Subsidiaries are forms of legal entities opened by foreign companies in order to perform commercial activities not necessarily in the same field as the foreign company.
The main characteristics of a subsidiary in Hungary and the process of opening this type of office are presented in our scheme below.
A series of treaties signed by Hungary that have as result the exemption or lower withholding taxes are making the foreign companies to choose this location to open subsidiaries.
For example, Hungary has adopted the EU Parent-Subsidiary Directive which allows the exemption from withholding tax on dividends paid to a company based in a EU country.
If the company is not situated in the EU, it can still have privileges granted by the many double tax treaties signed by Hungary all over the years (more than 60).
These treaties provides no corporate taxes or their refund in Hungary and lower or exempt withholding taxes on dividends, interests and royalties paid to a treaty country.
A subsidiary opened in Hungary may take many forms but the most popular are the limited liability companies.
A public limited liability company has a minimum share capital of 20 millions HUF, in cash or kind and its members are liable for the company’s obligation in the limit of their contribution to the capital. The shares are freely transferable even to the public, especially through the Stock Exchange Market.
A private limited liability established in Hungary is based on a share capital of at least 5 millions HUF and just like in the case of the previous described company, the liability of its members it’s limited by the contribution to the capital. The main difference is that the shares of this type of company cannot be transferred to the public.
The process of registration of a subsidiary in Hungary begins with hiring a lawyer to prepare the company’s foundation deeds and articles of association. The decision of opening a subsidiary provided by the parent company must also be seen by the attorney.
At least half of the minimum share capital must be deposited in a bank account and a certificate of deposit must be released.
The registration of a Hungarian subsidiary continues with the electronically submission of the company’s documents (certificate of deposit, the articles of association, the foundation deeds and the decision of opening of the subsidiary) at the Registration Court.
The last step of opening a subsidiary in Hungary is registering for the social security. The process of registration is one of the simplest in Europe, especially because of the recently implemented electronic system. In maximum 5 days from depositing the documents, the Hungarian company may pursue with the economic activities.