The Hungarian law on setting up new companies allows all interested persons to operate a business without limitation. Foreign individuals and legal entities can operate in all business areas, with some restrictions in agriculture. If the chosen activity requires a permit, such as banking activity, there are the same rules for residents or abroad entities.
There are multiple types of structures from which investors can choose when deciding to start their business in Hungary. When trying to establish a large business, the Hungarian or foreign individuals can create a joint stock company (RT) which can be set up with a minimum share capital of 5 million HUF by a single individual or corporate body. It can be private or public. The shares issued by a joint stock company are registered at the Stock Exchange and have a predetermined nominated value. The management of such company is made by the board of managers and a supervisory board of at least three members.
A limited liability company in Hungary (Korlátolt Felelosségu Társaság – “Kft.) is based on a contribution of at least 500000 HUF (or 100000 HUF if established by a single entrepreneur). The management is made by a director appointed by the general meeting of the shareholders.
A Hungarian general partnership is composed by at least two members who share the same liability and responsibilities and can use the profits after paying the specific taxes on profits. The main advantage is that it doesn’t require a minimum share capital.
The Hungarian limited partnership is very similar with the above but it is formed by a general partner, with an unlimited liability and a limited partner that is limited by the capital contribution, monetary or non-monetary.
Depending on the business needs and objectives of every entrepreneur, he can choose whether to open a branch or a subsidiary in Hungary, or even start small, with just a virtual office in order to minimize his start-up costs.
Incorporation Procedure in Hungary
The process of company incorporation in Hungary takes around five working days as it is simplified by the possibility to register an entity electronically. It is advisable to hire a lawyer to represent the company, to create the company incorporation documents and make sure that all the legal actions are taken.
At least 50% of subscription amount must be deposited in a bank account and a certificate of deposit is issued by it in order to be used in the incorporation process.
All the entities must be registered into the company register kept at the competent county court or the metropolitan court. After depositing the application, the Court will also register the entity at the State Tax Authority (for Vat and income taxes) and with the Statistical Office. Not more than two days are necessary for the entire process.
The last step of company incorporation in Hungary is the registration at the Social Security. The procedure is simple and takes 1 day to be completed.
Opening Branches or Representative Offices in Hungary
For a foreign company, there are the options of opening Hungarian branches or representative offices. Neither of them has the status of a legal entity. A representative office is easy to administer and the closure doesn’t require deregistration. Non-residents who want to start a company in Hungary can operate a business in this jurisdiction through a branch registered with the Court of Registration. The necessity of a business license is applied in this case as well. The books and financial statements must be kept in accordance with the Hungarian law.
Representative offices have to be registered at the Hungarian Court of Registration. It is not allowed to engage in any commercial activity. A representative office may assist in the preparation of contract and provide advertising services on behalf of the parent entity. Neither of the two entities requires a minimum share capital.
Our specialists can provide consultancy in both formation and management of companies in Hungary. We can also help our clients take advantage of the double tax treaties signed by Hungary.
CompanyIncorporationHungary.com is a part of Bridgewest.eu, an international network which has affiliated partners throughout the world, including Hungarian, Iranian, Russian, Polish lawyers who can provide local legal assistance to foreign investors. Businessmen interested in investing in a country from Northern Europe, for example in Norway, are invited to get in touch with ourpartner law office.
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