As a flourishing economy in Europe and a member of the European Union, Hungary provides incredible opportunities for foreign companies looking to invest and open a company in the country. Hungary has the lowest corporate tax rate in the EU which makes it a very impressive country to invest in.

Advantages of registering a company in Hungary

Hungary is a continental state in Central Europe with an advanced economy showing annual GDP growth of 5% and a favorable position as a railway hub between the CEE countries. In addition to the following advantages, it is one of the most desirable low-tax jurisdictions in the European Union for business activity of both residents and non-residents of Europe: 

• a single member is able to form a business in Hungary. 
• corporate income tax is 9%, the lowest in Europe. 
• local business tax ranges from 0% to 2%, subject to the location. 
• Tax on dividends is in most cases 0% in Hungary 
• an entrepreneur can avoid double taxation 
• reasonable and well-qualified workforce. 
• given its strategic location and its market potential, as well as its European Union membership and diplomatic ties, Hungary gives a wonderful opportunity to enter the markets of the developed EU Member States. 
• Hungary is a member of the Customs Union, enabling significant savings in time and administration when working with other EU Member States. 
• a satisfactory business and tax environment. 
• free flow of capital and labor within the European Union. 
• English language is generally used with the option of foreign language bookkeeping. 

Within the European Union area, Hungary is the country with the lowest tax rates for foreigners, along with Cyprus and Malta. 

Forms of company in Hungary 

Before registering a company in Hungary, it is highly recommended to decide on the organizational and legal form of the enterprise, taking into consideration the level of responsibility of the founder and the size of the legitimate capital. 

When registering a company in Hungary, it is vital to specify the planned activity, since, unlike most European countries, the option of a wide range of activities is unacceptable. However, you can choose different types of activities or amend the constituent documents in the future, putting in new items to them. 

Companies forms in Hungary

Limited Liability Company (Korlátolt Felelősségű Társaság or Kft.) 

Features: 

• A Limited Liability Company is established with a predetermined amount of initial capital that is HUF 3,000,000 provided by its Founders. 
• The liability of its members is limited to the provision of the company’s initial capital. 
• Members of a Limited Liability Company may not be solicited by public invitation. 
• The capital contribution of members is provided in the form of core deposits and Each member shall have one core deposit. 
• The members’ rights and their title to the company’s assets are represented by shares in the company. 
• No securities may be issued in respect of the business shares. 
• A Limited Liability Company could operate even having one member. 

Company Limited by Shares (Részvénytársaság or Rt.) 

Features: 

• This is the most regulated corporate form, which shows similarity to the English Plc. 
• There are two types of stock companies: Private Limited Company (Zártkörűen működő részvénytársaság or Zrt.) and Public Limited Company (Nyilvánosan működő részvénytársaság or Nyrt.) 
• A stock company is especially suitable to large business entities with several investors. 
• A Private Limited Company in Hungary shall be established with an initial capital consisting of a predetermined amount. 
• The amount of cash contributions at the time of establishment may not be less than 30% of the share capital. 
• The liability of its members is restricted to the provision of the nominal or issue value of the shares. 

Limited Partnership (Betéti Társaság or Bt.) 

Features: 

• In a Hungarian Limited Partnership, the minimum number of members is two, which is at least one general partner and one limited partner. 
• Only the general partners may oversee the partnership and represent the partnership in its transactions with third parties. 
• The profit distribution is commonly equal to the capital contributed, but the parties are free to agree oppositely. 
• It is against the law to exclude any partner from the distribution of profits. 

General Partnership (Közkereseti Társaság or Kkt.) 

Features: 

• In a General Partnership, the members of the partnership must agree to contribute to the partnership the capital contribution essential for its activities, 
• the liabilities of its members are joint and numerous for the partnership’s obligations. 
• every member is authorized to represent the partnership unless its articles of association state otherwise. 
• the partnership must have at least two members. 
• active participation of the partners in the conduct of the partnership’s business is legally required 
• no minimum capital is required to found and operate a General Partnership. 

Steps of Hungarian company incorporation

The important stages of registering a business company in Hungary include the following: 

• Choose the company name. The necessities are quite standard: suggest at least two names, and the suggested name shall be unique. Latin letters must be used and the company ownership type must be reflected in the company name, for instance, the name shall end in KFT if it is a KFT 
• Determine the company structure, directors, and stockholders. 
• Choose a legal address. 
• Formulate the distribution of the charter capital between the company owners. 
• Specify the spheres of business activities that the company is going to be engaged in. 
• Find out the provisional costs of registering a company in Hungary 
• Prepare the package of corporate application documents (this is possibly the most demanding stage and the document preparation should be handled with care) 
• Pass through the Due Diligence/KYC(know your customer) processes. 
• Register the company in the Hungarian Company`s Court. 
• Register the company with the tax authorities and obtain a taxpayer number. 
• Register the company with the Hungarian social security service. 
• Open a corporate bank account. 

Starting a business in Hungary as a foreigner or as a local indicates several phases, from selecting the most suited type of company for the business objectives to company registration. 

If you are ready to set up your company in Hungary, let’s go ahead and contact your Damalion expert now.