Hungary is a jurisdiction with a strategic European location, well-developed economy, lots of skilled employees where hiring is not associated with astronomic costs. At the same time, it also provides favorable conditions to foreign investors. This country may be potentially promising for establishing a business here in view of many other advantages associated with the considered state.

Advantages of the Jurisdiction

A business decision related to company formation in Hungary is also associated with potential enjoyment of the next benefits this jurisdiction offers to investors and local businessmen:

• reputation of an existing stable and favorable framework for investments
• plenty of opportunities for handling business, including in such well-developed sectors of the economy as technologies, service industries, renewable energy, logistics, etc.
• skilled people for hire
• modern and convenient infrastructure
• well-developed banking system with many options to open an account for non-resident enterprises
• many opportunities for entering different European markets at a moderate cost
• low corporate income tax rates (among the lowest in the European region), lots of double-tax treaties, and incentives for businessmen (for small and middle-sized enterprises, different tax allowances, for R&D works, for instance).

If you want to get more precise information about benefits you may expect to enjoy in the areas of your operation or interest after company registration in Hungary, freely refer to Prifinance lawyers for getting a more detailed assessment.

Forms of Legal and Business Presence

The decision of company formation in Hungary or formalizing your local commercial presence in any other way may be practically implemented using one of these variations:

• Private Limited Liability Company – a local legal person that can be formed by both residents and non-residents, natural or legal persons, with the chartered capital of HUF 3,000,000. All financial responsibilities of founders towards the company and creditors are restricted exclusively to the amounts invested). The specificity of this legal person type is that limitation for shares transfers should be stipulated in its chartered documents (memorandum of association, in particular) – such cannot be transferred freely by default to third parties.
• Private Company Limited by Shares – a legal person where shares may be distributed among the participants and cannot be offered or freely sold to third parties. The chartered capital of this legal person should be HUF 5,000,000 at minimum. All shareowners will bear restricted liability for the results of this legal entity operation – only within the sums invested in this enterprise.
• Public Company Limited by Shares – this is a more complicated business structure that requires chartered capital of HUF 20,000,000 at minimum. The distinct feature of this legal person type is that its shares may be freely offered to third parties for subscription and sold by the shareowners without any restrictions. As its securities can be traded, this legal person is suitable for involving external financing.
• General Partnership – a much simpler variation for handling business matters where all partners take unlimited liability for all debts and responsibilities incurred as the consequence of these joint commercial activities – even their personal assets may be taken to cover potential losses. Still, this form is more flexible and easy to regulate than any type of company established in Hungary. Still, a partnership requires more close interactions between the partners. Their rights, duties, and obligations are stipulated in the partnership agreement.
• Limited Partnership – another variation for carrying out joint commercial activities (simpler than opening a company in Hungary) where can be (1) the so-called “general partner” who undertakes managerial tasks in this business formation but bears the risks for the results of the joint commercial activities entirely – even with his/her own property, and (2) the so-called “limited partner” who is not involved in carrying out managerial activities but who is in charge of possible debts and losses only within the limits of funds contributed.
• Branch – this is the simplest option for a non-resident company to start operation in Hungary with certain limits, however, – a foreign legal person is allowed to carry out only those types of commercial activities it is allowed to transact abroad only. This can be started after completing the local registration procedure.

These are general company forms in Hungary that may serve well for starting entrepreneurship in the considered state. The exact choice of business presence variation or legal and organizational form shall be made taking into account the types and peculiarities of activities subject to transacting. Prifinance lawyers are ready to advise you a bit on the point after getting initial details from you as well as develop a concrete registration plan suitable for your registration case and realize it practically.

Registration Requirements and Steps

The process of company formation in Hungary may preliminary take these approximate steps to pass:

1. Shortlisting commercial priorities and types of business activities you plan to conduct through a local legal person. Elaborating on your business plan.
2. Developing and checking titles for the anticipated legal person taking into account the rules applied to determining company names in Hungary. Reserving the final choice.
3. Pricking and arranging all required personal (for natural persons) and registration (for legal persons) details from founders. Requesting extra details about beneficiaries and managers of the future legal person.
4. Searching for and formalizing an official business address for the future legal person.
5. Forming a chartered capital of a future Hungarian legal person.
6. Composing and formalizing all required registration and statutory documents for a new Hungarian company.
7. Collecting all necessary forms and other documents requested for consideration with their further submission to the Hungarian Court of Registry of the Ministry of Justice. Including the details about a newly incorporated legal person to the Hungarian Commercial Register.
8. Registration for the purposes of paying taxes and hiring employees.
9. Searching for banks, negotiating the details of accounts opening for a company in Hungary.
10. Lodging fillings for granting extra licenses and permits that may be necessary for starting operation in certain sectors.

This is an approximate scheme of how the process of company registration in Hungary flows. Prifinance lawyers will be able to develop a detailed and individualized action plan for incorporating a legal person in your concrete case.

Legal and Regulatory Framework

The local business and regulatory provisions are investigated to be suitable for prompt and easy start and doing local business, including by non-resident investors. The country suggests equal opportunities both to residents and foreign persons who wish to explore local opportunities for entrepreneurship. Such opportunities are open to businessmen in the industry, service, and trade areas – all of them are well-developed in the state. Also, non-resident investors may obtain certain incentives in specific sectors. This leads to a continuously high rate of foreign investments in the local economy.

The ease of the process of company registration in Hungary adds points to this jurisdiction. It doesn’t take too long to create a company in Hungary and the position of local authorities is business-oriented – the process lacks bureaucratic formalities to the benefit of interested businessmen. Among all advantages offered by this jurisdiction, the absence of withholding tax on dividends that will be paid to foreign investors should be noted.

Thus, it is necessary to keep in mind that local legislation is entirely adapted to European standards, including with regard to compliance. All applicable requirements, including in terms of money laundering prevention, should be strictly adhered to by a company incorporated in Hungary.

The most important legal acts whose provisions extend their force on the enterprises transacting locally are the Civil Code of Hungary, the Act on Business Associations, the Act on Corporate Tax and Dividend Tax, the Act on Accounting, and the Labor Code. Among state authorities, foreign businessmen will likely to deal with while starting and operating through a company in Hungary are the Hungarian Court of Registry of the Ministry of Justice (maintains the Hungarian Business Register), the Hungarian Financial Supervisory Authority, and the National Bank of Hungary.

Tax System in Hungary

Any company registered in Hungary has to pay taxes applying these rates:

• Corporate income tax rate (generally-applied CIT rate) – 9%
• Personal income tax rate (generally-applied rate) – 15%
• Value-added tax rate – 27%
• Withholding tax rates applied to foreigners – not foreseen
• Capital gains tax rates – (1) corporate – see the generally-applied CIT rate and (2) personal – see the generally-applied PIT rate. There are also specific provisions applied to determining the sums of taxes due in certain cases.

How Prifinance Specialists May Help You

If you are in doubts about a potential jurisdiction for starting entrepreneurship abroad or want to get more information about how to register a company in Hungary, Prifinance lawyers are ready to be of service for you and ensure the subsequent aspects:

• assessing all suitable business-registration options and suggestions the best one for your concreter case
• making all required arrangements to launch and complete the company registration process
• handling all required negotiations with local partners and state authorities
• dealing with local banks
• supporting the further operation of a newly-established legal person after finishing the company formation process.

We offer prompt company registration and bank account opening services in Hungary and worldwide. New registration and ready-made options. Provide extensive details for more precise consultations and suggestions that can be effective for your future project.