Company Formation in Hungary

Top 5 Advantages of company registration in Hungary

1. EU Membership
2. Automatic receipt of Hungarian and European VAT numbers
3. Lowest corporate income tax in the EU
4. Ease of doing business and favorable business environment
5. Simplified corporate law and system

Roadmap

How long does it take to register a company in Hungary?

• 3-7 working days
• 5-10 working days if done remotely and all requirements are made available

Note: It may take longer if opening for a temporary bank for purposes of registration account will be included if capital will be paid up

What are the steps to register a company in Hungary?

The registration process of a company in Hungary is very simple. The experts of LegalBison will assist you throughout every step of it:

1. Initial consultation and agreement
2. Payment of the full invoice
3. [IF REMOTELY]: Notarization of POA by client
4. Preparation of registration documents
5. Document signed at the notary
6. Official register validity: immediately

Taxes

How high are the corporate income tax in Hungary?

Resident companies are taxed for all incomes regardless if derived domestically or internationally. All companies are taxed at a flat rate of 9% for corporate income tax

• In addition, there is also a 0-2% municipal tax on all profits depending on the location of registration of the company and/or where its business activities are conducted
• For dividends, however, is not tax except for those derived from sources that are in low-tax countries. In which case, the dividend tax is 9%

What Double-tax treaties has Hungary?

Since Hungary is a member of the EU, it has entered into different agreements with different jurisdictions to avoid double taxation. To date, it has on-going agreements with:

Albania, Armenia, Australia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hong Kong, Iceland, India, Indonesia, Iraq (ratified, not yet in force), Iran, Ireland, Israel, Italy, Japan, Kazakhstan, Kosovo, Kuwait, Latvia, Liechtenstein, Lithuania, Luxemburg, Macedonia, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, Netherlands, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, San Marino, Saudi Arabia, Serbia, Singapore, Slovak Republic, Slovenia, South Africa, South Korea, Spain, Sweden, Switzerland, Taipei, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States of America, Uruguay, Uzbekistan, and Viet Nam.

Status: End of 2020

VAT number

Without VAT number

• All companies are required to have their local tax and VAT number in Hungary. Failure to register and report may result to penalties and other sanctions

With VAT number

• Hungarian companies are automatically registered for VAT upon registration and as soon as they get their Hungarian VAT number, it can also immediately obtain its EU VAT number
• VAT rate is at 27%
• Whether there are business activities or none, VAT reporting must be done monthly.
• VAT refund is possible. For the first time VAT refund, the refundable amount must be at least 1 million HUF. All other succeeding refunds may be had regardless of amount

Decide first

1. Do you want to register your own or buy shares from already existing companies?
2. Note: Shelf companies is not a common practice in Hungary

Speak to our consultants to get a free consultation and guidance on how to choose the best jurisdiction based on your business model.

Documents to provide for company registration in Hungary

• Passport copies (a scan) of shareholder/s and director/s, also beneficiary owner if applicable
• A Power of Attorney (in case of a remote company registration)
• Certified company documents (in case at least one of the shareholders is going to be a foreign company)

Note: The minimum capital requirement is depending on the structure of the company you intend to register but for the more popular structure Limited liability company (Kft.), the requirement is at least HUF3 million (about 10,000 EUR). Various certifications may be issued if capital will not be paid up

Information needed to get started

• 3 options of your desired name for the company for the name reservation
• At least 1 shareholder (unlimited)
• At least 1 director (natural person or legal person represented by a natural person)

Remote incorporation

• The whole incorporation process can be conducted remotely. No travel necessary. Notarization of documents is necessary
• A Power of Attorney (POA) from (all) partners/shareholders is needed
• The POA is sent to you by us based on the services you want
• You have to certify the POA by a notary and in some cases legalize it by apostille (some countries need full legalization)
• Once you have the POA on your hands, we double-check, and you send us the original form (physical document!) via courier to our address
• Hungary is part of the Hague Convention of the Apostille

Accounting and auditing

• In Hungary, companies must maintain accounting records in Hungarian and comply with double-entry bookkeeping methods. A financial report is filed annually regardless if there were business activities or none. All financial reports are signed by the director and the accountant
• For newly registered companies, an audited annual financial report may not be required but after two years of operation, filing of audited annual financial report is required except in the following cases:

1. Your average annual net sales revenues for the 2 prior financial years did not exceed HUF300 million (USD1 million) on average
2. The average number of people employed did not exceed 50 people on average for the 2 prior financial years

Residential requirements

What are the residential requirements in Hungary?

• Regardless of the company structure sought to be registered, no residency restriction is mandated in Hungary
• A company may even be fully foreign-owned and managed

LegalBison offers help with all of the above requirements. We assist and are local on ground. Speak now for free with one of our consultants to get your business started.

FAQs about doing business in Hungary