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Holding Company Hungary

Holding Company Hungary

Hungarian holding company is an efficient instrument for the investors willing to save their profits made in other country by their subsidiaries. The particularity of these companies is that most of them are established only for acquiring a majority of shares and operate through other companies. In certain cases these companies can also perform various activities like a normal company. If you are interested to know more, get in touch with our lawyers in Hungary.

Step-by-step guide to opening a holding company in Hungary

Please find below a step-by-step guide on how to open a holding company in Hungary:

Step 1: Choose a Legal Form in Hungary, a holding company can be established as a limited liability company (LLC) or as a joint stock company (JSC). You can get assistance from our lawyers to decide which legal form is most suitable for your holding company based on your business goals.

Step 2: Choose a Company Name Next, you need to choose a unique name for your holding company that complies with Hungarian naming regulations. The name must not be identical or similar to existing company names, and it must contain a legal ending such as “Kft” for LLC or “Nyrt” for JSC, which denotes the type of legal form.

Step 3: Prepare Required Documents, To register a holding company in Hungary, you will

need to prepare the following documents:

  • Articles of Association: The Articles of Association (also known as Articles of Incorporation) are a legal document that outlines the internal rules, regulations, and governance structure of your Hungarian Holding company. It needs to be drafted in Hungarian and notarized.
  • Shareholders’ Resolution: A resolution signed by the shareholders of the company, agreeing to establish the holding company and approving the Articles of Association.
  • Proof of Address: You need to provide proof of your registered office address in Hungary, such as a rental agreement or utility bill.
  • Identification Documents: You and other shareholders, directors, and officers of the company will need to provide identification documents, such as passports or ID cards.
  • Tax Identification Number: You will need to obtain a tax identification number for the company from the Hungarian tax authorities.

Step 4: Register the Company, Once you have prepared the required documents, you need to

register your holding company with the Hungarian authorities by following the steps given below:

  • Submit the documents to the Hungarian Company Registration Court: You need to submit the Articles of Association, shareholders’ resolution, proof of address, identification documents, and tax identification number to the relevant Company Registration Court in Hungary.
  • Pay the Registration Fee: There is a registration fee that needs to be paid at the time of registration. The fee amount depends on the share capital of your holding company.
  • Wait for Approval: The registration process can take several weeks or even months, depending on the workload of the registration authorities. Once your company is registered, you will receive a company registration number and a registration certificate.

Step 5: Obtain Business Licenses and Permits Depending on the nature of your holding company’s activities, you may need to obtain business licenses and permits from relevant authorities in Hungary. For example, if your holding company plans to engage in regulated activities such as financial services or real estate, you may need to obtain special licenses or permits before commencing operations.

Step 6: Register for Taxes and Social Security, After your holding company is registered, you will need to register for various taxes and social security contributions with the Hungarian tax authorities and social security agencies. This may include corporate income tax, value-added tax (VAT), payroll taxes, and social security contributions for employees.

Please note that the process of opening a holding company in Hungary can be complex and may require legal and accounting expertise. So, it is recommended to seek assistance from our Hungarian lawyers to ensure that you comply with all the legal requirements and regulations.

Besides this, the legal services of our lawyers are also at your disposal if you want to apply for citizenship in Hungary.

Overview of a holding company in Hungary 

Usually a company designed only for acquiring shares is called pure holding and it’s efficient mostly because it can  beneficiate from a set of advantages which comes from the double tax treaties signed by Hungary all over the years and because of the EU Parent Subsidiary provisions but not only from those. The particularity of the holding regime in Hungary is granted by the Hungarian holding company tax regime, introduced in 2006.

According to it, the profits realized after selling the subsidiaries are free of taxes, the profit distributions received from subsidiaries are also fully exempt from paying corporate tax and  no withholding tax should be raised on the profit distributions made by the holding company to its own shareholders. 

Beside the above, Hungary offers a vast network of double tax treaties which grants exemption from paying Corporate income tax or any withholding taxes on dividends, interests or royalties or their minimization. For more details about the taxes in Hungary and the tax incentives offers in this country, you can contact our team of lawyers. They can also help you open a bank account in Hungary.

The tax exemption is not related to the place where the corporate shareholder is located, the size of its holding or the period of time when the shares are held. The capital profits coming from the sale of shares of the Hungarian company are also tax exempt but only if the Hungarian company is holding at least 30% of the interest in the subsidiary. Also the company must keep these shares for more than a year. Anyway, the investor must keep in mind that any loss resulted after the resale of the shares is non-tax-deductible. Holding companies are available for incorporation by immigrants in Hungary as well. 

Opening a holding company in Hungary is very popular among the foreign individuals because they don’t face any restrictions related to the location and activities of their subsidiaries. Hungarian holding companies which are not pure and perform normal activities which can be taxed as usual can benefit from the low Hungarian corporate tax. For example, the Hungarian corporate tax for the profits on sums up to 500 million HUF is 10% while for the amounts above this sum, the rest of the amount is taxed with a 19% tax rate. 

If you are interested in Hungarian residency, the services of our lawyers are at your disposal. For tailored company formation solutions in Hungary, please contact us. In addition to this, if you are planning immigration to Hungary, you can rely on the services of our lawyers. Hungary offers numerous sorts of visas for non-EU nationals since they should obtain a visa or a work permit to remain in Hungary. Such visas include visiting visas, business visas, medical visas, individual work-permit, seasonal employment visas, etc. 

Tax Benefits in Hungary

You are welcome to get in touch with our Hungarian lawyers for the list of tax benefits you can avail of in Hungary. In Hungary, there are various tax benefits available for individuals and businesses. Some of the common tax benefits in Hungary include:

  • Small Business Tax (KATA): The KATA is a simplified tax regime for small businesses in Hungary with annual revenue below a certain threshold. Businesses under KATA are subject to a fixed monthly tax rate and are exempt from certain other taxes, such as corporate income tax and value-added tax (VAT);
  • Research and Development (R&D) Tax Incentives: Businesses engaged in research and development activities in Hungary may be eligible for tax incentives, including deductions for R&D expenses, accelerated depreciation of R&D assets, and reduced corporate income tax rates on income generated from R&D activities;
  • Investment Incentives: Hungary offers various investment incentives, such as tax credits, exemptions, and reduced tax rates, to encourage foreign and domestic investments in certain industries or regions;
  • Social Security Contributions: Certain social security contributions in Hungary, such as those paid for private pension funds or voluntary health insurance, may be tax-deductible.

It is important to note that tax benefits in Hungary may be subject to certain conditions, limitations, and documentation requirements. Therefore, it is recommended to seek professional tax advice to determine your eligibility and ensure compliance with Hungarian tax laws. If you have any questions in this regard, you are welcome to contact our lawyers in Hungary. 

Besides this, our lawyers can also assist you if you are planning immigration to Hungary