Registration of a company in Hungary

If you wish to open your own business in Europe, one of the possible and best options may be registration of a newly established enterprise in Hungary. The country remains interested in attracting foreign investment, constantly introducing new reforms, attracting potential businessmen with low tax rates and loyal laws.

At the same time, you get the opportunity to obtain a temporary residence permit, which can later become the next step towards naturalization in Europe. Registration of a new company in Hungary can also be interesting due to the fact that there are no strict requirements for citizenship of the founders, shareholders and directors.

Why you should consider registration of a company in Hungary

What is Hungary? This country is located almost in the center of Europe and has a fairly stable economy with a steady development trend. The annual growth of the gross product is about 5%, which is a serious result even for developed countries.

Hungary is an important “transshipment point” on the way of import-export of many goods. Here are some of the lowest tax rates, as well as attractive conditions for non-residents who want to open their own business. The country is one of the leaders among other countries of the European Union in terms of attracting foreign investment.

The tax legislation in the country is very friendly and has minimal tax rates. All taxes are clear and “transparent”, so you can plan the development of your business for years to come. As an example, consider the amount of corporate tax, the rate of which is 9% of profits.

The tax on dividends in Hungary has been abolished, which may be interesting for business in the holding format. It is also worth noting that Hungary has an agreement with more than 60 countries around the world regarding double taxation. You will pay taxes in the country where you conduct business.

It takes a minimum of time to open an account with any Hungarian financial institution. Banks are quite favorably disposed to new customers, who, moreover, may be non-residents of the country. You can establish a new Hungarian company and open any number of accounts for it.

It is allowed to circulate both the local currency (forints), and euro, dollars and other convertible currencies. You can easily obtain a loan at a minimum interest rate when conducting business in the country, and there are a lot of Russian-speaking staff among banking specialists.

As for obtaining a temporary residence permit in Hungary, you have the right to apply for it after registration of a new company. The status is issued for one year, after which it shall be prolonged. Three years after establishing a company in Hungary you can apply for permanent residence in the country and, in the future, for citizenship.

Of course, there are some nuances that you should pay attention to when starting a business in Hungary. One of them is mastering a rather difficult language, in which all business documentation will have to be kept.

Experts recommend taking courses of the Hungarian language, as well as hiring local accounting specialists who are familiar with all the nuances of accounting in the country. It will also be possible to use the services of outsourcing companies that can provide freelancers for your business in any area of your interest.

Summing up the above, we note the main reasons for starting new business in the country:

Developing economy with stable growth of gross product at the level of 5% per year;
Good conditions for investors in various fields;
No requirements for the availability of Hungarian citizenship for the founders, shareholders and directors of a new company;
Opportunity to reach a new level and expand the number of European clients and partners;
You can open representative offices of the company in any other country of the European Union;
Favorably disposed conditions for non-residents investing in the economy;
Almost complete absence of bureaucracy;
High level of trust in Hungarian companies from foreign partners;
Valid agreements with dozens of countries regarding the absence of double taxation;
Minimum corporate tax;
No taxes on dividends;
Possibility of registration of the Hungarian value added tax number in automatic mode;
Possibility to establish holdings with attractive working conditions;
Loyalty of the country’s financial institutions to the founders of Hungarian companies;
Possibility to obtain loans at minimum rates;
Possibility to open accounts in different currencies, including not only forints, but also euros, dollars, rubles, and so on;
Possibility to obtain the status of a temporary residence permit;
You get a chance to travel freely in the countries of the Schengen area without a visa;
Fairly affordable cost of living compared to other European countries.

An important point is that you cannot buy an already existing and operating Hungarian company, however, no one forbids you to re-register it in your name or in the name of a new director. You can find out all the nuances and other questions interesting to you from the specialists of our company by phone numbers listed on the site.

Organizational legal forms when choosing a new company

Which option and type of a new company to choose when registering it in Hungary? The question is quite important, since each of them has its own advantages and disadvantages, ranging from the responsibility of the founders to the size of the authorized capital.

As a rule, most often newly established Hungarian enterprises are of the Korlatolt Felelossegu Tarsasag (KFT) or Reszvenytarsasag types. The Korlatolt Felelossegu Tarsasag format of a company is almost a complete analogue of a well-known domestic limited liability company.

Registration of a newly established company ends with signing of a memorandum, you will also need a new articles of association and an elected director or a collective management body. You can register a company only at a real legal address.

The owners of a company can be individuals or legal entities, and there are no requirements for their citizenship, nationality and other parameters. The founder must be at least one person. Please note that many financial institutions in Hungary are quite meticulous about companies with multi-level management structures.

For this reason, experts advise starting a company headed by one person, this simplifies opening of a new bank account, for example. In the future, you always have the opportunity to change the format of ownership, replacing one private owner with a council or a legal entity.

The Korlatolt Felelossegu Tarsasag companies shall hold annual meetings of shareholders. The minimum authorized capital shall amount to 3 million forints or €10,000. These funds must be paid even before the submission of a package of documents to the relevant registration authorities.

After opening a savings account and depositing the minimum amount of authorized capital into it, you will need to take a certificate of account status at the bank, which is necessary to complete the registration processes. Contributions to the authorized capital can be both financial resources and other assets, which shall be preliminarily assessed by independent experts.

In accordance with Hungarian laws, the authorized capital is the means of managing a company. This type of funds cannot be “frozen”, but there are some conditions. In particular, until the full amount is on the account, your company will not be able to operate with dividends, the owners of unpaid shares cannot alienate them.

When planning to establish your own business, it is very important to preliminary determine its direction and format. You must clearly indicate what you will do, since it is unacceptable to indicate the “wide range of activities” of the enterprise when registering a company in Hungary.

You can specify a couple of main activities of the company, after which, if necessary, make certain amendments to the constituent documents and the articles of association of the company. This will make it possible to somewhat “expand” the type of activity of the company without violating Hungarian law.

Any company must have at least one director, it can be a private or legal person. The maximum number of directors is not limited, and there are no strict requirements regarding their citizenship, place of residence, nationality.

You should keep in mind that if you specify a foreign company as the directorate of a new company, you may have difficulty with opening bank accounts. It is better to initially indicate an individual as a director, then open an account and amend the articles of association by selecting a new management.

The liability of the owners of the Korlatolt Felelossegu Tarsasag company shall be limited solely to the amount of their personal contributions to the authorized capital in the bank savings account. Personal accounts and property are always protected.

At the same time, any manager shall be fully responsible for all actions as a director of a newly established company. In case of violation of Hungarian legislation, both administrative and criminal liability are provided.

Other types of organizational legal forms of companies in Hungary

There are other forms of companies that may be of interest to foreign founders. Among them are:

Open Joint-Stock Company with Limited Liability or Reszveny Tarsasag (ZRT).

There is a higher amount of the authorized capital, which amounts to 5 million forints or a little more than €20,000. To register a company, you must deposit at least a third part of this amount into your account. The number of shareholders is one or more. The director is one individual. The amount of liability is limited by the amount of contribution to the authorized capital. The Reszveny Tarsasag format is usually interesting for large investors.

Limited Liability Partnership or Beteti Tarsasag.

The number of founders shall be not less than two people, and one of them must be a director who will bear unlimited liability for all debts of the company. The second founder has limited liability within the amount of his or her contribution to the authorized capital of the company. Management shall be carried out by the director or general partner. The size of the authorized capital shall not be established by law. Dividends shall be distributed in accordance with the contributions of participants.

Unlimited Liability Partnership or Kozkereseti Tarsasag.

This format also does not set the minimum amount of the authorized capital. The number of participants can not be less than two people, and their liability is not limited to contributions to the authorized capital. Any shareholders who have made individual contributions will be able to represent the company.

Documents necessary for registration of a Hungarian company

When registering a new company, all documents must be drawn up in two languages - Hungarian and English. It is possible to conduct an accelerated registration procedure, when documents shall be submitted exclusively in Hungarian. The contract and articles of association shall be translated and transferred to the founders of the company in the format of separate documentation.

What documents are required for registration? First of all, these are:

The applicant’s questionnaire of the established format;
Application for identification;
Copies of the pages of the internal and international passports of the founders and the director;
Confirmation of the place of residence;
Drafted articles of association of the company;
Selected types of activities;
Notarized power of attorney, if you do not plan to be present in person at the registration;
Specimen of signatures of the management team;
Certificate from the bank on the status of the account and the amount of the contributed authorized capital;
Actual legal address and its confirmation;
Certificate from the bank on the status of the account and the amount of the contributed authorized capital.

If your future business is related to investments, insurance, financial flows, trust structures, you need to obtain a license of a special format.

Procedure of registration of a company

You will need at least a couple of weeks to establish and register a company, regardless of the chosen format of organizational legal form of ownership. The main steps will be:

Choosing a unique name.

You will need to present at least three options of a name, which shall be checked for compliance with established rules and regulations. Typically, the company’s name ends with the chosen form of ownership, such as KFT, for example.

Selection of a legal address.

Registration takes place on the basis of an actual legal address in Hungary. At the same time, the legal address does not have to be the actual address of a newly established enterprise. You can rent an office, for example, or use the services of third-party companies by creating a “virtual office”.

Preparation of constituent documents.

It requires the participation of local lawyers and attorneys who shall be involved in the preparation and signing of statutory documents, founders’ agreements, statements and other documents. It is also possible to notarize a package of documents with legalization by apostille.

Opening an account and transferring the authorized capital into it.

The authorized capital can be kept both in a banking institution and in cash with the director. In the latter case, a statement of the established form from the director is required.

Registration in the Commercial Register.

The registration process can take quite a long time, depending on the workload of the Commercial Register. Usually it takes a couple of weeks. As a result, you receive documents with the name of the company, its address, registration number and other necessary data.

Registration with tax authorities and social insurance.

The company must obtain a value added tax number, a tax number, and also conclude social insurance contracts as of the moment the first employment contract is concluded.

Opening a real account with a financial institution.

After registration in the register, the director is obliged to open a bank account. The minimum number of real accounts is one, the maximum is unlimited. Accounts can be opened both in Hungarian and foreign banks.

As for the cost of establishing a new company in Hungary, it ranges from €2,000 plus additional costs for lawyers, translators and other specialists.

Taxes in Hungary

Having registered a company, you receive a Hungarian VAT number. It is also possible to simultaneously receive a pan-European number – in this matter, the country does not create any bureaucratic obstacles.

As for the base rate of value added tax, it is 27%. If your company is engaged in certain types of activities (provision of general educational services, for example), VAT can be significantly reduced or even completely eliminated.

Corporate tax is 9%, which is quite low among European countries. This type of taxation is valid for any companies and firms, regardless of their profitability and the amount of turnover. Income tax is advance and must be paid every quarter.

If you miss the next payment, the company can be punished by a fairly significant fine, and the income tax rate itself can be increased to 10%. The current tax rate on dividends is zero, and this applies to both dividends from affiliates of the company and those paid to its owners.

Hungarian law provides for certain tax benefits if the company is engaged in the field of intellectual property, education, medicine, science, and so on.

The rate of municipal tax, which must be paid according to the place of economic activity, can vary from zero to two percent. If you work in the capital, the rate is maximum, and for the regions it may be completely absent.

The amount of social contributions in the form of a tax on social needs is 23%.

Bookkeeping and accounting

In accordance with strict legal norms, any enterprises conducting economic and business activities on the territory of Hungary must maintain and submit financial statements in a timely manner. It is necessary to either hire a local specialist or use the services of outsourcing companies for accounting.

It is required to submit VAT reports monthly, and after several years of activity and absence of complaints about your work, reports can be submitted quarterly.

A mandatory financial report shall be drawn up annually, which is checked by independent audit services. The financial report can be omitted if the annual turnover of the company is less than 300 million forints, and the staff is less than 50 employees. This is one of the advantages of small and medium business in Hungary.

Please note that reporting must be maintained and submitted even in cases where the company did not conduct business activity. This shall be shown up in the documents as a null declaration.

Residence permit in Hungary

Establishing and registering a company in the country can be a step towards naturalization in Europe, and the issue is not only about Hungary, but also about any other country of the European Union. The residence permit status will allow you to not only conduct business, but also to stay in any country in Europe for an unlimited time without the need to open visas.

Why is Hungary so popular in the business immigration format? Everything is quite simple: you have the opportunity to apply for a temporary residence permit immediately after establishing your company in the country, and then prolong it twice.

In three years you can apply for permanent residence status, and after a few more years you have the opportunity to obtain a Hungarian passport. This country is good not only for business, but also for living, thanks to a high standard of life, developed infrastructure, high-quality education and medicine.

Here are minimum tax rates, low crime level and laws that apply to everyone without discrimination, regardless of the origin and the amount of the capital. Establishing your business in Hungary can be the first step towards the European market, expanding the list of reliable partners and clients of your company.

As for obtaining a temporary residence permit, the application can be submitted after the newly established company is registered in the state register. As a rule, the decision on granting you the status of a temporary resident shall be made within one month from the date of submission of the application to the relevant migration authorities.

With a positive decision, the applicant shall obtain an updated resident status and a residence permit card. Its validity period is one year, so in 12 months it is necessary to prolong the card for another 24 months. In three years you can apply for permanent residence in Hungary.

Registration of a company in Hungary