A TCN’S pocket guide to success in Hungary
Individual Entrepreneurs and the Gainful Activity Residence Permit
In our series, A TCN’s pocket guide to success in Hungary, we have walked our lovely readers through the basic steps of applying for an employment resident permit. In Part One: Navigating the ‘Work Permit’ in Hungary: What are Your Options?, we went back to the basics and outlined the key definitions and processes you need to be aware of when looking into the ‘Work Permit.’ In Part Two: Popping the “Big Question” to your Hungarian Employer, we went over some tips and tricks on how and when to pop the big question to your future employer… “will you…sponsor my employment RP?” Finally in Part Three: What do TCNs need to do?, we broke down the basic document categories you will come across, as well as the specific forms that you will need to submit, when applying for this employment residence permit.
However, as many of us know, securing an employment residence permit can be very tricky, and sometimes having one employer sponsor your residence permit isn’t the best case scenario for everyone. For example, what if you are a TCN who wishes to work for multiple clients as a private entrepreneur? TCNs who would like to make their income by providing services to multiple entities and or individuals will not find the employment residence permit conditions under which they must work ideal. If this sounds like your situation, then please dear reader, read on. Because this article is dedicated to those TCNs who are interested in the Residence Permit for the Pursuit of Gainful Activity.
So, what is this “Residence Permit for the Pursuit of Gainful Activity,” (i.e. ‘Gainful Activity RP’) exactly? Well, the Gainful Activity RP can be given to a TCN “whose purpose of residence […is to either…]
- lawfully perform work in a self-employed capacity for remuneration; or
- to engage in any gainful activity in the capacity of being the executive officer of a for-profit business association, cooperative or some other legal entity.”
Need a translation?: Basically, let’s say you’re a TCN living in Hungary who is a language teacher, online marketer, graphic designer, or simply someone with a marketable skill or service that you plan to sell. You are familiar with the Hungarian market and are confident that you will be able to support yourself based on the income generator from your individual entrepreneurial activities. If you also do not plan to work for one specific employer alongside your entrepreneurial ventures, then the Gainful Activity RP may be a good option for you! It will give you the flexibility to work for and with multiple clients, properly register your activity so you can pay the correct taxes, and will also give you stable legal residence for up to three years.
As always, the specific procedure and requirements depend on the individual situation of each TCN. However, in general, we can tell you that the process usually takes around 2-3 months. The basic immigration papers you have to provide are very similar to those we listed in Part Three: What do TCNs need to do? article, so please check this link for the full list of basic documents and their explanations. The basic differences between the documents listed for the Employment RP and the Gainful Activity RP application have to do with taxation and proof income documents, as well as projected income based on planned business activities.
So, save your neurons and hang on to your sanity and read the following case study to see how the procedure can look in the scenario described below:
Example Case Study: Bruno Asad (Employment to Gainful Activity RP)
Meet Bruno Asad: Bruno is a 33 year-old Albanian national who has been living in Hungary for about four years. He came to Budapest to earn his Master’s from a Budapest-based university and, when he graduated, he secured full-time employment with a Hungarian employer. Alongside his formal employment, Bruno also registered as a sole proprietor so he could teach Albanian and English to adult learners. He issues electronic invoices as he is registered part-time under the KATA tax system. Over the past year, Bruno realized that the demand for his services is growing and that he would like to work full-time as a language teacher and translator. As such, Bruno has decided to transition from his Employment RP to a Gainful Activity RP. This is, of course, not a problem! Bruno will simply need to be aware of procedural requirements and key deadlines in order to successfully transfer from one permit to the other.
First, Bruno will need to discuss with his current employer that he will be leaving the company. This is important because Bruno’s employer must file formal employment exit papers – usually the ideal option is to file a termination of employment by mutual consent papers. Ideally, this should be done at least one month before the final date of employment.
After these papers have been properly filed, Bruno should be making arrangements with his KATA, as well as gathering the necessary residence permit application documents. Since he will be using his KATA full-time, he will need to change his part-time status to full-time about one week before the final date of employment listed in his exit papers. This will give the system enough time to register his new full-time entrepreneurial status.
In addition to this procedure, Bruno should compile and complete the following documents:
● A copy of a valid TAJ card (this demonstrating health insurance coverage)
● Documents supporting the financial conditions necessary to live in Hungary – this can come in the form of six months bank statements in a Hungarian account. This demonstrates not only subsistence, but shows the income that has been made from entrepreneurial activity.
● Documents demonstrating Hungarian accommodation and valid work address – this will be important because it shows that you will have a valid address and place to live, as well as an address where your business is registered.
● Official translation of diploma/education papers (demonstrating and proving qualifications)
● Employment exit papers – proof of filing
● NAV & tax papers
● income certificate about employment and KATA income
● Zero certificate – get to show that you don’t owe any taxes
● 6 month of invoices and valid contracts
● Download tax statement that everything has been paid – would be better to do before end of year
● A business plan outline economic activities – this document is one of the most important documents that you will submit. From this document, the authorities should be able to understand what it is you have already achieved (as an individual entrepreneur) and how, moving forward, you will prosper to ensure that you will be able to support yourself as an entrepreneur. The contents of the business plan must be verified by credible means, such as, in particular, by supplying a works contract, a personal services contract, an agreement, or a supply or sales contract. In terms of length, it should be between 8-10 pages. Our experts have suggested it’s helpful to make the business plan colorful – add links to previous work/projects, include pictures of yourself with clients while you are performing work, include pie charts which break down who your main clients are and what type of accomplishments you have achieved whilst working under KATA already. After demonstrating completed work, the business plan should also provide projects for future earnings for the next three years. It also helps to demonstrate that the activity that you will be performing must be done in Hungary and will specifically benefit Hungarian people. This is not necessary, but it certainly gives your application an edge when you can demonstrate how you as an entrepreneur are assisting the Hungarian economy and people.
A key aspect of timing that Bruno should remember: by the time the exit papers are filed and the stated termination comes into effect, Bruno should submit his new application for Gainful Activity RP. So, if Bruno’s last day of employment is December 1st, he should be sure to file his new Gainful Activity RP application on December 1st.
 TCN Tip – make sure that the place where you have registered your address has an indefinite validity period. This is important because your permit duration will be tied to the contract’s validity period.
Photo credit Monstera Production – https://www.instagram.com/monstera_production/