Company Formation in Hungary
Hungary can be a great place to form a company if structured correctly and Hungarian incorporation can become a tax efficient solution with tax rates as low as 10%, with plans to further simplify the tax regime in the near future. While Hungarys tax system is complex, the situation is improving constantly.
And not only is it located conveniently within Europe and boasts political stability, it has recently emerged as a country with a fast developing economy and significantly streamlined incorporation procedures. Another huge benefit that Hungary brings to the table is that appointing local directors or shareholders is not required at all, so you can have 100% international ownership and control. Investors thinking about Hungary company formation can also take advantage of the double taxation treaties the Hungary has agreed to with other states.
Typically and in the past, Hungary has not been the easiest place to set up shop. However, now there is nowhere in Europe where you can incorporate faster, and with your own VAT number; within 24-48 hours in fact.
Foreign business owners often look at Hungary as an area that is tolerant of the grey market, but this is often not the case. This is because the authorities (in particular labour and tax) are very active so it is essential you remain fully compliant. Forming a company in Hungary has many advantages, but it is not regarded as an offshore or tax haven.
Some companies will take advantage of Hungary more than others and one example would be a holding company; paid royalties are seen as expenditures that can be subtracted from your corporate profits, and any dividends paid to a non-resident or resident are tax free. There are four main types of companies people tend to incorporate within Hungary; a Limited Liability Company (Kft), Company Limited by Shares (Rt), Limited Partnership (Bt) and a Branch Office. Each has different traits and requirements of which are broken down below.
Limited liability company (Kft)
- One owner and one director is sufficient
- Liability limited to the capital
- Minimum share capital is HUF 500,000 (approx. EUR 1,900)
- The most common form in Hungary
- Can be owned by foreigners and foreign companies (as subsidiary)
Company limited by shares (Rt)
- Owners bear no liability for the operations
- Zrt sells its shares through a private offer to the founders
- Nyrt sells shares publicly
- Minimum capital is HUF 5M (approx. EUR 19K)
- Some activities (finance, insurance, etc.) can only be done in this form
Limited partnership (Bt)
- Min. one general partner and one limited partner
- The general partners liability extends to his/her private assets
- The limited partner is only liable up to the value of his/her investment
- No minimum capital requirement
Branch office
- Liability and most taxation obligations lie with parent company
- Much less common than subsidiary
- Inalienable part of the parent company
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Company Formation in Hungary, click
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