Entrepreneurs who want to open a company in Hungary have several types of legal structures to choose from. In Hungary, the Companies Act (Act IV of 2006 on Business Associations) governs the regulation of companies.
If you are interested in opening a company, you are welcome to get in touch with our lawyers in Hungary. They can guide you in detail about the types of structures in Hungary and their regulations.
Types of companies in Hungary
According to the Hungarian Companies Act, there are several main types of companies that can be established in Hungary.
• Limited Shares Company: a legal entity that requires a minimum hare capital of 5,000,000 or 20,000,000 HUF; If you want to open this type of structure in Hungary, get in touch with our lawyers;
• Limited Liability Company: a legal entity that requires a minimum share capital of 500,000 HUF; the LLC is a popular type of company in Hungary, similar to a private limited company in other countries. It requires at least one shareholder and one managing director, and the liability of shareholders is limited to their capital contributions;
• Unlimited partnership: it does not have legal status and there is no minimum share capital necessary for its incorporation; It is a type of company in Hungary where all partners have unlimited liability for the company’s debts and obligations. It requires at least two partners who are jointly and severally liable for the company’s obligations;
• Limited partnership: this type of company in Hungary is like the unlimited partnership, it does not have legal status and does not require a minimum share capital; at least one member has unlimited liability.
• Joint Stock Companies: this is a type of company in Hungary that is publicly traded, with shares listed on the stock exchange. It requires a minimum share capital and has a board of directors and a supervisory board. JSC can be private or public and the public ones may be traded on the Hungarian Stock Exchange; the minimum share capital for a Hungarian public joint stock company is 20 million HUF, and for private joint stock companies the minimum share capital is 5 million HUF.
The share capital of a company that is founded by a single member must be paid in full prior to the submission for company registration.
Limited liability companies (Kft.) and limited shares companies (nyrt or zrt.) are mostly used by business owners in Hungary. Our Hungarian lawyers can offer you more details about the specific liabilities of the shareholders, according to the type of company. Our attorneys can also help you comply with the taxation system in Hungary.
Company incorporation in Hungary
Regardless of the type of Hungarian company, the first step towards forming a new company in Hungary is preparing the Articles of Association. They must be signed by all the members and legalized by a notary public. Our attorneys in Hungary can also countersign the Articles of Association.
The new company can begin to operate once the Articles of Association have been signed. However, also it needs to be registered at the Court of Registration. The new business needs to be reported to the Court of Registration within 30 days after the Articles of Association have been signed.
Our Hungarian law firm offers specialized legal services and complete services for company incorporation in Hungary, from company registration to assistance in opening a bank account in Hungary. Please contact us for detailed information and personalized offers.
Company incorporation steps in Hungary
Incorporating a company in Hungary involves several steps. For instance:
- Choose a company name: The name of the company must be unique and not already registered in Hungary. You can check the availability of your desired company name on the Hungarian Company Information System website;
- Draft the articles of association: This document sets out the rules for running the company, including the share capital, the number of shares, the rights and obligations of the shareholders, and the procedures for appointing and removing directors;
- Deposit the share capital: The minimum share capital required to incorporate a limited liability company in Hungary is HUF 3 million (approximately EUR 8,300). The share capital must be deposited into a Hungarian bank account;
- Register the company: The registration process can be completed online through the Company Registration Portal (CEFRI) or in person at the Company Registration Office. You will need to provide the articles of association, proof of deposit of the share capital, and other relevant documents;
- Obtain a tax number: All companies operating in Hungary must have a tax number. You can apply for a tax number through the Hungarian Tax Authority;
- Register for social security: All companies must register with the National Tax and Customs Administration (NAV) and pay social security contributions for their employees.
- Register for VAT: If your company’s turnover exceeds HUF 8 million (approximately EUR 22,000) per year, you must register for VAT;
- Obtain any necessary permits and licenses: Depending on the nature of your business, you may need to obtain additional permits and licenses before you can start operating;
- Open a bank account: You will need to open a Hungarian bank account for your company to receive payments and pay expenses.
Once you have completed all these steps, your company will be incorporated and you can begin operating in Hungary. It is recommended to consult with our local Hungarian lawyers to ensure that you comply with all legal requirements and regulations.
Besides this, our lawyers can also assist you if you are interested in immigration to Hungary.
The benefits of company formation in Hungary
There are several benefits to forming a company in Hungary, including:
- Low corporate income tax rates: As mentioned earlier, the corporate income tax rate in Hungary is one of the lowest in Europe, which makes it an attractive destination for foreign investors;
- Strategic location: Hungary is located in the heart of Europe, with easy access to both Western and Eastern European markets. The country is also a member of the European Union, which makes it an ideal location for businesses looking to expand into the EU;
- Skilled workforce: Hungary has a highly educated and skilled workforce, particularly in the fields of engineering, IT, and manufacturing;
- Business-friendly environment: Hungary has a relatively simple and transparent business registration process, and the government has implemented several measures to support entrepreneurship and foreign investment;
- Competitive costs: The cost of living and doing business in Hungary is generally lower than in other Western European countries, which can result in significant cost savings for companies;
- EU funding opportunities: Hungary is eligible for funding from the European Union, which can provide financial support for research and development, innovation, and other business activities.
Forming a company in Hungary can offer numerous advantages, particularly for businesses looking to establish a presence in Europe or expand their operations in the region. Get in touch with our Hungarian lawyers for legal assistance.
If you are planning to acquire Hungarian citizenship, the services of our lawyers are at your disposal.
Taxation in Hungary
In Hungary, the corporate income tax (CIT) rate is 9% for companies with an annual net income of up to HUF 500 million (approximately EUR 1.4 million) and 15% for companies with an annual net income above that threshold. The tax year in Hungary is the calendar year, and companies must file their tax returns by May 31 of the following year.
In addition to the corporate income tax, companies in Hungary may also be subject to other taxes, such as value-added tax (VAT), local business tax, and social security contributions for employees. The VAT rate in Hungary is generally 27%, with reduced rates of 5% and 18% for certain goods and services.
It is important to note that there are various tax incentives and exemptions available for companies in Hungary, such as research and development tax credits, investment tax credits, and exemptions for certain types of income. It is recommended to consult with our local tax expert or accountant to ensure that you are taking advantage of all available tax benefits while remaining compliant with Hungarian tax laws and regulations.
Our Hungarian law firm offers specialized legal services for company incorporation in Hungary. Please contact us for detailed information and personalized offers.