Open a Branch vs.a Subsidiary in Hungary - Updated Guide 2021
Open a Branch vs.a Subsidiary in HungaryUpdated on Thursday 17th June 2021
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Branches and subsidiaries in Hungary are chosen according to the activity of the company and its specific needs. Both legal entities have their own particularities and while one may be suitable for certain businesses, it may not be the perfect business choice for other types of activities.
Our lawyers in Hungary are ready to offer you specialized counselling if you want to open a branch or a subsidiary in Hungary.
Branches in Hungary in 2021
Branches are flexible and, compared to subsidiaries, the time needed to open them and prepare them for business is much shorter. Another advantage of the branch model is a lower set up cost: generally, branches will require less capital than other business structures in Hungary.
The main disadvantage of the branch is that the parent company has unlimited liability for the actions and obligations of the Hungarian branch. Despite this negative aspect, international companies may find the branch model more suitable for providing services for clients around the world.
Subsidiaries in Hungary in 2021
Unlike branches, subsidiaries in Hungary have legal status and they are generally set up as a Hungarian limited liability company. Subsidiaries have their own share capital and the parent company is their main shareholder. Because the parent company is not liable for the actions of the subsidiary, these types of structures are independent.
Although the business costs may be lower for branches than for subsidiaries, the subsidiary structure has more stability and is generally more protected against the failure of an affiliate of the same company set up in another country.
The political stability in the country or other significant aspects, such as the easiness to open new structures may be key arguments when deciding to open a branch or a subsidiary in another country. The business model of the parent company is also an important aspect to consider. Our Hungarian lawyers can present you detailed information about the percentages of branches and subsidiaries set up in different financial regions in Hungary.
If you want to open a branch or a subsidiary in Hungary and you are not sure on the advantages of each structure and how it will help your business grow, please contact our Hungarian lawyers. Our team can present the main regulations which are in force in 2021 and can offer advice on the tax obligations that you will have for each structure. For instance, both of them are charged with the corporate tax of 9% in 2021, but the branch is liable to taxation only for the income obtained on the Hungarian territory.
Our law firm in Hungary can offer you more information about the types of structures in Hungary and how to open a company. Our attorneys can also help you comply with the fiscal system in this country, from details about the taxes in Hungary that apply for your company to VAT registration.