Setting Up a Sole Trader in Hungary

Setting Up a Sole Trader in Hungary

Updated on Monday 04th October 2021

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An individual can open a sole trader in Hungary, which is a type of business with no legal personality. A sole trader can be established by registering itwith the Company Register as per the Hungarian company registration rules. A Hungarian sole proprietor has legal capacity, rights, andobligations. This business can also acquire property, initiate court proceedings, conclude agreements, and can be sued in case of any breach.
A sole trader is a simple business structure that is run by one individual who is entitled to keep all the profits,but in the same time he/she is liable for the losses that his/her business incurs. Our Hungarian lawyers can provide you with legal assistance if you are interested in setting up a sole trader in Hungary.Foreign residents can register as sole proprietors if they have a residency permit in Hungary. Our lawyers in Hungary can help you start any type of business in this country. 

A simple business form in Hungary

Investors who want to run a small business have the option to set up a sole trader in Hungary. Also known as the sole proprietorship, it is the simplest business form but also the one that creates the most liabilities for its owner. The Companies Act in Hungary regulates the main types of businesses available on its territory. The experts at our Hungarian law firm can give you complete information about the liabilities that arise with setting up a sole trader in Hungary.

Necessary documents for obtaining a sole trader’s permit

Sole traders can be set up by Hungarian nationals or by foreign individuals who hold a residence permit in Hungary. Individuals who want to perform business activities as sole traders must apply for a sole trader permit. The application form will be accompanied by the following documents:
  • proof of payment for the application fee;
  • criminal record;
  • qualification documents: proof that the individual is qualified to perform the respective activity;
  • personal identification documents and residence documents;
  • employment certificates (if the individual does not perform the sole trader activity as the main occupation).
Sole traders in Hungary can commence their activities after the permit is issued. They can only conduct the activities described in the permit and must perform the activity themselves.

Who can set up a sole trader in Hungary?

Setting up a sole trader business is authorized for citizens of Hungary, third-country immigrants, or settled persons. An individual holding a residence permit issued for the sake of paid employment, study purposes, or family reunion, can also open a sole trader in Hungary. The stateless individuals can set up a sole trader in Hungary, only if they are not excluded from exercising sole trader’s activities and if they hold a Hungarian residency permit issued for humanitarian purposes.
If you belong to any of the above-defined categories, and you are interested in setting up a sole trader in Hungary, you are welcomed to get in touch with our Hungarian lawyers. They will provide you with legal assistance regarding the process of setting up a Hungarian sole proprietorship.

Who cannot open a sole trader in Hungary?

In Hungary, there are some categories of individuals who are not allowed to open a sole trader. The individuals who cannot exercise activities as sole traders in Hungary include:
  • Fully liable partner of a business entity;
  • Member of a private company;
  • An individual who has committed crimes against international public life or against the morality of public life;
  • A person who has been involved intentionally in financial crimes, and sentenced to imprisonment by final court decision.
If you are confused about whether you are allowed to open a sole trader in Hungary or not, you can rely on the legal knowledge of our lawyers. Our experienced lawyers will guide you if you are eligible for setting up a sole trader in Hungary or not. 

Obligations for a sole trader in Hungary

An individual who is planning to open a sole trader in Hungary should know that he/she is not allowed to pursue the activities of a private patent attorney, private bailiffs, lawyers, notaries, primary agricultural producers, and private veterans. Our attorneys in Hungary will help you to understand the list of activities that you cannot pursue as a sole trader in Hungary. On the other hand, a sole trader can carry out his activities at various branches or sites. The head office will be considered as the sole trader’s registered office and also the trader’s postal address where he/she will receive business documents. The site or branch of a sole trader must be located within his/her legitimate property. 
If any business activity is subject to a certain qualification, then a sole trader can only pursue that activity if he/she meets the statutory qualification criteria. As per the law, a sole trader who fails to comply with the qualification criteria can carry out an activity that is subject to certain qualifications if the sole trader hires an individual who holds the required qualification for an indefinite period. The sole trader is obliged to obtain an official license if he/she wants to carry out any business activity that is subject to an official license under law.
If you have any queries regarding the obligations of a sole proprietor in Hungary, you can trust the legal advice of our lawyers. 

The advantages of a sole trader in Hungary

It is rather easy to set up a sole trader in Hungary compared to the other business forms available in this country. Although the sole trader will also need to comply with certain taxation laws and make social security contributions, the demands are more relaxed than for large companies which require annual audits.
Lawyers in Hungary, private health contractors, social workers, consultants, accountants and other service providers can benefit from setting up a sole trader in Hungary.
You can get in touch with the experts at our Hungarian law firm for more information about the liabilities of the sole proprietor in Hungary.  We can also help you set up other business forms like subsidiaries or branches.

Types of taxes for sole proprietors in Hungary

Hungary offers two types of taxes to the individuals who own a sole proprietorship in Hungary. The first tax option is the lump sum, and the second option is paying the business income tax. Please find below the difference among these taxes:
  • The lump tax is for those sole traders whose yearly revenue is less than HUF 15 million;
  • The lump tax rate is 15% and you canalso get deductions on expenses;
  • Business income tax is obligatory on sole traders whose yearly revenue is more than HUF 15 million;
  • The tax rate for this option is 9% and deductions are also applicable.
If you are facing any difficulties regarding taxes, you can contact our experienced lawyers in Hungary. They will legally guide you regarding the regulations and structure of a sole trader in Hungary.