Doing business in Hungary

Doing Business in Hungary

1. Cross-border activity in Hungary
2. The simplest way to do business in Hungary – register as a private entrepreneur
3. Company establishment in Hungary
4. Doing business in Hungary – how to start your business
5. Tax planning – taxation tailored to your business

1. Cross-border activity in Hungary

First of all it has to be clarified that you can do business in Hungary without establishing any legal entity. It is a great opportunity because with your cross-border activity you can sell your products or services without any investments. Let’s see the possibilities:

• You can have VAT registration in Hungary for your trading or service provision activity
• You can also establish a local site which is still not a legal entity (permanent establishment)
• You can register your foreign company as an employer – to be able to have employee’s in Hungary
• You can render labor hiring services to have employee’s in Hungary without any kind of tax registration

2. The simplest way to do business in Hungary – register as a private entrepreneur

The first step is to register yourself at the document office (called „okmányiroda”) to get an access (your username and your password) to the Hungarian gateway (called “Ügyfélkapu”). To register a private entrepreneurship in Hungary as a foreigner you must have tax number and social security number as an individual. If these numbers are not available you have to submit the application form 16T34 at the Hungarian tax authority (called “NAV”) for your tax number and the form NYT53 at the National Insurance Fund („called OEP”) which procedure takes 30 days. Once these numbers are available you can register your private entrepreneurship via the Hungarian gateway on your own.

On the Hungarian gateway you can register your private entrepreneurship within 5-10 minutes.

Required data for the registration:

• name
• address
• seat address of your private entrepreneurship
• mother’s name
• citizenship
• birth date, place, country
• business activity (NACE code)
• taxation type (simplified taxation, VAT subject/free etc.)
• tax number as a private person
• social security number as a private person

Before you register your private entrepreneurship please check our page TAXATION in order to get information about the optional tax types.

3. Company establishment in Hungary

From the perspective of the business structure you can establish:

• An independent company: As a foreigner, you can set up and operate a Hungarian-based company without restrictions, and without the need to appoint a local director, or
• A subsidiary: If you are already a foreign business owner, you may opt for your Hungarian company to be subsidiary (wholly or partially) to your company abroad, or
• A branch office / representative office: A Hungarian branch office of a foreign company is considered as a permanent establishment in Hungary, however, it is fully dependent on the foreign head office in terms of responsibility. A Hungarian representative office is not  subject to the Hungarian tax law and it is fully dependent from the foreign company.

The most important company forms in Hungary:

• Limited liability company (“KFT”): You can establish a Limited Liability Company. Liability is limited up to the amount of capital paid by the owner. Minimum capital is HUF 3,000,000 (approx. EUR 10.000) and you can calculate with the fee of the lawyer. This is the most common form in Hungary. The company can be owned by one private person, more private persons (foreigners and Hungarians can also establish a company), or a holding company, foreign company (or a combination of the above) etc.
• Company limited by shares (“RT”- Nyrt/Zrt.): The shareholder(s) of an RT are not liable for the operations of the company. This is essentially a hybrid stock company in so far as it can offer shares publicly to the market or through a private offer to its founders. The difference is indicated in the company ending ie. “Zrt” – private or “Nyrt” – public. The minimum share capital for a Zrt is HUF 5M (approx. EUR 18-19K), Nyrt is HUF 20M (approx EUR 67K).
• Limited partnership (“BT”): A limited partnership must have at least one general partner and at least one limited partner (foreign individuals, Hungarian private persons or the limited partner can be a company). The general partner’s liability is unlimited for the partnership’s obligations (multiple general partners are jointly and severally liable) while the limited partner is only liable up to the value of his invested capital. The general partner may be a legal entity (another company) subject to certain restrictions. There is no minimum capital requirement for BT.

4. Doing business in Hungary – how to start your business

The establishment of a company in view of corporate regulations consists of the following steps:

1) Discussions with the lawyer and tax adviser regarding the intentions and purposes of the Hungarian operations to determine the most optimal legal and taxation structure.

2) Collecting the necessary data, preparing and reviewing the documents necessary to establish the company.

These documents are in general:

• articles of Association;
• declarations of the Managing Director(s) on the acceptance of the appointment and on miscellaneous corporate law issues;
• specimen(s) of signature of the Managing Director(s);
• list of the owners;
• proxy for our law office to act on behalf of the company during the registration procedure;
• declaration whether the company required the reservation of the firm name;
• document entitling the company to use a property as its seat.

3) Signing the documents. In the case of foreign founders signing abroad, the documents must be signed through a special procedure, e.g. they must be signed before the Hungarian Embassy / Consulate, or signed before a notary and in certain cases additionally endorsed with an Apostille.

4) The capital must be appropriately paid.

5) The documents mentioned under point 2 must be filed with the Court of Registration together with -normally the following documents:

• bank certificate issued by the bank keeping the company’s bank account on the payment of the cash contributions;
• document verifying the official translation of the foreign name of the company (if any).

6) The company must be registered in the Companies Register by the Court of Registration.

In general, the time frame of the procedure is 5 or 6 weeks.

5. Tax planning – taxation tailored to your business

Tax planning is the most important task during the company establishment or during the registration process of the private entrepreneurship. Tax planning means for us to create a most effective tax and legal structure of the companies and private entrepreneurs and use all of the tax assets which are availed in the countries. Our goal with the tax planning is not less than every companies and private entrepreneurs will be able to use the most tax efficient way to achieve their aim.