Guide to Company Registration in Hungary for Foreigners

Are you looking to set up your business in Europe? If yes, then you should consider incorporation your business in the thriving economy of Hungary. Hungary is one of the most ideal locations for business incorporation. With a corporate income tax rate of 9%, the nation has the lowest tax in the European Union, which attracts entrepreneurs from all over the world. The 54th biggest economy on the planet is that of Hungary, and the nation is also ranked 41 globally in terms of GDP per person as calculated using purchasing power parity. 

The country’s economy is substantially influenced by the automobile, telecom, computers, food manufacturing, textiles, and chemical industries. Approximately 50 per cent of the GDP and nearly 65 per cent of the workforce were employed in the services sector. The tourism sector of the nation greatly contributed to the nation’s development. This makes company registration in Hungary a favourable choice for entrepreneurs.

This article discusses how an entrepreneur can register a company in Hungary. Additionally, the documents, criteria, advantages, and cost for company formation in Hungary are also briefly covered. 

Why register a company in Hungary?

• Hungary has the lowest rates of corporate taxation in the European Union at just 9%.
• In Hungary, operating a business is much less expensive than it would be in the UK or other parts of Europe.
• Hungary’s economy is based on exports. Automobiles, medicines, plastics, hospital instruments, and rubber products make up the majority of its exports.
• Hungary offers affordable business establishment costs.
• In comparison to Western Europe, Hungarian salary and wage levels are quite modest.

Procedure for Company Registration in Hungary

In order to register a company in Hungary the following process must be followed:

1. Choose the legal entity

The initial step for Hungary company registration is to choose the legal form of your business. An entrepreneur can set up a sole proprietorship, an LLC, a branch office, or any other form of business.

2. Decide on a business name

The selected business name should be recognized, and genuine, and should not violate the rights of another individual or entity.

3. Prepare the company documents

Based on the type of firm, the entrepreneur can prepare the necessary documents required for company registration in Hungary such as the article of association, the statutory documentation, etc.

4. Open a business bank account

An entrepreneur has to open a business bank account and deposit the required share capital in the bank.

5. Register with the Court of Registration

All firms in Hungary have to register with the Court of Registration and submit the required documents along with it.

6. Register with the tax authorities

Registration with the tax authorities and the social security system is a requirement for all firms in Hungary.

7. Acquire business licenses

Organizations should also apply for various business licenses depending on the industrial sector in which the firm will operate.

Documents required for company formation in Hungary

Here is the documentation needed for the company formation Hungary:

• Name and activity of the business
• Proof of paid-up share capital
• Details of the registered office address
• Memorandum of association
• Article of association

Business Entities for Company Registration in Hungary

The various business entities in Hungary are discussed below:

Limited Liability Company

A Hungary LLC can be created with just one shareholder and one director, both of whom can be from any country and are not obliged to live in Hungary on a regular basis. In a Hungary LLC, entrepreneurs may possess all of the stock. A minimum share capital of 3,000,000 HUF is required to form an LLC.

General Partnership

People who want to engage in business activities can form general partnerships. In a general partnership, the partners’ responsibilities are shared and unlimited. There is no minimum amount of capital required to incorporate a general partnership. 

Limited Partnership

One general partner and one limited partner are required for a limited partnership in Hungary. For a limited partnership to be incorporated, there must be at least two members. At least one partner has a responsibility that is only capped at the amount of his investment, whereas the other member has unlimited responsibility.

Joint Stock Company

In Hungary, a joint stock company can be either private or public, depending on whether or not its stocks are offered to the general public. A JSC must have a minimum of one shareholder who can be of any nation. For a private JSC incorporation a required share capital of 5 million HUF is necessary. Similarly, a public JSC a required share capital of 20 million HUF is needed.

Branch Office

The branch office may be appropriate for international corporations who wish to establish a presence in Hungary and meet the criteria for carrying complete responsibility for the branch.  Although a branch office lacks legal identity, it is permitted to conduct commercial operations in Hungary as a subsidiary of its parent corporation. The enrollment cost for a branch office is 50,000 HUF.

Eligibility Criteria for Hungary Company Registration 

Here are the criteria that must be fulfilled for company registration in Hungary:

• Shareholder: To register a company in Hungary, at least a minimum of one shareholder is necessary.
• Director: To register a company in Hungary, at least a minimum of one director is required.
• Registered business address: It is essential to have a registered business address in Hungary.
• Bank account: The business needs to have a bank account in Hungary.
• Minimum required capital: At least a capital of 3M HUF is needed for Hungary company registration.

Taxation Structure in Hungary

Firms incorporated in Hungary have to enrol with the appropriate tax authorities and pay the necessary taxes.

The different taxes that companies in Hungary are required to pay are listed below:

1. Corporate income tax (CIT): The rate of corporate tax in Hungary is 9%.
2. Personal income tax(PIT): The personal income tax rate in Hungary is 15%.
3. Value-added tax: The rate of VAT in Hungary is 27%, however, lower rates of 18% and 5% are also applicable to certain products.

Cost for company registration in Hungary

The different costs involved in registering a company in Hungary must be taken into account whenever an entrepreneur considers starting a business. For Hungary company registration, an entrepreneur has to consider the business incorporation expenses, registered office address cost, fees for enrolling with the tax authorities, etc.

Here are the various costs for company registration in Hungary:

• Limited partnership firm filing fees are HUF 50,000.
• Limited liability companies and privately held companies with a share capital must pay about HUF 100,000 to register as a business.
• The minimum capital that is required to be deposited in the bank is 3,000,000 HUF. 

Advantages of Hungary company registration

The numerous advantages of Hungary company registration are listed below:

Tax advantages

With a corporate tax rate of about 9%, Hungary has one of the lowest rates in the European Union. In addition to that, the nation has several double taxation treaties with almost 80 countries in order to avoid being taxed twice. Neither businesses nor private persons are subject to any withholding taxes or dividend taxes.

Affordable and skilled workforce

In comparison to the majority of other EU nations, Hungary’s average salary is quite low. The workforce in Hungary is often well-skilled and better qualified. In the corporate world, English is a commonly used language.

Lower maintenance cost

In comparison to the UK or Western Europe, Hungary has much lower maintenance costs for businesses. This implies that you may retain the central location and cosmopolitan ambiance of Budapest while hiring top personnel for less money than you would be required to pay somewhere.

Gateway to Europe

Hungary is a part of the EU and is ideally situated in the centre of Europe. It is still a significant commercial and social centre in the region and served historically as a bridge between Eastern and Western Europe. Opening a company in Hungary gives immediate access to all of Europe. 

Conclusion

With access to approximately 450 million consumers in the European Union, Hungary is a great location for company incorporation. Company registration in Hungary also provides additional benefits to an entrepreneur, such as decreased maintenance expenses, double taxation accords, and no withholding taxes on dividends, interests, or royalties paid to non-individual beneficiaries.

If you want to register a company in Hungary, you can get in touch with our company formation experts. Our experts will guide you through the incorporation procedure.