. Here we will look at why even a so-called "smart auto trade bot" can go haywire and how traders can manage the risks.

How Bots Can Fail

At their core, trading bots are lines of software code. That code can have flaws that lead to improper trades or system crashes. Bugs happen in all software, and trading algorithms are no exception. If not rigorously tested, simple errors could cause major losses.

A smart auto trade bot can also fail because of technical glitches. Unstable connectivity, hardware crashes, and exchange outages can all disrupt a bot’s trading. Even a brief disruption could allow major market movements during downtime. And complex bot strategies often rely on real-time market data. Any lag or latency in inputs can skew outputs and lead to errant trades.

Unpredictable market events also trip up algorithms. Volatility from news events, political turmoil, or black swan occurrences can exceed historical norms. If not coded to handle extreme scenarios, even the best bots fail when markets go haywire. Traders saw this in March 2020 when coronavirus crashed markets. Bots programmed for normal levels of volatility were rendered ineffective.

Guarding Against Failure Risks

No bot is failure-proof, but traders can take steps to manage risks. Thoroughly backtesting algorithms in a simulation before going live is essential. This allows for assessing performance across different market conditions. Traders can then optimize strategy logic and tune settings to build in more resilience.

Redundancy and risk management protocols also help minimize the downside if failures occur. Having backup internet links, alternate power sources, and parallel computing resources reduces single points of failure. Most critically, maintaining a kill switch capability allows immediately disabling a malfunctioning bot before losses mount.

However, the best defence is ongoing human monitoring and oversight. While tempting to “set and forget,” bots require regular supervision. Abnormal behaviour, errors, or performance divergences necessitate intervention. Prudent bot traders approach them as tools for enhancing human trading, not replacing it entirely.

Impact on Markets

Not only do individual bot failures impact traders, but cascading failures can affect broader markets. As algorithms become interconnected, glitches can quickly spiral. We saw this in the 2010 Flash Crash when high-frequency bots exacerbated a plunge in indexes.

To reduce systemic risks, regulators impose trading curbs and circuit breakers during volatile periods. However, some argue these safeguards remain inadequate to contain domino bot effects. Better coordination and kill switches between exchanges and traders could limit contagion. However, preventing all cascading bot failures remains challenging.

Ultimately markets evolve and bots adapt. Periodic failures lead to the next generation of algorithms more resilient to those scenarios. Predicting inflection points and black swans by definition remains difficult. However, incentivizing bot programmers to build in flexibility and fail-safes promotes overall market stability.

ChatGPT and AI Assistants 

Emerging technologies like ChatGPT hint at AI advancing to potentially "self-correct" and program bots with less human input. However, these conversational tools still lack market intuition and cannot trade. While an AI assistant could generate code, human oversight is still essential to train, test, and monitor for failures.

For now, no AI exists that can reliably replace human traders or programmers. Bots will continue failing without accountability. True autonomy to surpass human-level adaptability remains years away. However prudent integration of AI into existing workflows could eventually enhance failure recovery and lessons learned.

When bots stumble, recovery procedures kick in to contain the damage. But just as important is reviewing thoroughly to learn from mistakes. Diagnosing failure points and opportunistically improving is the key to better algorithms. Traders should ensure post-mortems on major bot failures become learning opportunities.

Of course, failures also impact confidence in deploying bots going forward. Periodic stumbles tend to make traders more conservative with positions and leverage. However, the risk of failure should not deter utilizing bots altogether. Rather, expectations just need recalibrating. Bots are tools to enhance human trading, not replace it. Once conditioned to their imperfections, traders can still benefit from their strengths.

Conclusion

Trading bots offer immense promise to automate profitable strategies. But like any technology, they remain prone to failure from flawed code, technical glitches, and unanticipated market turbulence. No “set and forget” bot exists. However, prudent risk management, ongoing monitoring, and learning from failures allow algorithms to strengthen over time. While failures are inevitable, traders who plan and adapt appropriately can still thrive in harmony with the bots.