Open a sole trader in Hungary – Get help from our lawyers
Setting Up a Sole Trader in HungaryUpdated on Monday 27th February 2023
Rate this article
based on 2 reviews..
based on 2 reviews..
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.
Our Hungarian lawyers can provide you with legal assistance if you are interested in setting up a sole trader in Hungary.
Sole proprietorship in Hungary
One-person enterprises with no legal identity are known as sole proprietorships. For debts arising from the company's activities, the private entrepreneur has complete accountability with all of his/her assets.
Individuals who provide services, such as accountants, consultants, and others, should use this business form. However, certain professions, such as primary agricultural producers, veterinarians, lawyers, private patent attorneys, and notaries, are not allowed to register as sole merchants.
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
In comparison to the other company types, setting up a sole trader in Hungary is quite simple. Although the single trader must comply with tax regulations and pay social security obligations, the requirements are less stern than for big corporations, which must undergo yearly audits.Sole traders can beset up by Hungarian nationals or by foreign individuals who hold a residence permit in Hungary. 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 in Hungary 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 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 welcome 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.
The procedure of setting up a sole trader in Hungary
Individuals who wish to create their businesses do not need to apply for a sole trader authorization any longer.
It is a good idea to visit an accountant before starting the registration procedure; they can assist you to choose a code and provide important tax information.
Our Hungarian lawyers can provide you with legal assistance if you want to open a sole trader in Hungary. However, you can also find below general information regarding setting up a sole trader in this country.
You must file a notification of the commencement of activity to begin your sole trader business.
A valid personal identity document, an official address card, your tax number, and a certificate or license must be submitted with this notification (if your business requires it).
You will also need to know the activity code for the company you are registering.
When you notify the state regarding initiating your business, they will immediately insert you into the register and send you the certification that certifies the start of your business; it comprises your tax number, the selected business activity, registration number, and personal information.
The once-mandatory single trader license is now only available upon request and is free of charge.
If you still have any questions regarding the procedure, you are welcome to get in touch with the experienced lawyers located at our law firm in Hungary.
How does a sole trader initiate his/her business in Hungary?
In Hungary, sole traders can begin operating their businesses immediately after receiving their certificate.
The newly formed sole proprietorship in Hungary must register with the tax authorities; this process takes place within 15 days of the company's registration application.
If a foreign resident has a residency permit in Hungary, he/she can register as a sole trader. Hungary provides residency permits to foreign nationals who desire to settle in the country and have nearly the same opportunities as Hungarian citizens.
Furthermore, Hungary is a member of the Schengen zone, anybody possessing a Hungary resident permit is eligible to travel inside the Schengen region without a visa.
Hungary should be chosen as a residence nation since it provides a high-class lifestyle at a reasonable cost, and many individuals prefer to establish their enterprises here. So, you can get in touch with our lawyers in Hungary if you want to obtain residency here.
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:
- The fully liable partner of a business entity;
- A member of a private company;
- An individual who has committed crimes against international public life or the morality of public life;
- A person who has been involved intentionally in financial crimes, and sentenced to imprisonment by a 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.
Advantages of setting up a sole trader in Hungary
Hungary is an excellent place for setting up the sole proprietorship. It is an EU member state with a mature economy, favorable investment, and innovation climate, located in the center of Europe.
Budapest has become one of Europe's most coveted startup hotspots as state regulations have been adjusted to meet the rising interest of entrepreneurs.
If you have been considering starting a Hungarian sole proprietorship, you should know the benefits of opening this business type. Here are the advantages of opening a sole trader in Hungary:
1. Simple to set up
It is simple to establish a business on your own because there are no legal requirements.
Distinct individuals are involved in a partnership, and they all have different responsibilities. However, a sole trader just has to take two steps. He/she must first consider an original concept before putting it into action using a sound plan.
The business will begin to provide you with benefits within a few months.
Furthermore, an individual may develop a sole proprietorship for a very small sum of money, while in a partnership there is a significant demand for finance.
When a sole trader makes a profit, it is all yours; you do not have to share it with anybody. On the other hand in a partnership the profit is split among all partners.
Sole proprietorships in Hungary are used for starting small businesses and there are just a few items on which you must concentrate.
Customer demands are the first, and customer satisfaction is the second.
As a result, you only have to handle a few things, and you have a lot of flexibility. On the other hand, with a partnership, the team is much larger, and you are in charge of a big portion of the firm.
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. Besides helping you with the incorporation of these business structures, if you need help with other matters, the services of our lawyers are at your disposal. Our immigration lawyers can assist you if you are interested in applying for citizenship in Hungary. They will not only guide you but also practically assist you throughout the application procedure. With their assistance, you will be able to comply with the regulations in an efficient way.
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 between 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 can also 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.
In addition to this, our skilled lawyers in Hungary can also provide you with comprehensive legal assistance if you want to immigrate to this country.