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Types of Companies in Hungary

Updated on Tuesday 06th October 2020

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Legal entities in Hungary

 
The main legal document which prescribes the types of companies that can be registered in Hungary is the Companies Act, which grants the right to both resident and non-resident businessmen to incorporate any of the business forms prescribed by it. The following legal entities can be incorporated in Hungary: the limited liability company, the joint stock company, the general partnership, the limited partnership, the sole proprietorship, but also branches and representative offices. 
 
Below, you can watch a short video presenting the main types of Hungarian legal entities that can be incorporated by foreign and local investors. For advice on the incorporation procedure, you can always address to our team of consultants in company formation in Hungary.
 
 

 

The joint stock company and the limited liability company in Hungary

 
The Hungarian joint stock company can be incorporated as a private entity as long as the shares of the company are not listed to the public, in which case it will be after the abbreviation “zrt”, or it can take the form of a public entity when the company is listed on the Stock Exchange (it will be recognized by the abbreviation “nyrt”). 
 
Besides the manner in which the company’s shares are sold, another major difference between the two entities is given by the capital necessary for their incorporation. The private joint stock company needs a capital of HUF 5 million, while the public entity needs a capital of HUF 20 million. This company can be opened by one or more founders and a board of directors must oversee the actions of the company.
 
The limited liability company in Hungary (kft.) is suited for small and medium sized businesses. Shareholders bear limited liability according to the amount invested in the capital of the company. This legal entity is subject to lower incorporation costs and a minimum share capital of HUF 3 million. Contributions can also be made in kind.
 
Investors who want to open a Hungarian company as a limited liability company must know that this company type allows its incorporation by a single shareholder. The company can have a single director as well, and it must be noted that there aren’t any requirements with regards to the nationality of the businessman, which means that foreign investors can easily set up this company type.  
 
More importantly, the procedure for company registration in Hungary for this legal entity does not impose any requirements referring to the residency of the company’s founders (the founders of a Hungarian limited liability company are not required to have their residency in this country). 
 
After the company becomes operational, specific accounting procedures must be completed and in the case of this business form, it is necessary to prepare annual financial statements, that must be deposited with the Company Register. Our specialists in Hungarian company formation can present other accounting procedures applicable to this company type. 
 
Depending on the types of business you perform in Hungary, you will need to obtain certain permits and licenses form the relevant authorities. Our experts can help you obtain these permits and can also assist you throughout the entire company registration procedure in Hungary.
 
 

Hungarian partnerships and sole proprietorships

 
Individuals who want to perform business activities together can form a general or limited partnership. The general partnership requires that all its members are jointly liable for the obligations of this business form. Like all partnerships in Hungary, it does not require a minimum share capital. The limited partnership allows only for some members to be fully liable, while others can have limited liability (according to the amount contributed to the capital, in cash or in kind).
 
A sole trader in Hungary is a natural person who has legal capacity but no legal personality and has registered his or her business with the Companies Register. The individual has full liability for the actions and obligations of the sole trader. This form of business may have only one member.
 

What other company types are available in Hungary? 

 
Investors looking to set up a company in Hungary can also incorporate a branch or a representative office. A branch office can be incorporated in Hungary by foreign companies interested in having an office here, but which want to have full responsibility on the capital of the branch, its management and business model. Foreign companies also have the possibility of registering a subsidiary, which represents a separate legal entity than its parent company. 
 
Local and foreign businessmen can also opt for a virtual office in Hungary. Regardless of the chosen business form, both types of companies must be registered with the Hungarian Company Register. There are several domains in which you can launch a business in Hungary and depending on the size of your future business we can help you choose one of the legal structures above. 
 
Before starting up, you should have an extensive knowledge about that sector you intend to activate in. For example, before opening a financial company it is recommended to take finance training courses, which will help you understand better the domain and will bring you new professional acquaintances. 
 

What is the tax base for companies in Hungary?

 
The corporate tax system is very favorable for those who want to open a company in Hungary. The country has one of the lowest corporate taxes in its region, as well as a low tax rate applicable to the taxation of dividends. The Act on Corporate Tax and Dividend Tax prescribes the basic tax measures applicable to both Hungarian companies and foreign companies, and some of the highlights of the Hungarian tax system are the following: 
 
  • starting with 1st of January 2017, the corporate income tax is applied at the standard rate of 9%;
  • the corporate tax applicable to branches of foreign companies operating here is charged at the same rate, of 9%;
  • businesses involved in the energy industry, operating as energy producers or energy distributors, are charged with a tax of 31%;
  • Hungary also charges a local business tax, and the rate at which it is applied can vary from a municipality to another, but the legislation capped the tax at a maximum rate of 2%; 
  • businesses are also liable to the payment of the value added tax (VAT) and the standard rate is of 27%;
  • depending on the economic field in which the procedure for company registration in Hungary is done, businesses can benefit from reduced VAT rates, of 18% and 5%. 
 
 
The tax obligations of legal entities operating here are prescribed by the national tax legislation of the country and they are enforced by the National Tax and Customs Administration. Here, those who want to open a company in Hungary will register as local taxpayers and pay taxes accordingly, following the specific system applicable to their company type.   
 

What is the duration of the Hungarian company formation process?

 
The time required for company formation in Hungary will generally depend on the type of company that the investor wants to register in this country. The process can also be delayed in the case in which the necessary documents do not fulfill the basic requirements and this is why it is highly advisable to be represented by specialists in the field, as is our team of consultants in company registration in Hungary
 
The duration of the registration can vary from two weeks, in the case one wants to register a limited liability company, to three weeks, for a branch office or a representative office, or to four weeks, in the case of the joint stock company, which is the most complex company type that can be registered here. 
 
Companies in Hungary must also have a corporate bank account in which the investors will deposit the minimum required capital for their selected company type. The investors should also take into consideration that opening a corporate bank account can take 2-3 weeks, depending on the commercial bank at which the procedure is completed and the required documents for a specific company type
 
 
For more details regarding the types of structures in Hungary or if you are in need of personalized consultancy, please feel free to contact our specialists in company registration in Hungary. In case you want to establish a company in another country, for example in Singapore, our agents can put you in contact with their partners who can tell you more about the types of companies available in Singapore and can help you register your company.
 

 

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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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