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Invest in Hungary

Updated on Wednesday 05th May 2021

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Foreign investors looking for reasons to invest in Hungary can easily see that this European country offers plenty of business opportunities. Hungary is a part of the European Union (EU), and this means that foreign investors from other EU countries can easily register a company here or operate through a branch office or a subsidiary. 
 
Additionally, Hungary provides an attractive geographical local in its region and numerous international companies that operate here benefit from a variety of investment policies. The country offers many advantages that can be summarized into five key reasons for investing in Hungary. Our experts in company registration in Hungary can give you detailed information about Hungary's economy and business market.
 

Does Hungary have a good geographical location?

 
With its geographical location, Hungary can be a suitable jurisdiction for foreign businessmen who want to develop their activities in Europe. Its geographical position offers the advantage of developing transportation activities as well as logistics operations that are normally necessary for companies, both local and foreign, involved in import-export. From this location, a business that needs to deliver goods and products to other European countries can have an easy access, due to the country’s road connections with other states.  
 

Hungarian workforce, very well trained

 
In a economy, the human resources represent one of its most important assets. In Hungary, foreign investors can benefit from a well-trained workforce, that is characterized by numerous persons who have university degrees or have obtained a qualification in certain areas that are in demand for businesses, such as manufacturing. 
 
Those who want to open a company in Hungary should also be advised on the fact that the country stands out as an attractive economy when we refer to medical sciences and the technical sector. The workforce in Hungary is also more accessible to the employer who benefits from competitive average wages. Businessmen who choose to invest in Hungary will benefit from the country's trained workforce.
 

The Hungarian business friendly environment

 
The Hungarian authorities have created numerous policies designed for foreign direct investment purposes and foreigners can find here suitable policies that can help their business grow. Although a foreign investor can find numerous business activities that can be successful in Hungary, the country’s main industries are as follows: the automotive industry, the electronics sector, the services sector and the food and agriculture industry.
 
Our specialists in company formation in Hungary can give you detailed information about these investments fields and the business opportunities that exist for foreign entrepreneurs. Our specialists can also help you in understanding the requirements you must meet when investing in a particular investment sector
 
 
 
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The favorable tax system in Hungary 

 
If you want to invest in Hungary you should know that this country has advantageous taxes for companies and individuals. The corporate income tax used to fluctuate between 10 and 19%, lower than in other European countries like France or the United Kingdom, but it is currently charged at a standard rate of only 9%. 
 
The personal income tax is charged at the standard rate of 15%. One must know that the Hungarian authorities have created this attractive tax system by introducing certain allowances or tax incentives. The tax system is generally lower compared to other countries in its region, but you must know that besides the tax rates presented above, the following taxes will apply as well:
 
  • those who open a Hungarian company can be charged with a local business tax, imposed at a rate of maximum 2%, but its value can vary based on the municipality where the company operates;
  • capital gains are also taxed in Hungary with the standard corporate tax, of 9%;
  • retailers are charged with a special tax, applied to foreign companies as well, including those who have an online shop, with rates of 0,1%, 0,4% and 2,5% (charged progressively based on the income of the company);
  • however, one must know that the above mentioned rule will not apply to entities that have a tax base lower than HUF 500 million;
  • employers in Hungary are required to pay a social tax base charged at a rate of 17,5% of the employee’s gross salary.
 
However, if you want to open a Hungarian company, you must know that the value added tax (VAT) rate is charged at a much higher rate compared to other countries in the region. The standard VAT in Hungary is imposed at a rate of 27%, but the country provides two reduced VAT rates, charged at 18% and 5% for specific goods and products sold on the local market. 
 
The reduced VAT of 18% is generally charged for basic food products, while the lower VAT rate, of 5%, is applied to various medicines and medical products. Certain animal products (meat, eggs and milk), and livestock are also charged with the same VAT. Companies operating as accommodation units also benefit from this lower VAT rate. 
 
Hungary also charges an excise tax, applied for a wide category of goods, such as: alcohol and alcohol beverages, tobacco products, or energy products. There is also an environmental protection fee, imposed on specific goods, such as tires, batteries, chemical products, plastic products and others. For more details, you can receive advice from our consultants in company registration in Hungary
 

Hungarian government incentives

 
The Hungarian government encourages investments and competitiveness through a range of incentives. One can receive a state aid that can be provided as a refundable or non-refundable. Special attention is offered to the progress of research and development activities and R&D investments. There are special categories of subsidies which can be obtained by foreign investors in specific cases. 
 

Legislation for foreign investments in Hungary

 
The law on foreign investments was created with the purpose of establishing a legal framework applicable to foreign investments in this country, by establishing certain procedures, regulations, measures which protect the investors, tax rules, etc. Hungary presents many advantages for foreign investors and businessmen interested in performing business activities can benefit from the following: a highly efficient workforce, a well developed infrastructure and a strategical geographical position.
 
Our local company formation specialists can help foreign businessmen invest in Hungary and provide them with assistance through the entire process of company registration in this country. If you want to open a company in Hungary, our team can prepare the set of documents required for registration and file them with the local institutions on your behalf. 
 

The Foreign Investment Act in Hungary

 
The Foreign Investment Act in Hungary represents a set of laws, enabled in 1988, providing the main legal framework that guarantees foreign investors will benefit from the same treatment that Hungarian investors have. The legislation was modified throughout the years in accordance with the needs of the market and those for foreign investors, also taking into consideration the needs of Hungarian businessmen
 
The Foreign Investment Act in Hungary focuses on three directions: to create suitable grounds for international cooperation between Hungary and foreign investors coming in the country, to encourage the injection of foreign capital and to boost the country’s technological development. You can learn more on this subject if you address to our consultants in company registration in Hungary
 

The authority responsible with foreign investments in Hungary

 
Founded in 1993, the Investment and Trade Development Agency in Hungary was established with the purpose of providing assistance to companies interested in investing in this country. In 2011, its responsibilities were taken by the Hungarian Investment and Trade Development Agency, a smaller and new institution that was established under the Ministry of Economy.  
 
Our Hungarian company formation team can provide you with more details about each industry and help you invest in Hungary by establishing a company in any of the business sectors available in this country. You can also receive information on the tax advantages you can obtain when investing in Hungary in a specific economic sector. 

 

 
You can also watch the video below, which presents the main reasons for investing in Hungary:
 
 

 

Why invest in Hungary?

 
Hungary’s economy is becoming more competitive, even if the changes are taking place at a slower pace. Slowly but surely, the country is becoming a competitive market, even when compared to Asia. Production plants in Hungary include car assembly, which still involves manual workers in Hungary and provides workplaces. 
 
However, Hungary’s Prime Minister believes that the country needs to focus on the future and consider making investments in other key sectors, such as research and development and the production of high value added goods. The Prime Minister also believes that Singapore’s interest in the Hungarian market is a sure proof of the country’s valuable workforce. Hungarian officials encourage the existence of free trade agreements between Europe and Asia and believe that these agreements will increase exports.
 
Foreign investors must also know that Hungary has signed numerous double tax treaties with other countries, in order to secure the avoidance of double taxation of income obtained by a person or a legal entity from taxable activities originating in Hungary and in other jurisdictions. 
 
Our consultants can provide you with in-depth information on the full list of treaties, which stipulate a specific tax treatment for the nationals and the tax residents of countries that have signed a double tax agreement with Hungary. As a general rule, such treaties will stipulate specific measures on the manner in which withholding taxes are charged, as well as the rates charged to local and foreign entities. 
 
Here, one must know that the withholding tax on dividends is charged at a rate of 0% in the case in which the dividends are paid to a non-resident company; the tax is of 15% if the dividends are paid to a non-resident individual. For interest, the same rule applies, as well as for royalties. 
 
If you need assistance on the registration of a business, our team of consultants in company formation in Hungary remains at your disposal for full legal representation and advice on the incorporation formalities, as well as on other matters, such as the management of a Hungarian company, once the company becomes active. You can contact us if you have more questions on how to invest in Hungary.
 

Meet us in Budapest

Istvan Sinkovicz is our experienced company formation agent. He has helped numerous businessmen open companies in Budapest and in other Hungarian cities.

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Call us now at +36/306943931 to set up an appointment with our lawyers in Budapest, Hungary. Alternatively you can incorporate your company without traveling to Hungary.


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