Since 2003, Healy Consultants has assisted Clients with business registration in Hungary. Our services include i) Hungary company registration ii) corporate bank account opening iii) employee recruitment iv) employee visa strategies and v) office space rental solutions.

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Hungary business setup summary

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• Advantages and disadvantages

  Advantages of Hungary company registration

  

  1. A Hungary company is an excellent global holding company because:
     • Dividends received by a Hungarian company from a foreign company are 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 are exempt from withholding tax;
     • Hungary does not impose any withholding tax on dividends, interest, or royalties paid to non-individual beneficiaries.
     • Capital gains resulting from sale of an investment are 100% tax-exempt if a Hungarian national has been a 10% shareholder in the company for at least one year;
     • Hungary has signed double taxation agreements with 80 countries including Australia, Canada, China, India and USA;
     • A Hungary company only requires 1 shareholder and 1 director who can be the same person, of any nationality and does not need to be resident.
     • It has one of the lowest corporate tax rates in Europe at 9%.
     • Securing a local and European Union VAT number is easy and instantly issued.
  2. A Hungary company is an excellent EU trading entity because:
     • Following the EU principle of free circulation, all goods originating in and trading within the EU are 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 full-time employees;
     • Companies are allowed to carry forward their losses for a period of up to five years and offset these losses against up to 50% of the profit in another financial year;
     • Foreign companies enjoy an 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;
  3. The Hungarian government extends both refundable and non-refundable incentives to entrepreneurs aiming to invest or expand their businesses in Hungary. The main incentives include i) cash subsidies ii) tax incentives iii) low interest loans and iv) availability of land at reduced prices;
  4. Hungary is located in central Europe with access to the EU’s 450 million consumers, and is therefore excellently placed as a manufacturing, services and logistics hub benefitting from zero customs duties or quantitative restrictions.

  Disadvantages of Hungary company registration

  1. A Hungarian business must contribute 13% of an employees’ gross salary for social security purposes.
  2. At 27%, Hungary has the highest VAT rate in the European Union and the 4th highest VAT rate in the world.
  3. Hungary is perceived as one of the EU’s more corrupt countries;
  4. Immediately upon incorporation, our Client must appoint an accountant to conduct monthly tax, payroll and VAT reporting. Average monthly fees can reach €760;
  5. Hiring foreign employees in Hungary can be challenging as the company hiring a foreign employee will need to prove that they were not able to locate a suitable Hungarian citizen to fill the position.
  6. Non-Hungarian-speaking foreign entrepreneurs might find it difficult to communicate locally as only 16% of Hungarians speak English.
  7. In 2020 Hungary recorded a national debt to GDP of 80.40%, which is the highest national debt has been since 2011. This will likely lead to new taxes being implemented affecting all sectors of the economy.
  8. Hungary could suffer future economic challenges due to political conflict with the European Union.
  9. Importing and exporting goods to and from Hungary is a very slow and arduous process, with imports on average taking 19 days to clear and exports taking 17 days to clear.

• 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).