A businessman may not choose to establish an actual company. Some businessmen, specially foreign investors, choose to open a representative office in Hungary instead. Representative offices are organizational entities of foreign companies that have no separate legal identity of their own. As such, they may not engage into activities that generate profit or any other form of income. Hungarian law allows such entities to be established in the country. The main law that governs representative or liaison offices is the Branch Act. Our Hungarian law firm can help you get started on your representative office in the country.
You are welcome to get in touch with experienced lawyers at our law firm in Hungary. They will provide you with detailed information regarding establishing a representative office in Hungary and how this entity works. In addition, it is recommended to acquire legal assistance to understand the structure of these representative offices because they vary from company to company.
Conditions for foreign companies opening liaison offices
Opening a representative office in Hungary is probably one of the simplest procedures a foreign company can complete to have a presence in this country. Apart from being legally registered in its state of origin, the parent business is not subject to any specific criteria when setting up such an enterprise here.
The creation of a Hungarian liaison office implies drafting a few documents that attest to the status of the parent company, among which its Certificate of Registration that must be filed with the Trade Register.
Our law firm in Hungary is at the service of foreign company representatives with support in drafting the necessary documents for opening a commercial liaison office.
| Quick Facts | |
|---|---|
| Applicable legislation | Hungarian Business Act |
|
Status |
The Hungarian liaison office is not considered a legal entity. |
|
Uses of a liaison office |
– market research, – marketing, promotion, – contact point for business partners and clients, etc. |
| Restrictions of a representative office (if any) | Yes, it cannot engage in commercial or trading activities. |
| Minimum share capital (YES/NO) |
No, there is no share capital requirement for a representative office in Hungary. |
| Local representative required (YES/NO) |
No, however, most foreign companies appoint one. |
| Documents to be filed by parent company |
– copy of the Articles of Association; – copy of Certificate of Registration, – affidavit for the establishment of the office |
| Local address requirement (YES/NO) |
Yes, the Hungarian commercial representative office must have a local address. |
| Authority to be enrolled with |
Trade Registry |
| Liability of the parent company | The parent company is responsible for the liaison office. |
| Taxation of a liaison office in Hungary |
The liaison office is not subject to taxation in Hungary. |
| Possibility of hiring local staff (YES/NO) |
Yes |
| Travel requirements for setting up a representative office (YES/NO) |
No, there is no need to travel, as you can use our legal services. |
| Advantages of a liaison office |
– simple and fast to create, – low maintenance and administration fees, – it can be used to test the market on behalf of the parent company |
| Support in opening a representative office | Yes, we can assist in opening a commercial liaison office in Hungary. |
Activities of a representative office in Hungary
As per the Branch Act, the representative offices in Hungary can be 100% foreign-owned. However, these offices are not allowed to undertake any profit-generating activities. If you want to open a representative office in Hungary, you must know these facts;
- This office can only promote the business of the parent company;
- It can undertake liaison activities;
- It is also allowed to conduct market research.
If you want to establish a representative office in Hungary, you can get in touch with our lawyers for details about the activities of such offices. You can obtain the legal services of our attorneys in Hungary if you need guidance regarding reserving a company name in Hungary. They can help you in picking an available and appropriate name for your entity.
Registration of a liaison office in Hungary
Although representative offices are not allowed to engage in commercial activities, they must still be registered. Registration of representative liaison in Hungary can be done with the Court of Registration where the office is located. There is no minimum share capital requirement for creating a liaison office but a registration fee of 50,000 Hungarian Forint has to be paid. After all requirements and fees have been complied with, the Court of Registration enters the application in its records.Representative officescan only start business operations after registration. Our attorneys in Hungary are can help you with the registration process.
Commercial representative office in Hungary
The same employment rules apply to the commercial representative office in Hungary as to the branch office. It is also an organizational unit that acts as an outpost of a foreign business without a legal personality. The activities of a commercial representative office are limited to carrying out information, propaganda activities on behalf of the foreign company, mediating and preparing contracts, etc. Furthermore, these offices are not allowed to perform business activities that yield profits. A commercial representative office is not deemed as a separate legal person, so it cannot do actual business in Hungary. As a result, such offices are not required to pay corporate tax or local business tax. However, the parent company will pay corporate tax where it has its headquarters.
If you want to register a representative office in Hungary, you can rely on the legal help of our lawyers. They can provide you with comprehensive assistance in this regard. Furthermore, you can get business consultation from our lawyers in Hungary. Their contribution can help you avoid making typical mistakes and take a reliable business approach in the Hungarian business market.
Branch representative office in Hungary
The representative branch office in Hungary acts as an outpost of a foreign business. This office does not have a legal personality; however, it is a separate organizational unit of the foreign business association. Therefore, this office needs to be registered in the Hungarian company registry.
You can get legal assistance from our lawyers to open a representative office in Hungary. To obtain our lawyer’s services, you must present the articles of association of the parent company. In Hungary, the representative branch office is deemed as an individual company form, so it pays corporate tax, local business tax, and all taxes required by the law.
In addition to establishing a representative office in Hungary, if you want to open a company in this country, you can trust the legal assistance of our lawyers. They will provide the details about the types of companies in this country. This legal assistance can help you comply well with the requirements. Besides helping you in opening a representative office in Hungary, you can also get in touch with our lawyers for their services in other matters. For instance; if you are interested in Hungarian citizenship, you should know these facts. Hungary recognizes dual citizenship. To become a citizen of Hungary, you do not need to renounce your previous nationality. Furthermore, Hungary does not officially restrict any country, anyone from anywhere in the world is welcome to visit.
The legal status of a liaison office
Even if the representative office is established under the conditions of the Hungarian Company Law, the main aspect foreign companies need to consider about it is that it does not have a legal status. This means that the parent company is fully liable for its activities, obligations, and debts. From this point of view, this type of entity must always wait for the approval of the foreign business when completing its activities.
The operations of a liaison office in Hungary are limited to non-commercial operations, which is why most overseas businesses use it temporarily in order to determine if it is in their best interest to expand their activities here.
If you need more information about the particularities of a representative offices, our lawyers in Hungary can answer your questions. They can also offer alternatives in terms of business registration if this is not the type of entity you are interested in.
Limited activities of Hungarian representative offices
Representative offices in Hungary can only conduct certain activities. These are some that are listed by our Hungarian lawyers:
1. Mediation of contracts between its foreign principal company and Hungarian business entities and private individuals;
2. Preparation of contracts that have been entered into by its foreign principal and Hungarian companies;
3. Information drives and promotional activities of goods, services, and rights sold or provided by its foreign principal;
4. Represent its foreign principal company during exhibits, fairs, professional lectures, and other identical events done in Hungary.
If you have any further queries regarding the activities of representative offices in Hungary, you can interact with our lawyers.
In addition to this legal service, you can also interact with our Hungarian lawyers to open a bank account in this country. Our lawyers will not only help you in opening a personal bank account but also a corporate account in Hungary.
Ownership of real estate in Hungary for your representative office
Foreign companies may purchase real estate for the establishment of representative offices in Hungary. If the foreign company is registered in a country that is a member of the European Union or the European Economic Area, it may acquire property as long as it is not considered as agricultural land. For foreign companies that are neither registered with the European Union, nor the European Economic Area, they may still purchase real property as long as it is not tagged as agricultural land or natural preservation area. Our law firm in Hungary can help you determine if you are qualified to acquire real estate in the country.
Hiring employees in a Hungarian representative office
Even if its activities are not extensive, a representative office can have a few employees. For this reason, one of the main aspects when using this business form is registration for social security purposes, just like any other Hungarian employer. With respect to the number of workers, foreign enterprises will usually consider 3 or 4 Hungarian citizens, even if employee relocation from the headquarters is also a possibility.
Should you need assistance in employment-related matters, you can rely on our local law firm. Please mind that it is best to verify all labor requirements before hiring employees in Hungary. Also, in the case of dispatching personnel from other countries, it is worth noting that specific rules for immigration to Hungary may apply in the case of non-EU people.
Appointment of a legal agent in Hungary
If the foreign company decides not to hire employees, it can appoint a legal representative to handle administrative tasks and answer potential clients or associates’ queries. In this case too, employment regulations must be respected, namely registering the agent for social security purposes and paying related contributions in this sense.
Taxes on corporate income in Hungary
As a foreigner, you are only required to pay corporate income tax (CIT) on your income generated from the Hungarian branch’s business activities. Please find below the corporate income tax percentage in Hungary:
- From January 1, 2017, the corporate income tax rate is a flat 9% of the positive CIT base;
- The minimum corporate tax base is calculated as 2% of the total revenue;
- General VAT (value-added tax) is 27%, and the reduced rate is 18%;
- The tax rate is 9% for the foreign owner of a real estate holding company.
We also have a video on this topic:
How to choose the best expansion option in Hungary
Foreign companies have several choices when it comes to expanding their operations in Hungary. These are categorized into the corporate forms of branches and subsidiaries and the non-corporate one of representative offices. When seeking to test the market, the Hungarian liaison office is the best pathway to choose, as it can be set up temporarily followed by its transformation into a branch.
When it comes to using a subsidiary, the liaison office must be closed, as the foreign company must use the regular company incorporation procedure that applies to domestic businesses.
According to the latest statistics;
- at the end of 2021, there were 1.9 million businesses operating in Hungary, while in 2022 information indicates a slight decrease of this number;
- out of these, 137,000 were operating in whole sale and retail;
- 114,000 businesses were contstruction companies.
There can be a lot of legal implications when you set up a liaison office in Hungary. Contact our law firm in Hungary to obtain their legal services in this matter. They will provide you with legal assistance throughout the process.