Company Formation Hungary
Updated on Tuesday 10th March 2020
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The registration of a company in Hungary can be done in a simple and fast manner, as long as the legal requirements are met. Any person - no matter his or her nationality or residence - can be a director or a shareholder in a company in Hungary. Shareholders of a Hungarian company can be natural persons or legal entities; foreign shareholders must appoint a Hungarian delivery agent who will conduct the incorporation process.
What are the basic requirements for starting a Hungarian company?
The company must have a local registered office and BridgeWest offers this type of service. In order to incorporate a Hungarian limited liability company, investors must prepare a share capital of HUF 3,000,000 (which represent approximately EUR 10,000). The first step for company incorporation in Hungary is providing a name for the company, choosing a legal entity and the business activities.
The second step for company incorporation will be to set up a bank account where the share capital will be deposited. The fee to open a company in Hungary as a limited liability company is of HUF 50,000 or HUF 100,000, depending on the type of incorporation procedure selected by the investors. All documents for company incorporation must be notarized by a Hungarian public notary.
The requirement to have a bank account is available for all the company types that can be set up in this country. This is also necessary in the case of those investing in an offshore jurisdiction, where they will have to set up an offshore bank account.
As a general rule, the process of starting a company in Hungary is not very complicated. Still, if the investors are not familiarized with the process, it is best to receive professional assistance and in this sense, our team of specialists in Hungarian company formation can be of help. Some of the basic steps in opening a business are:
- prepare the incorporation documents, such as the statutory documents and the personal identification papers of the founders, which can also be required for offshore company formation jurisdictions;
- opening a corporate bank account in which the investors will deposit the required capital;
- obtaining a tax identification number and registering with the local institutions, including with the Hungarian Court of Registry;
- pay the required registration fee (each institution can have its own fee system);
- submit the incorporation documents with the tax authorities.
The shareholder/s can also name representatives who will conduct the incorporation process by using the power of attorney. After the documents are ready, the company will be submitted to the Hungarian Trade Register for approval. Once the registration is complete, the company will be able to operate. The incorporation process in Hungary takes between five and seven days. Bridgewest provides the following services for company incorporation in Hungary:
- drawing up the articles of association that can be signed through power of attorney (Hungary laws require powers of attorney for any public notary proceedings);
- drawing up documents for company incorporation in Hungary - specimen signatures, passports copies, application forms required for company registration;
- arranging public notary proceedings (all procedures for company incorporation are done in front of a Hungarian public notary);
- providing a registered office in Hungary on demand - the registered office serves as headquarters for the company in Hungary and it will be made public;
- setting up a bank account for the company in Hungary - BridgeWest will help in setting up the share capital bank account, as well as a current bank account once the company is incorporated;
- putting you in contact with a local accountant, as all Hungarian businesses will need accounting services.
The limited liability company in Hungary (Korlátolt Felelosségu Társaság, Kft)
The limited liability company in Hungary must have at least one shareholder and one director. It is required to have a registered office and a minimum share capital of HUF 3 million (approximately EUR 10,000). Our team of specialists in company registration in Hungary can provide step-to-step information on how to start this type of company.
The limited liability company in Hungary is the most common way to start a business in this country and, besides the fact that it provides limited liability for its founders in the event in which the company has financial difficulties, it also allows the registration with 100% foreign capital, which means that foreigners can own 100% of the company’s shares.
The registration of a limited liability company in Hungary can be completed following two different systems: the online registration and the general registration. The online registration, which is commonly used for offshore incorporation as well, is the simplest and fastest method, and it is available for businessmen who want to sign the standard charter incorporation document.
Even in this case, the company’s documents have to be approved and signed in front of a public notary and it is necessary to have an attorney present at the moment of the registration or a team of specialists in company registration in Hungary. Considering that the company’s documents will follow a standard model, the process can be completed in a day.
In the other case, which refers to the general registration, the process of starting a local company will be longer, as the company’s statutory documents can be drafted following the investors’ terms and conditions (which must respect, of course, the Hungarian law regarding the incorporation of companies). This procedure can last up to a week.
After the basic company formation process is completed, the investors should also register for taxation purposes. This is done with the National Tax and Customs Administration. Here, companies can also apply for a VAT number. The requirement to register with a local tax administration applies to offshore company setup businesses as well, but the obligation to pay specific taxes that are customarily imposed to European businesses may not apply.
The joint stock company in Hungary (Részvénytársaság, Rt)
The Hungarian joint stock company must have at least one shareholder, one director, and a registered office. The minimum share capital for a Hungarian joint stock company is HUF 5,000,000 (approximately EUR 20,000). This company type is usually selected for registration by businessmen who want to open a company in Hungary as a large business.
The Hungarian limited partnership (BT, added after the name of the partnership)
The Hungarian limited partnership requires at least two partners - one is a general partner who will be held fully liable for the company’s debts and obligations and will also have management rights, and a limited partner who will be held liable to the extent of his/her contributions. The limited partnership has no legal status, but it can become a limited liability company.
The Hungarian general partnership or unlimited partnership (KKT, added after the name of the partnership)
The Hungarian general partnership requires at least two partners and all members are held fully liable for the company’s debts and obligations and have management rights. The general partnership does not require a minimum share capital and has no legal status.
Taxation in Hungary
The standard VAT rate in Hungary is 27% for products and services, 18% for certain foodstuff and accommodation and 5% for packaged medicines and printed materials. The corporate tax in Hungary is set at 9%. The dividend tax paid by foreign companies in Hungary is 16% unless tax treaties are enforced.
These types of corporate taxes are applied in most of the countries of the world, but investors interested in offshore company set up must know that, in these jurisdictions, such taxes can be exempted. When referring to the taxes applicable in Hungary, those investing here should take into consideration the following:
- an employer in Hungary is required to pay for his or her employee a social contribution of 17,5% of the person’s salary;
- the employer is also required to pay a vocational training contribution at a rate of 1,5%;
- those interested in purchasing real estate properties in Hungary will be liable for the payment of a transfer tax rate of 4% for properties with a value of maximum HUF 1 billion;
- any value for a property above HUF 1 billion will be charged with a transfer tax of 2%;
- those carrying temporary business activities in Hungary are charged with a local business tax of HUF 5,000 per each calendar day.
BridgeWest is also able to offer ready-made Hungarian companies and VAT registration. Please contact us for more information about how to open a company in Hungary and prices. Our specialists can also provide information on the procedure for offshore company formation in reputable offshore jurisdictions.