Open a Company in Hungary
Open a Company in HungaryUpdated on Friday 08th May 2020
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What are the types of legal entities I can register in Hungary?
Hungarian economic entities can be divided into companies and partnerships.
A private limited liability company is formed by at least one founder and it’s suitable for medium and small businesses. The management of this type of company is performed daily by at least one manager while the major decisions are taken by the general meeting of the shareholders.
Foreign investors who decide to open a company in Hungary should know that for large businesses is advisable to use another economic instrument: the joint stock company, established by at least one founder. Unlike the limited liability companies, the daily management is assured by a board of managers composed by at least three members. The major decisions are taken just like in the case of the private limited liability companies by the general meeting of the shareholders. There are two types of Hungarian joint stock companies: open and closed. The main difference between them is that the stocks from the closed joint stock companies cannot be freely transferable to the public, while the stocks of an open joint stock company can be registered at the Stock Market. This is a method to increase the company’s capital.
The members of the companies have liabilities for the company’s actions in the limit of their contribution to the capital, unlike the members of partnership who have their personal assets not protected in case of liquidation.
A Hungarian general partnership is formed by partners who actively take part into the operating business. All the partners have decisional powers and can lose their assets in case the partnership have uncovered claims. No minimum capital is required in case of a general partnership.
A Hungarian limited partnership is formed by two types of individuals of corporate bodies: the general partners with an unlimited liability in the partnership and a silent one limited by his/her capital contribution. The silent partner cannot be involved in the process of management but have his/her personal assets protected in case of uncovered claims belonging to the partnership. Our Hungarian lawyers can help you open a company in Hungary, no matter the type of legal entity you choose for incorporation.
What are the steps for incorporation of a company in Hungary?
In the process of company registration, the founders must be represented by an attorney. This attorney will receive for his/her contribution a commission fee, which depends on the complexity of the registered entity.
In the beginning of registration, at least half of the company’s capital has to be deposited in a bank account. The bank will release a certificate related to this deposit, which will be used during the incorporation process. The other half of the contribution must be deposited no later than one year after the registration.
The applicant must then register at the Registration Court, which will also deliver the specific information to the Tax Authorities, which will check the financial aspects of the company and who will issue the corporate tax number. The Court will issue a certificate containing the company’s name, address, temporary tax and statistical number and the number of reference of the registration. Also, the Court will inform the State Tax Authority(for VAT and income tax purposes) and the Statistical Office regarding the newly formed company. If you need details about the taxes that must be paid by a company in Hungary, our lawyers can help you.
The last step of registration is the enrollment for the social security.
What is the minimum share capital of KFT and RT in Hungary?
A Hungarian limited liability company (KFT) requires a minimum share capital of at least 500000 HUF, for the entities established by more than one shareholder and 100000 HUF for the single shareholder limited liability company. A joint stock company (RT) must deposit at least 20 million HUF. If you want to open a company in Hungary as a KFT, you can rely on our team of corporate lawyers. They can also help you register a trademark in Hungary.
What documents are required for the incorporation of a company in Hungary?
In order to incorporate a company at the Registration Court, a founder must deliver a proof that the initial capital was deposited at the bank, the decision of opening a company, the company’s articles of association and the representatives ID’s and specimen signatures.
How easy is it to open a company in Hungary?
The process of setting up a company in Hungary usually takes five working days if all the documents are properly submitted at the right authorities. The process is usually simplified by the fact that the company must hire a lawyer in order to take care of all the procedures. The newly established company has to pay only a half of the share capital at registration which is very advantageous for the entities without the entire funds for starting the business. The registration in the Commercial Register is made very simple with the help of the electronic system.
The only step that has to be performed and it’s not online is the registration for the social security which is made in just one day from the depositing the correct documents.
How easy is to hire personnel in Hungary?
The Hungarian young workforce is highly trained in the many Regional Knowledge Centers of Universities where many students comes from all European Union countries. That’s the reason why many of the courses are in English so this makes the graduated suitable for working in foreign owned companies. The experience can also be gained in the R&D centers of the Hungarian subsidiaries of multinational companies opened in here. Because of the EU membership, the employees are free to work in any EU countries and the opposite is also valid, the EU workers can find suitable jobs here.
The companies are often using the help of recruitment agencies in order to find suitable candidates for the vacant places or publish announcements regarding these vacancies in local newspapers and job related websites.
What are the main points of interest for foreign investors?
The main points of interests for the foreign investors who want to open a company in Hungary are represented by the private services, which accounts around two thirds of the GDP. The private service is represented by the trade, finance, tourism. The exports of telecommunication, automotive industry, and computer technology are highly developed, while the exports of agriculture products are not so successful even though various incentives were granted on those.
The agriculture is also a developed segment of the economy due to the favorable climate conditions but again, not so developed in order to export goods.
What are the advantages of a holding company in Hungary?
The advantages of the Holding companies in Hungary is that the tax system specifies that there are no tax on dividends received from EU subsidiaries (or from other subsidiaries located in countries which have signed double tax treaties with Hungary) and no dividend tax on outgoing dividends. Also the capital gains provided by the sale of the “declared participation” are 100% exempted from company tax in the Hungarian holding company.
According to the provisions of the law, all the profits realized from the subsidiaries sellout can be exempted of corporate tax on income, and can be forwarded free of any withholding taxes to the owner of the Hungarian holding.
Why open a company in Hungary?
A central location for business
Hungary is a Central European country that shares borders with Austria, Croatia, Romania, Serbia, Slovakia, Slovenia and Ukraine. Its geographical position is an important advantage: the country has good connections with Central Europe and can access a market consisting of more than 500 million people. Hungary has good transportation networks: an extensive railway network, good waterway connections and a number of international airports. Hungary is a member of the European Union since 2004.
Reasons to invest in Hungary
The tax environment is competitive and supportive. Foreign investors in Hungary can benefit from refundable and non-refundable incentives. The Hungarian government offers special support for the research and development (R&D) sector. Our Hungarian law firm can provide in depth information about taxes in Hungary and special cash subsidies for companies.
The labor costs are lower compared to other European countries and businesses can be set up in just a few days, depending on the type of company. One of the most developed economic sectors in Hungary is the industrial sector: having more than 200 very well developed industrial sites around the country. A number of leading technology and logistical parks are available for business investors who want to invest in industry or manufacture in Hungary.
Business opportunities in Hungary
The types of companies that can be set up in Hungary are: the limited liability company, the joint stock company, the limited shares company, the limited partnership and the unlimited partnership. Each company has its own particularities and different advantages for investors. Foreign investors can also open branches or subsidiaries in Hungary. Our law firm in Hungary can provide detailed information about each legal entity in Hungary.
One of the most developed business sectors in Hungary is the automotive sector, which generates approximately 21% of all the country’s exports. More than 600 companies and 100,000 employees work in this business sector in Hungary. The electronics industry is another very well developed sector and Hungary is an important electronic producer in the Central and Eastern Europe region. The information and communication technology sector and the food industry are also very well developed.
If you want to open a company in Hungary, please contact our law firm. We can provide specialized legal services and consultancy for foreign investors starting their business in this country.