Registration of a company in Hungary

Hungary is one of the most favourable jurisdictions in view of its geographical position, highly developed and stable economy. For certain businesses, this country may provide extra opportunities. Prifiance specialists may consult you more precisely on the exact benefits you may potentially enjoy while doing business here. This short country’s profile may help you while considering Hungary as your target jurisdiction.

Forms of Legal and Business Presence

If you intend to establish your corporate presence in Hungary, it is allowed to accomplish in these major forms:

• Limited Liability Company – a vehicle that can be established after its founders have formed the initial statutory capital in the amount of HUF 3,000,000. The liability of business partners for all undertakings, in this case, is restricted to the value of contributed amounts only. The shares cannot be offered to the publicity. The personal property of founders (shareholders) cannot be used for covering the vehicle’s losses, except for certain cases. This entity may be incorporated by natural persons or entities. They can be both residents and foreign natural and legal persons. Zero restrictions are applied in this case.
• Private Company Limited by Shares – a vehicle with the minimal initial statutory capital in the amount of HUF 5,000,000. The ratio of contributions in cash should not be less than 30% at the time of incorporation also. Its shares can be freely transferred and the founders (shareholders) bear liability for all undertakings only within the nominal or issued value of owned shares.
• Public Company Limited by Shares – this business formation should have the minimal initial statutory capital of HUF 20,000,000. The amount of contributions in cash should not be less than 30% at the time of incorporation. The shares may be offered to the public. Such shares can be ordinary, preferred, redeemable, etc.
• General Partnership – this is a business formation established by partners for conducting joint commercial activity provided that their liability for all partnership’s undertakings is unlimited. This formation doesn’t have any separate legal personality.
• Limited Partnership – a business formation that can be established by at least two partners among which there are (i) at least one general partner who bears unlimited liability for all partnership's undertakings, and (ii) limited partners whose liability is restricted exclusively to the amount of the contributions made. In this case, the partnership also doesn’t hold a separate legal personality.
• Branch – this is a suitable form of business presence for foreign entities who intend to explore business opportunities of this jurisdiction without investing significant amounts at the moment of incorporation.

Registration Requirements and Steps

If you consider an option of company formation in Hungary, you may need to pass these preliminary steps:

1. Defining your business priorities and composing a business plan.
2. Choosing the business name for a future company and verifying its availability.
3. Collecting information about founders and beneficiary owners.
4. Searching for managers of the future company. Usually, the Board of Directors should comprise three persons. But, the vehicle’s statutory document may allow a single director to run this vehicle. It is advisable to choose a local director for incorporation and running a vehicle in Hungary.
5. Arranging the formation of the vehicle’s statutory capital. The most simple approach, in this case, is transferring contributions to the future director who executes a respective statement of confirmation in writing. Later this sum will be reflected in the records of the prospective vehicle.
6. Choosing the registered address for a future vehicle.
7. Drafting statutory documents.
8. Forming the set of registration documents (all documents not in Hungarian have to be previously notarized, apostilled and translated).
9. Submitting the set of registration documents to the Hungarian Court of Registry of the Ministry of Justice.
10. Registration for tax purposes (VAT-registration is made by default).
11. Registration for social security purposes.
12. Opening a bank account.

Legal and Regulatory Framework

The Hungarian legal environment may be considered as generally favourable. Hungary applies measures for promoting the development of various sectors of the economy. Production and service industries are major focuses of the Hungarian state policy. Still, investments are encouraged – foreign businessmen may enjoy certain incentives. In the outcome, Hungary has a high percentage of foreign direct investments.

The procedure for establishing a company in Hungary is not burdensome and costly. Hungarian authorities make certain steps for simplifying the procedure of establishing and doing business in the country. Another very beneficial opportunity for doing business is that dividends paid to non-residents are exempted totally from withholding tax. Still, the Hungarian Business Law has quite strict requirements to compliance as companies should keep all required documents, records and hold audits where legislation requires this.

The major legal acts regulating the procedure of establishing and running a business in Hungary are the Civil Code of Hungary, the Act on Corporate Tax and Dividend Tax.

Advantages of the Jurisdiction

If you intend to open a company in Hungary, you may potentially enjoy these benefits:

• This jurisdiction has a strategic location
• Reputable European country that provides numerous opportunities in major European markets
• Fast development of certain industries, like services, electronics, technologies, renewable energy industry, logistics, etc.
• It has advanced and modern infrastructure
• Stable export-oriented economic
• Qualified and experienced employees
• Plenty of double tax treaties
• One of the lowest corporate tax rates in Europe
• Developed and stable banking system
• Ability to open a bank account fast
• Comparatively prompt and cheap procedure for the company registration

Tax System

• Corporate income tax (CIT) rate – 9%
• Personal income tax (PIT) rate – 15%
• VAT rate – 27%
• Withholding tax rates for non-residents – not applicable
• Capital gains tax rates – (i) corporate – equals the standard CIT rate and (ii) individual – equals the standard PIT rate.

How Prifinance Specialists May Help You

If you consider Hungary as your potential target jurisdiction, Prifinance specialists may consult you more precisely whether it can assist you in pursuing your business goals as well as suggest alternatives. Our specialists will be glad to calculate preliminary the amount of taxes due emphasizing commercial activities you are going to conduct in Hungary. We will be also glad to consult you more precisely on the specifics of the setting up procedure and running business in Hungary, make all required arrangements, and open a bank account for a future vehicle. Our specialists will also support your business further in resolving any matters that may arise. Reach us shortly for more precise discussions and suggestions.