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Hungary company set-up

Establishment of a company in Hungary

Hungary, officially the Republic of Hungary, is a member state of the European Union located in Central Europe. Neighboring countries are Austria, Slovenia, Croatia, Serbia, Romania, Ukraine and Slovakia. Hungary offers many business opportunities and is also a good springboard to expand into Eastern Europe and its markets.

The main advantage of doing business in Hungary is low taxes and little administrative burden. Although it is not a tax haven in the traditional sense of the word, small and medium-sized companies here have almost half the income tax rate compared to the Czech Republic. The business environment is clear and favorable.

Capital city:  Budapest

Official language: Hungary

Currency: Hungarian forint (HUF)

DESCRIPTION AND BENEFITS OF THE HUNGARIAN JURISDICTION

  • Extensive network of double taxation treaties (more than 60 countries)
  • Member of OECD, WTO, NATO
  • Dividends exempt from withholding tax
  • Reduced DPPO rate of 9% for the tax base up to HUF 500 million (approx. CZK 42 million)
  • Simple assignment of a tax number

The legal system of Hungary enshrines similar types of commercial companies as Czech law.

The most common legal form of a Hungarian company is called a KFT (Kft. – Korlátolt felelőségű ságyná, similar to the Czech s.r.o.)

  • 1 executive, min. 1 companion
  • members or company bodies do not have to have permanent residence in Hungary
  • the obligation to have a registered company seat in Hungary and a person authorized to receive mail – “postal agent”
  • minimum share capital HUF 3,000,000, at least 50% must be repaid
  • possibility to invoice and purchase without VAT to/from all EU member states

KFT provides a great opportunity to do business within the EU or anywhere else in the world and can be used for holding purposes, property ownership, but also for normal business activities.

he company is registered for VAT and is assigned a tax registration number immediately upon incorporation (TIN – kommuník adószám). KFT must have a bank account maintained in Hungary, the establishment of which requires the personal presence of the executive, and this account is reported to the tax authority and is also published in the online Hungarian register.

Another type of capital trading company is Részvénytársaság (Zrt. – similar to a Czech a.s.)

  • any number of companions
  • minimum share capital HUF 5,000,000 (in case of listing on the stock exchange HUF 20,000,000)
  • amount of shares any amount divisible by HUF 10,000

The third type is the Betéti sánky (Bt. – similar to the Czech k.s.)

  • operating conditions similar to those of a Czech limited partnership

One of the main advantages of the Hungarian jurisdiction is the two corporate income tax rates: 19% and 9%. The reduced rate can be used for tax base up to HUF 500 million (approx. CZK 42 million). In the Czech Republic, with the same tax base, it is 19%.

The VAT rate in Hungary is the highest in the entire EU – 27%. A reduced rate of 5% applies to certain types of food.

Personal income tax is the same for all, namely 15%.

In Hungary, dividend payments are exempt from withholding tax, regardless of the destination to which they are paid. So it doesn’t matter if he leaves, for example, for England or Seychelles Ltd. Invoicing to or from Seychelles is also exempt from withholding tax.

Another interesting benefit is the exemption from income tax on capital gains.

Revenue from license fees is subject to a 5% tax.

The time required to start the activity of a new company is in the order of weeks (the time from the decision on establishment to the day when the company court (Cégbíroság) issues a confirmation of the application for registration). By obtaining this confirmation, the new company becomes a full-fledged legal entity. The extract from the commercial register can be obtained in approximately one month.

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