Setting Up a Business in Hungary

Setting Up a Business in Hungary
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Hungary offers a relatively fast and straightforward process for foreign investors to establish a business entity. Some key aspects:

Registration Process

There are several options for setting up a company in Hungary:

– Limited Liability Company (Kft.) – The most popular form due to lower capital requirements. Requires a minimum capital of HUF 500,000.

– Company Limited by Shares (Zrt.) – Typically for larger companies. Requires a minimum capital of HUF 5 million.

– Branch Office – A simpler option for foreign companies wanting to establish a presence. Not considered a separate legal entity.

– Representative Office – For foreign companies wanting to conduct market research or prepare for establishing a branch office. Cannot engage in commercial activities.

Registration can be done in-person or online through the Company Information and Electronic Company Registration Service. The process typically takes 1-2 weeks.

Required Documents

The key documents required for company registration in Hungary include:

  • Signed deed of foundation or incorporation
  • Specimen signature of authorized representatives
  • Proof of registered office address
  • Proof of financial contribution
  • Bank account details
  • Personal identification documents of owners/directors

Costs and Fees

The government fees for registering a Kft company in Hungary are around HUF 100,000. Legal and advisory costs can add about HUF 200,000-300,000.

For a Zrt company, government fees are around HUF 600,000, with total costs reaching HUF 800,000-1,000,000.

Overall, registering a company in Hungary is a fast and affordable process for foreign investors. The business-friendly policies make market entry efficient.

Taxation and Regulations

Hungary has a competitive tax environment for businesses with some of the lowest corporate income tax rates in the EU. The standard corporate income tax rate is 9%, one of the lowest in Europe. There are further reductions available, with small businesses paying only 5% up until HUF 500 million in pre-tax profit.

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Value-added tax (VAT) in Hungary is 27% which is the highest in the EU along with Croatia. There are however, reduced VAT rates of 18% and 5% for certain goods and services like basic food products, medical equipment, and books.

Businesses can benefit from various tax incentives in Hungary:

– Tax allowances for R&D activities up to 100% of costs

– Tax credits on qualified wages up to 19% for disadvantaged regions

– Tax deductions on new investment projects

– Accelerated depreciation on newly purchased assets

– Tax exemptions for free trade zones and logistics centers

The main regulatory institutions governing business and investment in Hungary are:

– Ministry for National Economy – Formulates economic policy

– Hungarian National Bank – Central bank overseeing monetary policy

– Government offices – Handle company registration, licensing, visas

– Hungarian Competition Authority – Oversees competitive practices

– Hungarian Tax Authority – Administers taxes and handles compliance

The regulatory framework is business friendly with 100% foreign ownership permitted in most sectors. Hungary ranked 35th globally in World Bank’s 2020 Ease of Doing Business rankings. The country offers a stable legal system and regulations aligned with EU standards.

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