COMPANY FORMATION IN HUNGARY
Company registration in Hungary offers entrepreneurs a strategic pathway into the European market. With its competitive corporate tax rate, stable economy, and supportive regulations, Hungary has become a popular choice for startups and international firms aiming for expansion. The company registration process is efficient and typically takes around 5 to 10 working days.
For company registration:
-
Select a legal form for your company;
-
open a bank account;
-
register a trade name;
-
apply for a tax number;
-
apply for a limited liability company (LLC);
-
apply for a commercial import/export license;
-
apply for a mortgage;
-
apply for an operating License.
Types of Business Entities in Hungary
Before proceeding with company registration in Hungary, it's essential to select the appropriate business entity. Below are the most common types:
1. Limited Liability Company (Kft.)
-
Most popular choice for small and medium-sized businesses
-
Limited liability for shareholders
-
Minimum share capital requirement: HUF 3 million (~€8,000)
2. Private Company Limited by Shares (Zrt.)
-
Preferred by larger businesses or those planning to issue shares
-
Shares are not publicly traded
-
Minimum share capital: HUF 5 million (~€13,000)
3. Public Limited Company (Nyrt.)
-
Best for businesses planning to go public on the Hungarian stock exchange
-
Minimum share capital: HUF 20 million (~€52,000)
4. Branch Office
-
Allows foreign companies to establish a business presence without forming a new legal entity
-
The parent company is responible for the activities of the branch office
Selecting the right entity depends on your business goals, liability concerns, and capital investment capacity.
Documents required for company registration in Hungary
-
Valid passport or identity card of shareholders and directors
-
Proof of residential address
-
Personal tax identification number, if available
-
Articles of Association or Founders’ Resolution
-
Signature specimen if the shareholder is a legal entity
Hungary’s Tax System for Businesses
1. Corporate Income Tax (CIT)
-
Flat 9% corporate tax rate – the lowest in the EU.
2. Value-Added Tax (VAT)
-
Standard VAT rate: 27%
-
Reduced VAT rates: 5% and 18% (for specific goods and services)
3. Social Security Contributions
-
Employer contribution: 13% of gross salary
-
Employee contribution: 18.5% of gross salary
4. Local Business Tax
-
Municipalities may charge local business taxes ranging from 0% to 2% on revenue.
Opening a Hungarian Bank Account
In Hungary, every company is required to open a local forint (HUF) bank account. Additionally, it is possible to open optional accounts in EUR or USD. While there are no initial fees for opening the account, monthly maintenance fees may apply. There is no deposit required at the time of setup, maintaining a minimum balance may be necessary to keep the account active.
We help you select the most appropriate bank for your business needs, including OTP Bank, Raiffeisen Bank, Erste Bank, or K&H Bank. You can open your account in person or remotely through an attorney if you prefer not to travel.
Common Challenges in Company Registration Hungary:
While Hungary provides a supportive environment for businesses, entrepreneurs may encounter several challenges. The process of company registration in Hungary can have the following difficulties:
-
Language Barrier – Most official documents must be submitted in Hungarian, which necessitates professional translation.
-
Capital Requirements – Certain entities (e.g., Zrt. and Nyrt.) require higher initial capital investments.
-
Legal Compliance – Hungary has strict compliance laws, making it essential to seek legal consultation.
Post-Registration Compliance for Hungarian Companies:
Once your company is officially registered, there are ongoing compliance requirements:
1. Annual Financial Statements
-
Companies are required to submit annual reports to the Hungarian Tax Authority.
2. Regular Tax Filings
-
VAT and corporate tax returns need to be filed either quarterly or annually.
3. Statutory Updates
-
All changes in company structure, ownership, or management must be reported to the Hungarian Court of Registration.
FAQs 1. How long does it take to register a company in Hungary?
Company registration in Hungary typically takes 5 to 7 business days, depending on document preparation and administrative processing.
FAQ 2: What is company tax ID in Hungary?
A company tax ID is a unique identification number assigned to businesses for tax compliance and financial reporting.
FAQ 3: How much is business tax in Hungary?
The local business tax can be up to 2% of a company’s revenue, varying by municipality.
FAQ 4: What is the corporate rate in Hungary?
Hungary has a flat 9% corporate tax rate, the lowest in the European Union.
