Company formation in Hungary

Hungary is a landlocked country in Central Europe. Its capital, Budapest, is bisected by the Danube River. Its cityscape is studded with architectural landmarks from Buda’s medieval Castle Hill and grand neoclassical buildings along Pest’s Andrássy Avenue to the 19th-century Chain Bridge. Turkish and Roman influence on Hungarian culture includes the popularity of mineral spas, including at thermal Lake Hévíz. 

Hungary is a middle power in international affairs, owing mostly to its cultural and economic influence. It has a high-income economy and ranks "very high" in the Human Development Index, with citizens enjoying universal health care and tuition-free secondary education. Hungary has a long history of significant contributions to arts, music, literature, sports, science, and technology. It is the thirteenth-most popular tourist destination in Europe, drawing 15.8 million international tourists in 2017. It is a member of numerous international organizations, including the United Nations, NATO, WTO, World Bank, IIB, the AIIB, the Council of Europe, and the Visegrád Group.

Starting a business, that is, setting up a company in Hungary takes only a few days, including VAT registration – making Hungary one of the last countries to issue EU VAT numbers automatically. Combined with a 9% corporate tax, this makes Hungary a prime business and investment destination, ideal for foreign nationals looking for a cost-effective solution or a convenient base in Europe.

Why Hungary?

• quick and easy incorporation: company registration in 4-5 business days
• low corporate tax: at only 9%, it is one of the lowest in Europe
• immediate international VAT number: no wait or extra requirements
• low starting capital which does not need to be deposited
• cost-effective setup and maintenance of the company
• central location in Europe and good infrastructure
• easy visa and residency options for all nationalities

Main advantages of Hungary for company domiciliation

• Sympathetic attitude towards foreigners in the country;
• Lack of serious restrictions for non-residents;
• A simple procedure of acquiring a legal residence permit in Hungary;
• A stable national currency (the Hungarian Forint, HUF);
• Short company registration timeframe. There can be exceptions, however, if you would like to register a company with a complicated ownership structure, for example, or if company beneficiaries come from sanctioned countries, or if the company has questionable partners, suppliers, etc.
• Transparent corporate legislation that is constantly improved;
• The cost of registering a company in Hungary is lower in comparison to the cost of setting up companies in other onshore jurisdictions;
• Relatively small fiscal burden. Some offshore and mindshare jurisdictions will charge less in taxes but if you compare Hungary with other countries popular with foreign entrepreneurs such as Cyprus, Czech Republic, or Great Britain, for instance, you will see that Hungary is less expensive. 

Types of company ownership in Hungary

Those international entrepreneurs who choose Hungary as the country of their company domiciliation usually choose to open an LLC there (KFT, Korlátolt Felelosségû Társaság, in Hungarian). However, there are other options in the country as far as the company ownership form is concerned. Please contact our experts at the address above and they will help you choose the best type of ownership for your Hungarian-based company.

Requirements to a limited liability company in Hungary – KFT:

• Charter capital: from 3 million HUF / from 20 million HUF.
• Minimum deposited charter capital: 50% / 30%.
• If part of the company charter capital comes not in the form of money but in some other form (such as real property, for instance), the worth of the property shall be assessed by a local independent expert, a citizen of Hungary.
• Company owners’ residential statuses do not matter.
• Open sale of company shares: prohibited/ allowed (both registered stock and bearer shares can be issued).
• Requirements to company directors: minimum 1 person or 1 corporate entity/ from 3 to 11 people, only private individuals (not corporate entities) to act as company directors. 
• Supervisory Board requirements: if the capital exceeds 50 million HUF and the number of company employees exceeds 200 people/ in any case.

Requirements to a partnership, limited or unlimited – KKT or BT, in Hungary:

• The amount of the required charter capital is not specified.
• The charter capital shall be equally divided between the partners.
• There shall be a minimum of 2 partners.
• The partners’ residential statuses do not matter.
• General partners have unlimited liabilities while the liability of limited partners does not exceed the amounts of their contributions to the charter capital.
• Transfer of shares is possible only on the decision of a general meeting.
• The Articles of Association shall contain all the principles/ methods of company management.

Required documents:

• Instrument of the constitution on a standard form
• Declaration to the Tax Authority to get the company a tax number
• Authorizations of the legal representative (the counsel), or the certification of the right for representation
• Certificate of payment of administration fees and a fee of disclosure
• List of members
• Declaration of the CEO not to be subject to forbidding according to Gt. 23. § Certificate of the payment service provider for depositing the contribution is cash, as indicated in the instrument of the constitution or the official declaration of the CEO for giving a free run of the pledged contribution in cash
• Declaration of the CEO for giving a free run of contribution in-kind as well as the assessment declaration of the members concerning the contribution in-kind.

Important note:

The fact that a company is registered in the company's register, or that an entrepreneur completes the registration required, or receives its operating license, does not necessarily mean that it may pursue unrestricted business activities. It is a basic condition for a legal operation that a company obtains the different licenses necessary for its activities.

Many manufacturing and service activities may be pursued on the basis of a simple report, while numerous activities require a premises license. Some commercial activities may be pursued on the basis of an operating license. A number of activities require an activity license prescribed by sector-specific legislation.

FAQS

1.Why choose a physical office?

It offers you a space where you can spend time on your own or with your clients. This will also contribute to the Hungarian bank account opening procedure since it proves to the bank that you are committed to operating a viable company in the local market.

2.What is the “client gate” in Hungary and why do I need it?

The client gate (or “Ügyfélkapu” in Hungarian) is an access point to e-Government or the electronic administration in Hungary. It lets you take care of paperwork online or make appointments at public records offices. You can register your Hungarian company at the company gate through the client gate, which makes it essential for company opening.

3.What is the “company gate” in Hungary and why do I need it?

The company gate (or “Cégkapu” in Hungarian) is a web portal with an electronic storage place where official mail is always accessible. It is similar to the registered address of your company, and registration is also compulsory. Currently, only the tax authority sends messages there, but the range of authorities will be expanded in the future. If you have your accountancy at Helpers, we can take care of the registration for you, as your accountant may be authorized to view your official mail – especially letters from the tax authority

4. Why should I order incorporation, accountancy, and registered office services from the same provider, e.g. Helpers?

If you order the accountancy service together with the registered seat and mail forwarding from Helpers Hungary, you can make sure that all the official inquiries will reach you and your accountant on time, and your company will never miss a deadline when it comes to administration.

5.Can I set up the company without traveling to Hungary?

You can set up the company via POA (Apostilled or authenticated by a Hungarian Consulate) and we can arrange the company registration without your presence. However, the director of the company has to travel to Budapest at least for one day to open a bank account for the company. Alternatively, you can schedule a 3-4 business day-long trip and complete the procedure during your stay.

6.I heard that Hungarian company incorporation is really fast, is this true?

Yes. Helpers offer full-service assistance with setting up a business in Hungary. Hungarian company formation is one of the fastest in the European Union – from the signing of the registration documents, it takes no more than 24-48 hours. VAT registration is also immediate, so you can start working immediately, and take advantage of Hungary’s favorable 10% corporate tax