Company Formation in Hungary

Why choose Company Formation in Hungary?

Company formation in Hungary to set up a company in Hungary is an easy and fast process in Hungary Business setup. The main benefit of incorporating a business is Hungary’s low corporate tax rate which is 9% as compared to other European Countries. Also, Hungary’s central location in Europe makes it easy to attract markets from both Western and Eastern countries of Europe to provide easy access to a large consumer base. Hungary has access to a European Single Market being a member of the European Union and it has a stable economic environment with a favourable business environment. Also, Company formation in Hungary protects your personal assets from being used as collateral for business liabilities.

Enlighten the Business Environment for Company Formation in Hungary

The business environment for Company Formation in Hungary is categorized by a mixture of economic stability, a favourable regulatory framework, and a strategic geographical position within Europe for hungarian businesses. Hungary is known for their low corporate tax rates which attract businesses seeking tax-efficient solutions. Our service of Company Formation in Hungary will help your business to get a business-friendly legal framework which is transparent.

The well-established infrastructure, skilled workforce and cost-effective business operations make it more convenient for the Hungary Business Setup to establish a presence in Central Europe. The company formation in Hungary provides a vast market and seamless cross-border trade. The government of Hungary take initiatives to simplify the administrative procedure to contribute to easy company formation in Hungary procedures which offers efficiency and ease for businesses. Also, the company formation in Hungary has a healthy political environment and commitment to innovation to attract more investors.

Procedure for Company Formation in Hungary

The formation process of company formation in Hungary is required to be followed for a smooth registration process.

Choose a type of Business Structure

Our company formation service in Hungary helps you choose the business structure per your specific need for the company's formation.

Choose a Company Name

Our Service of new Company Formation in Hungary helps in choosing a unique name for your company and its availability in Hungary with Hungarian Company Information Services which you are planning to incorporate is the first crucial process towards the Company registration in Hungary.

Preparation of Article of Association

Our service for company formation in Hungary helps in drafting the Articles of Association and statutory necessary papers to outline the company structure, activities and internal regulations. Also, includes the details about shareholders, share capital and the other required information about the company incorporation.

Notarisation of the necessary papers

The Hungary Registration is only complete when the Article of Association and all the other necessary papers are certified properly by a Hungarian notary public to gain the authenticity of the necessary papers.

Appoint the Board of Directors

Company formation in Hungary needs to appoint a board or director at the time of company formation required by the chosen business structure.

Company Formation in Hungary

For the successful competition of the company formation in Hungary, our experts will help you to get registered by the Regional Court of Registration and submit the required necessary papers such as an Article of Association, proof of depositing the capital and details of the directors or board members.

Obtain a Business License

If your business requires a trade license then our experts will help you to obtain the business license for the smooth functioning of your business as per your specific requirement.

Register for Taxation

For the Hungary company registration, you require registration of taxation with the Hungarian Tax Authorities and obtain a tax identification number for your company in local business tax.

Open a Corporate Bank Account

The company formation in Hungary requires you to open the bank account for the company in Hungary and deposit the required share capital as outlined in the Article of Association.

Register with Social Security

If your companies have employees then you need to register the company for social security with Hungarian Social Security Authorities.

Types of Business Entities and their Tax Implication for Company Formation in Hungary

There are various types of business entities to choose from for company formation in Hungary as follows

Limited Liability Company (KFT)

The LLC business structure is one of the most chosen types of company during company formation in Hungary. The Shareholder's liability is limited to their amount of contribution and their assets get protected from the business liabilities. The minimum share capital required for company formation in Hungary for LLCs varies as subject to Hungarian regulation, but it is currently 3 million HUF. LLC is managed by at least one or more directors (Managing directors) and must have a registered office in Hungary for the company registration in Hungary. The shares in LLC can be easily transferable and the small and medium enterprise is exempted from the statutory audit requirements as per the dependency on annual turnovers. The tax implication on LLC in Hungary is 9% a corporate rate tax on the taxable profits and if the SMEs annual profits are below 100 million HUF then the CIT will reduce to 5%. The rate of VAT depends on their applicability to the respective company but the general VAT rate is 27% which will be reduced to 18% and 5% as per the products but companies with 8 million HUF profits are considered under SMEs to be exempt from the VAT.

Joint Stock Company (RT)

The Company formation in Hungary as a Joint Stock Company is mainly adopted for larger businesses and it allows the issuance of shares to the public. The company formation in Hungary as a Joint Stock company requires minimum share capital varies as per the Hungarian Regulation but at present 5 million HUF for private companies and 20 million HUF for public companies.

You can easily attract capital by issuing shares to raise capital in the company. The RT require a board of directors and supervisory body to operate for day to day operation of the companies and at least one shareholder for company incorporation in Hungary. The RT must have a registered company address for company registration in Hungary. The Joint Stock Company have tax implications on their worldwide income at a 9% corporate income tax rate and the dividends distributed by the Joint Stock Company to shareholders are subject to a dividend tax in Hungary. The rate of VAT depends on their applicability to the respective company but the general VAT rate is 27% which will be reduced to 18% and 5% as per the products.

Sole Proprietorship

Hungarian company formation needs to select a business structure as a Sole Proprietorship which operates as an individual where the owner is personally responsible for the liabilities of the business and no separate legal entity. The tax implication as a personal rate is 15% for the business profits. The rate of VAT depends on their applicability to the respective company and if the company crosses the threshold limit and the general VAT rate is 27% which will be reduced to 18% and 5% as per the products but companies with 8 million HUF profits are considered under SMEs to be exempt from the VAT.

General Partnership (BT)

The company formation in Hungary as a General Partnership where each partner has unlimited liability for the debt in partnership, also the partners share the profits and losses. The Company registration in Hungary as a General partnership company required no minimum amount of capital for company incorporation in Hungary and the registered address of the company is in Hungary. The General Partnership has a tax implication as a personal rate tax of 15% on business profits. The rate of VAT depends on their applicability to the respective company but the general VAT rate is 27% which will be reduced to 18% and 5% as per the products.

Limited Partnership (KKT)

A limited liability partnership is a partnership where there is a requirement of two members to perform a company formation in Hungary where one of the members holds unlimited liability and the other is limited according to the contribution made by them to the company. The tax implicated in the company formation in Hungary on the profits which are attributed to the partners and taxed individually to the partners. There is a requirement of at least one general partner and one limited partner for the Company registration in Hungary as a Limited Partnership.

Branch Office

A foreign company establishing a branch office while performing Company incorporation in Hungary makes the presence of its foreign parent company, liable for the branch obligations to work on behalf of their parent company. It must have a registered office in Hungary The CIT in a branch office is 9% on taxable profits and the rate of VAT depends on their applicability to the respective company but the general VAT rate is 27% which will be reduced to 18% and 5% as per the products.

Business Development to SMEs by Company Formation in Hungary

Hungarian Investment Promotion Agency helps small and medium-sized companies to implement their business plans and also ensures the corporate needs by sectors to maximize the exports of SMEs. The agency acquires information on the suitability of the export data and the various innovative technologies and services to establish personal relations and give advice on business development for sustaining the growth of the business. The agency helps SMEs to participate in opportunities at exhibitions in foreign markets and identify the target export opportunities.

Eligibility for Company Registration in Hungary

• A minimum of One shareholder is required for the Company Registration in Hungary.
• At least One Director is required for the Company Registration in Hungary.
• For the Hungary Business Setup, you require a registered office address in Hungary.
• The Company needs a Corporate Bank Account for depositing a share capital or performing a financial transaction for the Company registration in Hungary
• The minimum share capital is 3 million HUF is required for the Company Registration in Hungary and the maximum depends on the type of business structure you choose to incorporate in Hungary

Set up your EU company in Hungary to enjoy the 9% corporate tax rate

Company Registration in Hungary offers the benefits of low corporate rates to companies by making it a more attractive platform for Company registration in Hungary and enjoying a favourable environment to sustain growth and profitability. The Standard corporate rate income tax is 9% on taxable profits up to 500 million HUF and 15% on profits exceeding 500 million HUF. The standard rate of VAT depends on their applicability to the respective company but the general VAT rate is 27% which will be reduced to 18% and 5% as per the products and the standard dividend tax rate is 15%.

Cost-effective and Quick company formation in Hungary

The Company Formation in Hungary requires careful planning and research to streamline the smooth process for operating a company in Hungary. The process starts with choosing the correct business structure for the company incorporation in Hungary. Select the correct Company Name at register it with the Hungarian Company Information Services. Our experts help in the Company incorporation in Hungary and ensure the drafting or preparation of the necessary papers to ensure accuracy and maintain the authenticity of the necessary papers in notarizing them in the public notary office and submitting the application for the company incorporation in Hungary with the Regional court of registration. After the registration, you need to perform a registration in taxation with the Hungarian Tax Authority. Our experts provide services to make company registration in Hungary an easy process and accelerate the process while ensuring compliance with the regulations to achieve cost-effective company formation in Hungary.

Benefits of 9% corporate tax rate: The lowest in the EU for the Company Formation in Hungary

The benefits of the low corporate rate tax for the EU companies for company formation in Hungary as defined below

Maintains Economic Growth

A low tax rate attracts investment and economic activity because the low tax rate can benefit businesses or individuals by increasing their overall return on investment and lead to an increase in the business's profits or income that will be utilised in spending or consumption to maintain economic growth.

Attract Foreign Direct Investments

Hungary with a low tax rate attracts foreign investors because a favourable tax environment encourages corporations and investors to establish operations leading to job creation and increased capital flow.

Encourage Compliances

With a tax-friendly environment, businesses or individuals avoid tax evasion and comply with the tax regulations due to its low rate of tax policies. Our team of experts ensure that businesses comply with the latest tax regulations to function smoothly.

Increase Innovation

The low rate of tax will benefit the business or individual to invest the profit in research and development in new technologies or innovation for economic growth and they willingly invest in the new technologies and processes to secure a sharing in the innovation.

Advantages of Company Formation in Hungary

The advantages of the company formation in Hungary are

Business-friendly Environment

Company registration in Hungary will help you to take the benefits by providing a business-friendly environment to make regulations which streamline the administrative process and maintain political stability to help businesses achieve success in a diverse range of sectors, getting a gateway of emerging markets in both eastern and western Europe, fostering international trade and attracting investors. Also, Hungary’s economic growth provides opportunities in sectors such as information technology, manufacturing and renewable energy.

Easy Hungary Business Setup

Company registration in Hungary is an ideal setup for forming a company in Hungary. The competitive advantage of lower operational costs, business-friendly policies etc., helps in setting up the incorporation of a business in Hungary an easy process. The minimum requirement of capital is minimum to 3 million HUF. The Company Formation in Hungary is an easy step because any company will only require one owner and the owner can be a foreigner because a Non-resident can own 100% of the shares in a Hungary KFT. Also, there is a need for at least one director to represent the company which means no such requirement for local directors.

Low Tax Rate

Company Formation in Hungary has one of the lowest corporate tax rates in the European Union which is 9% which states the benefits of doing business in Hungary for individuals and corporations to enable businesses to maximize profits. Due to the business-friendly tax system foreign investors attract more for the investment in the company. The company formation in Hungary helps your company after its initial incorporation and it generates profit the company will pay corporate income tax on an annual basis.

Strategic Location

Company registration in Hungary helps you to incorporate a business in Europe which has a strategic location and provides businesses with easy access to markets in both eastern and western Europe to make it an ideal hub for trade.

Skilled Workforce

Company registration in Hungary helps you with a well-educated and skilled workforce at competitive labour costs, making it an attractive destination for businesses seeking quality talent.

Double Taxation Treaties

The company formation in Hungary will help you to provide an extensive network of double taxation treaties to prevent double taxation of income for businesses engaged in cross-border activities. Hungary has signed agreements with different countries to avoid double taxation in the world.

General Overview of Tax Implication in Company Formation in Hungary

A brief overview of the taxation structure for company formation in Hungary is as follows

Corporate Income tax

The Corporate income tax rate is 9% of the company’s annual tax profits and it is calculated based on accounting profits adjusted for tax purposes. The dividends distributed to resident and non-resident shareholders are generally subject to a 15% withholding tax. Also, the most beneficial part of Hungary’s business setup is capital gain from the sale of shares and certain financial instruments are generally exempted from the tax.

Amortization

The purchase price of the assets gets depreciated for tax purposes at the rate of 10% tax depreciation may be claimed, if a taxpayer declares in their tax return that the presentation and cancellation of goodwill in their books was in line with its intended purpose then they may be eligible for tax benefits. Under the previous regime, ordinary depreciation of goodwill was not allowed for accounting purposes. However, extraordinary depreciation could be accounted for on goodwill in cases where the book value permanently and significantly exceeded the market value. This qualified for tax-deductible purposes for the Corporate Income Tax (CIT).

Tax Credits

The Company Formation in Hungary provides you with a unilateral foreign tax credit for the income tax paid abroad such as when the Hungarian Tax is Payable on the creditable income at a maximum of 90% of the paid tax. For example, companies engaged in research and development may get incentives, credits and deductions.

VAT and Dividend

The Standard VAT rate is 27% which will be reduced to 18% and 5% as per the products and the standard dividend tax rate is 15%.

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Company Registration in Hungary Service by Enterslice

The Services provided by Enterslice for the hassle-free procedure for incorporating a company in Hungary are

Choosing Company Name

Enterslice helps in company registration in Hungary by assisting you in choosing a company name for your company, ensuring the availability of your company’s name and assisting in the reservation process as per the Hungarian Laws.

Legal Advice

Our service will help you assist with specific business considerations such as opening of Corporate Bank Account, unique challenges your business may face, mitigating the risk of losses and the company formation process. Guide legal requirements and provide expert advice on the most suitable business structure. Also, it provides business strategies and helps in promoting business operations and ensuring financial protection. We also help you stay updated about the latest regulations for business aspects.

Drafting of necessary papers

Enterslice assists in drafting and preparation of the Article of Association, and other statutory necessary papers, coordinating and handling notarization of relevant necessary papers, and preparing or ensuring the accounting statements, agreements contracts etc., for your company. Our services ensure that your company complies with the contractual obligation under Hungary laws.

Tax Registration

The corporate income tax rate in hungary is 9% and the corporate income tax rate so our service of Company Formation in Hungary assists the experts in corporate tax services and makes sure that the company comply with tax regulations in filing an accurate and timely tax return. Our service will adhere to VAT obligations maintain proper records of accounting and ensure tax registration.

Hungary’s Company Activity in Accounts and Nace Codes for the Company Formation in Hungary

The NACE code is used to identify economic activities by maintaining statistical analysis to start a business in Hungary. The NACE Code 69.20 states that the company needs to do accounting, auditing activities, and bookkeeping so our experts assist in the accounting services to maintain the record of books of account. The NACE code 79.10 states the activities of the employee's agencies to get payroll services for the benefit of the employees. Our experts provide the service for taxation and finance activities to maintain accurate reports for attracting investors.

Essential necessary papers for opening of Bank Account in Company Formation in Hungary

The essential necessary papers for opening a bank account for the company formation in Hungary are

• The necessary papers and certificate of registration issued by the Regional Court of Registration in Hungary for during the company incorporation in Hungary.
• A copy of the Article of Association and Memorandum of Association
• A copy of the Tax Number Certificate issued by the Hungarian Tax Authority.
• An address proof of the registered office.
• If required then the Certificate of Good Standing.
• Identification necessary paper of company directors and shareholders.
• Proof of address for directors and shareholders for setting up a business.

Residence Permit in Company Formation in Hungary

The director of the company, shareholders or investors need to obtain a residence permit to acquire full business ownership. The Business Residence Permit is required for individuals involved in business activity in Hungary and the individuals making investments in Hungary need to obtain the Investment Residence Permit.

Requirement of VAT number in Company Formation in Hungary

In Hungary, obtaining the VAT number is an important aspect of company formation, especially when your business is engaged in taxable transactions.

Without the EU VAT number

Registration

To make your business engage in taxable transactions in Hungary you are required to register for VAT if the taxable turnover exceeds threshold limits at present the limit is Euro 71,500.

Application Process

You need to submit the VAT registration application to the Hungarian Tax Authorities by providing the necessary necessary papers such as a company certificate for formation, bank account details, registered office address etc.

Issue of VAT number

After the application is submitted with the relevant necessary papers the tax authorities will provide you the VAT number.

With the EU VAT number

Thresholds Transactions

If your company has an EU VAT number and then engages in transactions freely.

Invoices

The invoices will have the EU VAT number in them.

Ongoing Compliance

The company needs to comply with EU VAT regulations and Hungarian Regulations provided by the tax authorities.

What are the residential requirements in Hungary?

Opening a company in Hungary requires for the residential permits are stated below

Application for Immigration Certificate

The application for residence permits needs to be submitted to the Hungarian Immigration office and all the formalities related to biometrics need to be completed for approval.

Work Permit

The non-resident needs to get a work permit to work in Hungary.

Residence Permits

After getting the work permit the individual needs to apply for a residence permit to work and live freely in Hungary as a resident in hungary.

Investor or Business Permits

The individuals involved in business or investment need to get a permit to engage in business activities in Hungary.

Clean Criminal Record

The individual needs to have a clean criminal record from their home country to engage in business in Hungary.

Mandatory Post-Registration Formalities in Company Incorporation in Hungary

The post-registration formalities in Company incorporation in Hungary are to be followed by the individual to register your company in Hungary.

Tax Registration

The company needs to register with the Hungarian Tax Authority to obtain a tax number to fulfil all the tax obligations and the Hungary has the lowest corporate rate tax.

VAT Registration

If the company reaches the VAT thresholds then you need to obtain a VAT registration number with tax authorities.

Social Security Registration

If your company hires an employee for the company then you need to get your company registered with the Hungarian and Social Security.

Business License

Your company needs to obtain a business license for some specific industries and activities and ensure compliance with specific regulations.

Open a Bank Account

Your company needs to open a corporate bank account to deposit the required share capital for the company incorporation in Hungary.

necessary papers You Will Need for the Company Incorporation in Hungary

The certificate of Incorporation is required when you register your new company in Hungary.

• The Articles of Association outline the company's internal regulations and Memorandum of Association if required.
• The certificate issued by the tax authority for the tax numbers.
• The details of the corporate bank account and receipt for the share capital deposited in the bank.
• The proof of the registered office address.
• The valid identification proof of the director or shareholders etc., such as passports and IDs.

Social security obligation of a foreigner in Company Incorporation in Hungary

When the foreigner is involved in a company incorporation in Hungary then the social obligations may apply which cover various benefits such as health, pension and unemployment benefits.

Social Security Contribution

The employers and employees both need to make social contributions for the benefit of the employees in health insurance, unemployment benefits etc.

Employer’s Responsibility

The employees themselves make the social security contribution and pay to the social security system.

EU Nationals and Non-Nationals

The EU nationals need to comply with the rules based on the coordination of the social security system within the EU. The Non-nationals need to comply with the social security rules based on the bilateral agreements signed by Hungary with the specific country.

Why should you register a company in Hungary?

Company Registration in Hungary offers numerous benefits to make it an attractive place for company registration. Hungary is one of the most important benefits is the favourable corporate rate tax environment, strategic location etc., to encourage profitability and investment. The strategic location attracts a large and growing market to foster business opportunities. Hungary’s membership with the EU facilitates seamless access to the EU market for expanding the business.

How long does it take for a company formation in Hungary?

The timeline for company formation in Hungary requires one to two weeks to establish a company.