Hungary company registration

Hungary company registration

DOING BUSINESS IN HUNGARY

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  • Advantages and disadvantages

    Advantages of Hungary company registration

    Hungary business registration advantage

    1. A Hungary company is an excellent global holding company because:
      • Dividends received by a Hungarian company from a foreign company will be exempt from corporate tax if i) the foreign company does not derive most of its income from Hungary and ii) pays an effective tax of more than 10%. Also, dividends paid to all non-resident entities is withholding tax exempt;
      • Interest payments and royalty payments to all entities will be completely withholding tax exempt;
      • Capital gains resulting from sale of an investment will be completely tax exempt if a Hungarian national has been a 10% shareholder in the company for at least 1 year;
      • Hungary has signed double taxation agreements with 70 countries including Australia, Canada, China, India and USA;
      • A resident business can be registered with a relatively low minimum paid up share capital of €10,000, only 50% of which must be deposited at incorporation. Also, only 1 director and 1 shareholder are required, who can be of any nationality.

    2. A Hungary company is an excellent EU trading company because:
      • Following the EU principle of free circulation, all goods originating in and trading within the EU will be exempt from customs duties. Also, goods dispatched from one VAT registered business to another will be exempt from VAT;
      • Companies do not require an audit if i) their average annual revenue for previous two years is less than €325,000 and ii) they hired less than 50 fulltime employees;
      • Companies are allowed to carry forward their losses for a period of up to 5 years and offset these losses against up to 50% of the profit in another financial year;
      • Foreign companies enjoy a 80% corporate tax rebate for 10 years if they invest at least €321,000 in projects relating to i) environmental protection ii) broadband internet service iii) movie production iv) infrastructure for existing food production and storage facilities and v) R & D;

    Disadvantages of Hungary company registration

    1. A Hungary business will be required to contribute 9% of the employee’s gross salary for social security purposes;
    2. Hungary has a VAT rate of 27%, which is the highest in the world;
    3. Hungary was ranked 47th in the world in the corruption perception index for the year 2014. The country was also ranked as the 39th best country out of 130 countries to register intellectual property;
    4. Despite being in the EU, Hungary has its own local currency – Forint, which can be volatile;
    5. Hiring non-EU citizens can be a challenge in Hungary. Entrepreneurs will need to prove that EU citizens weren’t denied a work opportunity;
    6. In Hungary, English is only spoken by 12% of the population. Consequently, foreign entrepreneurs might find it difficult to communicate with local customers and suppliers.
  • Best uses for a Hungary company

    1. Hungary is an excellent EU manufacturing and distribution base because:
      • The Government will pay 40% of annual interest on a loan for resident SMEs if the amount borrowed is used for purchasing or manufacturing tangible assets;
      • A foreign company investing at least €1.6M in one of 47 Hungarian free entrepreneurial zones enjoys a 50% corporate tax rebate for 10 years;
      • Firms investing in infrastructure and R & D projects which result in creation of new jobs (dependent on the industry) can receive corporate tax credit of 80% for 10 years;
      • IT SMEs receive refund on i) 25% of payroll costs of software developers and ii) 10% of direct R & D costs for 4 years;
      • Hungary’s EU membership offers benefits including i) free movement of capital and labor ii) access to the vast European market of 500 million and iii) absence of withholding tax on payments to other European countries;
      • Hungary’s central location and its vast network of well-developed roadways, railways, waterways and airports make it a good choice for product distribution within Europe;
      • There are no capital or exchange controls imposed by the Hungary Government. Consequently, it is easy to convert foreign currency into Hungarian Forint (HUF).

Company registration

  • Time to incorporate: Two weeks
  • Cost to set up: €8,990
  • Minimum capital: €10,000
  • Physical office required: No

Required appointments

  • Shareholders: 1
  • Directors: 1
  • Company secretary: No
  • Resident director: No

Key facts

  • Corporate tax rate: 10%
  • Corporate tax base: Worldwide
  • Shelf companies: No
  • Main company type: KFT

Frequently asked questions

Contact us

For additional information on our company registration services in Hungary, please email us at email@healyconsultants.com. Alternatively please contact our in-house country expert, Mr. Petar Chakarov, directly:
client relationship officer - Petar