How to Form a Company in Hungary

Setting up a company in Hungary follows the same legal system that is currently used in other countries in the EU.

Our guide will help you to find out more about the procedure of forming a company in Hungary.

Foreign individuals and companies are freely allowed to pursue business activity in Hungary.

Individuals may obtain a sole trader’s licence, while companies shall be registered at the Court of registration.

The time required to set up a company in Hungary is as short as approximately 1 week. This includes consultation, preparation of the legal documents, and registration at the court.

Legal representation is a must in company formations and modifications. However in the process of forming a company in Hungary there are questions beyond the competence of the lawyer it is also advised to engage a consultant. He may explore your needs in depth and share information that are essential for the initial financial and tax planning of the new company, and gives you the best solutions for the particular requirements.

Founders of the company must sign the company’s constitutive document, which, together with some other documents must be countersigned by a Hungarian lawyer, who will then apply for the registration of the company from the Court. The registration process is fully electronic with electronic signatures either from the side of the attorney or the court of registration. Hard copy certificates are not issued in the process.

At the very same time the company is registered it will also get its VAT number. The company may also apply for an EU VAT (VIES) number at the time of registration, and so immediately may start business within the Community.

Within 15 days from registration at the court, the new company shall also register at the central tax office, local tax office, central statistical office, and at the commercial chamber. After forming a company in Hungary a consultant may also come in handy who will arrange these.

A bank account is a must for Hungarian companies, this can be opened at any Hungarian bank after the registration of the company. Please note that the electronically signed registration documents will be required by the bank. Important also to know that personal presence of the managing director is expected. Anti money-laundering provisions require the banks to carry out client screening, which among others includes the identification of the ultimate owner(s).

The most popular forms for foreign investors are the private limited liability company, and the company limited by shares (which may be public or private).

Foreign investors can invest in 4 different types of enterprises in Hungary:

Unlimited partnership (Közkereseti társaság; Kkt)

All the partners bear unlimited liability in all that concerns joint undertakings.

Limited partnership (Betéti társaság; Bt)

At least one of the general partners has unlimited liability for the joint obligation, the other partners bear only limited liability (a partnership is not allowed to be a partner with unlimited liability in any other partnership).

Joint Stock Company (Részvénytársaság, Rt)

A Joint Stock Company may be private (called Zrt) or public (called Nyrt). The latter one can get listed and traded on the Stock Exchange. Joint stock companies may have a single shareholder. Its board of directors must have at least 3 members but no more than 11. The shareholders in a private joint stock company may appoint a CEO instead of a board of directors. The minimum share capital is HUF 5 million for private joint stock companies.

Limited liability company (Korlátolt Felelõsségû Társaság ; Kft)

As distinct from an RT company, a company of the KFT category may not raise capital from the public. The shareholders have limited liability. The minimum equity must be in excess of HUF 3 million.

To set up a partnership company in Hungary at least two members are required. Limited liability companies and joint stock companies can be set up with only one member.

Key benefits of doing business in Hungary

  • standard corporate tax rate is as low as 10%: one of the lowest in Europe; increased corporate tax rate for large taxpayers is 19%.
  • no withholding tax and payment of dividends to any resident or non-resident person are tax free
  • stable economic and political system
  • location in Central-Europe, in close proximity to major European core markets.
  • member of the EU, NATO and the OECD and the World Trade Organisation
  • highly educated, multi-lingual local workforce

Source by Laszlo Horvath

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