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  • Writer's pictureCreimerman Product Team

Hungary: a Tax Heaven for company creation in Europe.

Did you know that you can take your business to Europe? Today we bring you information on how to create or bring your business to one of the European countries with lower taxes. This is Hungary.

How to create a company in Hungary?

Company registration in Hungary is easy and fast. It takes only 1 business day. This country is a tax haven, their standard corporate income tax rate in Hungary is only 9%, which is the lowest corporate tax rate in the entire European Union. Also by having a business in Hungary you get an EU VAT number and are eligible to trade with other EU countries free of VAT.

To start the process you have to follow certain steps. First in terms of investment, the minimum share capital you need to start your business is low (3,000,000 HUF) and does not need to be deposited. Then you would have to choose a single member of the company, both foreign individuals and legal entities can establish a Hungarian company. You only need one managing director to open your own Hungarian business.

Types of Companies You Can Open in Hungary

If you’re interested in setting up a company in Hungary, there are several types of companies at your disposal. Each has its own advantages and drawbacks, as well as registration rules. Also, all company types have their limitations in regards to approved business activities.

Here is a brief overview of the main forms a foreign company or individual can open in Hungary. The following company types all require a legal personality.

Limited Liability Company (Small business)

If you’re looking to establish a medium or small business in Hungary, your best bet is to go with a limited liability company . In this case, you will need a starting share capital of 3,000,000 HUF. Have in mind that the incorporation procedure might differ slightly depending on the type of business the company is involved with. You might need to get special licenses and permits. The owners are only liable for their share of the invested capital. This is one of the least risky options.

Limited Partnership

This type of company must have one general (unlimited) partner and one limited partner. The former has unlimited liability, while the latter’s liability is determined by the size of their capital contribution. You don’t need starting capital to form a limited partnership.

In general, and if not specified otherwise in the articles of association, only the general (unlimited) partner can represent the company. When it comes to company registration, in Hungary you will have to pay 50,000 HUF to register a limited partnership.A possible downside to registering this type of company is that the main partner is completely liable and bears the highest risk.

General Partnership

If you decide to establish a general (unlimited) partnership, all partners are fully liable and responsible for the company’s operations. You will need at least one partner other than yourself. There is no minimum in terms of the starting capital. To register the company, you will need to pay a registration fee of 50,000 HUF.

All partners can represent the company unless stated otherwise in the articles of association. There are no specific requirements in terms of management. You don’t need a board of directors or supervisory board to establish a general partnership.

In terms of risks, have in mind that you and your partner(s) are completely liable for all the losses and debts incurred by the company.

Joint Stock Company

If you’re planning to establish a joint-stock company, you have two options: public and private . The minimum requirement for both types is that the company has at least one shareholder of any nationality. Each Hungarian company set up as a joint-stock company limited by shares, both private and public, needs to have a board of managing directors.

Where these two types do differ is the required capital at the time the company is registered. For the public option, it is 20,000,000 HUF (Hungarian Forint), while for the private option it is 5,000,000 HUF.

You will need to have your annual financial statements and balance sheet audited by a professional accountant and submit them with your company register annually. When it’s time for company registration, in Hungary you will have to pay 100,000 HUF to register a private one and 600,000 to register a public one.

Branch Office

Every foreign company can open a branch office in Hungary. You will have to have a resident legal representative if you opt for a branch office that will submit annual returns. The registration fee is 50,000 HUF. The main risk with establishing a branch office is that the parent company holds the full (unlimited) liability for all its activities.

What benefits are there for me?

  • A favorable tax environment:Hungary is the country with the lowest tax rates for foreigners, their Corporate income tax: 9% is the lowest in Europe. Then they have a local business tax: 0% to 2% subject to location. Also their tax dividen in most cases 0% in Hungary

  • Low cost workforce: They have high-quality and inexpensive raw materials and an Inexpensive and well-qualified workforce.

  • Enter the EU market: Given its geographic location and its market potential, as well as its EU membership and diplomatic ties, Hungary offers an excellent opportunity to enter the markets of the developed EU Member States. Also you would have a free flow of capital and labor within the EU.

  • High Quality of life: An extensive IT infrastructure of high standards (administration, banking system, authority procedures).

So, if you are interested in finding out more about business and outsourcing and its opportunities to develop business, contact us today! Below this article, you will find a link to set up a free fifteen-minute consultation with us to discuss your options further.

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