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Doing business in Hungary

How quickly can I set up a business?

7-14 working days.

What is the minimum investment needed?

• Investment depends on the scale of project.
• Capital requirement is 3/5/20 MHUF depending on entity type.
• Registration fees are 50-600 THUF.

How can I raise finance?

Investor must contribute the entire capital. Both contribution in kind or in cash are accepted.

What are the legal requirements for setting up my business?

he articles of association must be executed by a Hungarian attorney-at-law.

Companies must be registered at the Court of Registration.

Limited liability company (Kft.)

• It may have one or more owners. It is not allowed to solicit for members publicly.
• The registration can take maximum 15 days.
• It is managed by one or more managing directors who are individuals. A Supervisory Board may be elected to control the activity and is compulsory if the number of employees exceeds 200.

Company limited by shares (Rt.)

• An Rt may be a private limited company or a public limited company. A public limited company is registered at a stock exchange or the trade with their shares is public.
• The registration procedure can last maximum 15 days.
• The managing body is the Board of Directors, consisting of at least three members. All Rt must have a Supervisory Board of at least three members.

Partnership (Kkt.)

• An unlimited partnership consists of two or more individuals or companies.
• Each member is fully liable for the Kkt’s debts. Kkt. may acquire rights, incur liabilities and be a party to a lawsuit. It is represented by its members.
• The registration procedure can take maximum 15 days.

Limited partnership (Bt.)

• A limited partnership consists of at least one general partner with unlimited liability and at least one limited partner, whose liability is restricted to the amount of its contribution.
• The registration procedure can take maximum 15 days.
• It is managed by the general partner.

Branch offices of foreign companies

• A foreign company may start business activities in Hungary also in form of a branch office.
• A branch is not a separate legal entity but an extension of the foreign enterprise, but it is also registered at the Court of Registration.
• It is managed by the Branch representative.

What structure should I consider?

All companies have to calculate with Value Added Tax (VAT), Corporate Income Tax (CIT), Local Income Tax (LIT), and salary related (personal income tax (PIT), social security (SS) taxes.

Limited liability company (Kft.)

• The minimum capital is HUF 3 million (approx. EUR 10,000), which may be paid in cash or in kind. The liability of members of a Kft is limited to their paid registered capital.
• Owners can be foreigners or Hungarians, private persons or companies.
• Members have limited liability

Company limited by shares (Rt.)

• Foreigners may acquire bearer share as well as registered share. Preference shares are limited to 50% of registered capital and interest-bearing shares are limited to a maximum 10% of the registered capital.
• The minimum capital is HUF 5 million (approx. EUR 16,000) for private limited companies, and HUF 20 million (approx. EUR 65,000) for public limited companies, which may be paid in cash or in kind.
• Members have limited liability

Limited partnership (Bt.) and Partnership (Kkt.)

• There is no minimum capital requirement, which may be paid in cash or in kind.
• Unlimited liability of the partners shall be considered before setting up this structure.

Branch offices of foreign companies

• There is no minimum capital requirement.
• There is no limited liability.

What advice can you give me in regards to payroll and taxation requirements?
Personal Income Tax

• General tax rate is 15%
• Dividends paid to individuals are subject to a 15% withholding tax.

Social security

• Employees pay 18.5% SS contribution on earnings.
• Employers pay 15.5% of the employees’ gross income as SS and 1,5% vocational training fund.
• Benefits in kind and representation costs (meal, drinks and entertainment services) provided to employees are subject of additional taxation (SS+PIT: total of 30.5%/37.76%)

Corporate income tax

• 9% flat rate shall be applied on profit regardless whether profits are distributed or not. Taxable income is calculated by adjusting accounting profit, or tax base shall be 2% of revenues (minimum corporate income tax base).
• Dividends received by a Hungarian company are tax-exempt, except dividends from tax havens.

Local taxes

• Municipalities may levy LIT at rates up to 2% on net sales revenue reduced by the cost of goods sold, value of ser-vices sold and material costs.
• Municipalities may also levy Building tax (max 1,852 HUF/sq. metre, or 3% of the adjusted market value, and/or Land parcel tax (337 HUF/sq. metre, or 3% of the adjusted market value.)

Value Added Tax

• VAT is charged on domestic sale of goods and services and on imported goods. The basic principles of VAT are based on the 2006/112/EC Directive and therefore it is similar to the VAT applied in most European countries.
• General rate is 27%, preferential rates are 18% and 5%

National Tax and Customs Administration

• The main tax authority is the National Tax and Customs Administration of Hungary (NAV – Nemzeti Adó- és Vámhivatal in Hungarian).

• Companies calculate and declare their own tax liability and make monthly or quarterly advance payments and yearend completion and tax-returns.

Is there anything else that I should know?
Audit requirements

All companies with an annual turnover over HUF 300 million (approx. EUR 1 million) and having more than 50 employees have to appoint an auditor and must publish their annual financial report as well as the auditor’s opinion. Branch offices are subject of audit regardless of the above thresholds.

Capital taxes

• There is no capital gains tax as such. Taxable gains are subject to corporate income tax.

Allowances in corporate tax as investment incentives

• CIT allowance for development purposes can be claimed for any predefined investment in a value from 100 million up to 3 billion HUF. Taxpayers can use this allowance during 10 tax years after putting the investment into operation.
• Supports given to spectacular team sports, movies or performing arts organizations can be used as tax allowance within six years after providing the support.
• Tax allowance for interests of an investment credit for the SME sector: 60% of interests paid in the tax year based on a credit agreement for a credit usable for asset purchase or creation taken from a financial institution, however, no more than 6 million HUF in each tax year can be settled as allowance.
• Development tax allowance can be claimed up to 80% of the calculated tax, and any other tax allowance can be settled up to 70% of the calculated tax reduced this way.

Double taxation treaties

• Hungary has concluded double taxation treaties with 84 countries until now and some are in discussion. These treaties are mainly based on the OECD model.

Hungary continues to be one of the leading nations for attracting foreign direct investment in Central and Eastern Europe. Major industries include food processing, pharmaceuticals, automotive, information technology, chemicals, electrical goods, and tourism.

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