COMPANY IN HUNGARY

Hungary is a state in Central Europe that is not as popular as France or Germany but provides similar business benefits. Registering a company in Hungary guarantees that the company will operate in a completely “white” jurisdiction. This automatically means a high level of confidence in the business and the transparency of its operation for counterparties.

Hungary consistently ranks top in terms of ease of doing business in Europe. Geographical location, appropriate tax regime and multiple connections with the rest of the regions make this country an excellent place to start your own business. The tax burden must be noted, which is considered one of the most loyal in the EU (the income tax rate is only 9%).

What form of business is it better to register?

Like with most other EU countries, a limited liability company (Kft) is the most beneficial organizational and legal form of doing business. It has the following features:

• the minimum authorized capital is 3 mln Forints (a bit more than 8.5 thous. Euros);
• the owner can be a non-resident, but the director must be a resident at the time of registration (it can be replaced by a foreign person afterwards);
• strict requirements for the types of activity (each type has its own classification code);
• the minimum number of participants is 1 (director).

An enterprise may register new activities over time, but it must provide the registrar with clear information about its planned operation first. A simplified procedure for registering a company has been in effect in Hungary since 2020, which allows to open a business without depositing authorized capital. The required capital must be available on the account of the director.

What documents are required?

Hungary is quite loyal to the procedure for starting a business on its territory. The following documents are required to register a company in Hungary:

• memorandum of association (with minutes);
• charter;
• application for registration (a special form approved in the country).

Documents can be drawn up in either English or Hungarian. All prepared certificates are submitted to the registration court. Cortax helps a business to settle in Hungary — we translate all the necessary documents and submit them to the registrar.

Specifics of the company registration in Hungary

The following issues must be taken into account when opening a business in Hungary:

• company founders can be either individuals or legal entities;
• no residency requirements;
• company members can pay 50% of the contribution before the registration;
• 1 resident director is desirable;
• all information about the company management is publicly available;
• minimum number of shareholders is 1.

If the company has only 1 shareholder also acting as a director, they must make contributions to the pension and insurance funds. You can register a business with the participation of 2 shareholders to solve this problem or appoint another person as a director.

Information about the company beneficiaries is recorded in special registers. They will be required to provide passport information.

Like in other European legal orders, Hungarian legislation places special requirements to the name of the registered organization. The name must be unique and end with KFT.

Each company must have a legal address. In this case, a physical office is optional (if there is one, a special nameplate with the company name must be placed next to the office). Cortax can help obtain an appropriate legal address, if the company faces any difficulties in finding one.

Following the results of the organization registration in Hungary, the state register issues a Decision to the applicant with all the information on the registered company. In addition, the body also provides electronic versions of all documents: decisions, charter, list of members, signatures, and letters of consent.

What taxes exist in Hungary?

It is especially important for each enterprise to know the tax burden in the country of the desired registration in advance. The following types of taxes exist in Hungary:

• corporate rate is 9%;
• municipal rate is from 0% to 2%;
• VAT. The basic rate is 27%, but reduced rates of up to 15% are more common in practice;
• mandatory contributions. The rate is 27.5% for employers.

There is no dividend tax in Hungary. However, the minimum wage must be noted (for employing organizations), which is 127,650 Forints for 2021 (about 425 Euros).

The tax burden in Hungary is quite low for businesses, compared to other highly developed European countries. This opens up the opportunity to take full advantage of the “white” jurisdiction and the region in general. The Cortax mission is to help a business open in Hungary by translating the necessary documents, notarizing them, and finding legal addresses and other services.