Company Registration in Hungary

Legal regulation and zero tolerance for bureaucracy

Hungary offers a legal framework that's characterized by efficient regulation and an aversion to bureaucratic hurdles. Companies intending to register here must navigate the nation's Civil Code, Corporate Tax Law, and Dividend Tax Law. To comprehensively grasp the legal requisites for obtaining a license in Hungary, seeking guidance from YB Case's legal advisors is recommended. Remarkably, a non-resident can establish a company in Hungary without encountering cumbersome administrative barriers.

A cornerstone objective of the Hungarian government is to establish a stable, predictable, and transparent legal environment. This endeavor involves continuous enhancement of the legal framework, the formulation of incentives, and the provision of benefits. For instance, dividends paid to foreign investors are exempt from withholding tax. However, in accordance with the Law on Entrepreneurial Activity, foreign companies are mandated to undergo auditing.

What prompts foreign entrepreneurs to select Hungary?

In 2024, the registration of companies in Hungary was accompanied by a range of monetary incentives, courtesy of both the government and EU funding. Entrepreneurs are further entitled to:

• Tax advantages
• Access to low-interest loans
• Opportunities for land acquisition (either free or at subsidized rates)
• Highly qualified workforce, particularly appealing to investors specializing in high-tech sectors, IT, and engineering.

Apart from the tax and financial incentives, entrepreneurs are drawn to Hungary for various other reasons:

• Expedited business registration (within just 5 working days)
• Unrestricted movement of capital and workforce within the EU
• Unhindered trade with fellow EU member states
• A competitive corporate tax rate of 9%
• Permission for 100% foreign ownership
• Modest startup capital requirements
• Supportive visa policies and the prospect of securing a residence permit
• Well-developed infrastructure, complete industrial sites, office spaces, and science parks
• A developed banking system
• Conducting all business activities and transactions in English, streamlining operations for international entrepreneurs.

How to register a company in Hungary?

Registering a company in Hungary involves several steps and the submission of specific documents. Here is an overview of the main steps and documents required:

• Select a legal structure
• Prepare documentation
• register a name;
• Open a corporate bank account in a Hungarian bank
• Contribute authorized capital
• Register an address
• Apply to the Commercial Register;
• Obtain a Tax Identification Number and Social Insurance Registration
• Obtain licenses

The documents required to register a company in Hungary depend on the type of legal structure chosen. Support in obtaining a license also includes the careful preparation of the Memorandum and Articles of Association of the future private or public company.

Entrepreneurial activity and residence permit

Entrepreneurs (directors and managing partners) from non-European countries who are ready to invest in the Hungarian economy are provided by the Hungarian Government with the opportunity to obtain temporary (three years) and permanent residence permits.

Obtaining a permanent residence permit is possible after the expiration of three years and the provision by the investor of evidence of the profitability of the company.

Opening a Bank Account in Hungary

In general, foreign residents encounter no barriers when seeking to establish a bank account with a Hungarian financial institution. Prominent choices among non-resident entrepreneurs are OTP Bank, K&H Bank, Erste, and CIB Bank. These institutions provide a comprehensive range of essential services, along with the option to open accounts in Hungarian Forint (HUF), Euros (EUR), and US Dollars (USD), catering to the demands of international transactions.

The process of opening a bank account in person is mandatory feasible. Alongside this, you are required to present documents that substantiate your registration at a Hungarian address, in addition to a valid residence permit or a work visa. Additionally, a preliminary deposit is requisite.

How to start a business in Hungary: choosing a business form of a company

Starting a business in Hungary involves selecting the right business form for your company. The available options include

• General Partnership (KKT)
• Limited Partnership (BT)
• Joint Stock Company (RT)
• Limited Liability Company (Kft)

Here's an overview of each option:

Registering a Limited Liability Company (Kft) in Hungary

It is Important:

• Suitable for medium and small businesses.
• The minimum capital required for registration is 7,000 USD.
• Founders and directors can be non-residents.
• Mandatory filing of annual financial statements with the Registrar of Companies.
• Shares cannot be sold on the stock exchange.

Registering a Joint Stock Company (RT) in Hungary

It is Important:

• Types: Public (Zrt) and Private (Nyrt) forms.
• Requires a board of directors.
• Requires at least 3 directors (non-residents allowed) and 1 shareholder (non-resident allowed).
• A substantial initial share capital (66,475 USD) is required upon registration.
• Appointment of a certified accountant is necessary.
• Mandatory annual filing of financial statements.

Registering a General Partnership (KKT) in Hungary

It is Important:

• Partners have unlimited liability for the partnership's activities.

Registering a Limited Partnership (BT) in Hungary

It is Important:

• Requires at least two partners, including a general partner (unlimited liability) and limited partners (limited liability).

Registering as an individual entrepreneur in Hungary is also available.

Establishing a trust in Hungary involves appointing a resident trustee who will manage the assets. The founder and beneficiaries can be non-residents. There are no restrictions on the types of assets that can be placed in trust.

Establishing a foundation in Hungary requires a minimum capital of about 2 million USD. At least 3 trustees are required, all of whom must be individuals. Additionally, at least 2 of the trustees must reside in Hungary.

Foreign companies can establish a branch in Hungary. The Representative Office in Hungary establishment is for non-commercial activities. For both branches and representative offices, a local representative needs to be appointed to fulfill legal and administrative requirements.

Taxation

• CIT one of the lowest 9% in Europe
• Local Business Tax Location determines the rate from 0% to 2%
• VAT 27%, does not apply to businesses that buy/sell goods and services outside the country
• Dividends Tax in most cases, 0%

Obtaining a Hungarian Business Visa

The Hungarian government extends business visas, also known as entrepreneur visas, to international businesses seeking to invest in the nation's economy and operate here. This visa category offers a prime avenue for establishing startups in Hungary. However, accomplishing this goal necessitates a personal visit to Hungary to initiate the process of opening a company's bank account in Hungary. Alternatively, entrepreneurs can leverage a Schengen visa for entry into the country.

Note: Hungarian business visa furnishes a residence permit for the startup's founder and for their entire family as well.

The process of business registration in Hungary typically spans about 7 days. The Hungarian government diligent efforts to streamline the incorporation by minimizing bureaucratic hurdles. For guidance or assistance in navigating of business operations, feel free to reach out to YB Case representatives using a method that suits your convenience.

What are the rights of a non-resident opening a company in Hungary?

Non-resident individuals are entitled to the same rights as the local interpreneurs.

How long does the incorporation process take?

It typically spans a duration of 7 working days, contingent upon satisfying all licenses prerequisites and providing accurate documentation.

How do I initiate the incorporation process in Hungary?

• Choose a legal structure.
• Register business name with the Registrar of Companies.
• Submit the application, accompanied by the requisite documents, to the Commercial Register.
• Establish a business bank account.
• Acquire the necessary licenses and permits.
• Register in tax and social security authorities.