Company Registration in Hungary: Step-by-Step Guide for Entrepreneurs

Benefits of Starting a Business in Hungary

Foreign investment in Hungary has tremendously increased, especially since 2019. It has proven very beneficial for individuals to start a business in Hungary as foreign investment is a significant force in elevating Hungary’s economy. Hungary has a very welcoming environment for accommodating new businesses in their country. Having a Hungarian bank account is essential for depositing share capital, which is a critical step in the company formation process.

Setting up a company in Hungary can offer the following benefits:

Favorable geographical business location

Hungary lies in the heart of Europe as it is the central location. Traveling to different parts of the continent is easy as it has excellent connectivity. The prime geographical location is one of the main advantages of doing business in Hungary. Additionally, Hungary, a member of the European Union, makes it convenient for business owners to travel, export, and import in a viable manner.

Fast and easy

The procedure to start a business in Hungary is one of the easiest and quickest. The time required for setting up a company in Hungary is generally 4 to 5 business days. The only major documentary required is identity proof, such as a passport of the person who wants to set up a company there.

Cost-effective

The country offers a cost-effective way of setting up a business in Hungary. Financial services and real estate are cheaper when compared to the other fraction of Europe. This is because the tax rates are business-friendly, and hiring top talent is challenging. The tax rate for local businesses is a maximum of 2%, which is almost negligible. Despite all these advantages, a new business can still enjoy the Cosmopolitan benefit.

Enormous starting capital is not necessary

Hungary offers a very liberal check Capital requirement for new businesses. The minimum share capital needed for a limited liability company in Hungary is €8,300. The share capital can be evenly split between operations, office rent, management, maintenance, etc. The minimum Capital requirement for a corporation is €18,000. Foreign founders must also obtain a business residence permit to meet the legal requirements for company registration.

Competitive tax system

Getting a VAT number for the newly established company is a must. Hungary issues a VAT number instantly and free of cost. The company does not have to wait as the VAT number is generated automatically from day one.

Lowest corporate tax in Europe

Hungary’s business incorporation is in demand as it has the lowest corporate tax in the continent, which is 9%. The flat tax rate system benefits small and medium size businesses and corporations in Hungary.

Requirements for Starting a Business in Hungary

Company incorporation in Hungary can benefit individuals who want to start a new business. However, they are following requirements that need to be fulfilled. Hungary company incorporation requirements include the following essential documents:

Domestic and foreign passport

Individuals must have a domestic and a foreign passport to prove their identity and nationality. Passports are one of the basic requirements to do business in Hungary. Hence, individuals must possess valid passports.

European health insurance

Every citizen in Hungary should have European health insurance to start a business in Hungary. It is required, and the company can only be formed with European insurance.

Valid Schengen visa

Individuals who aim to start a business in Hungary must possess a Schengen visa. A Schengen visa allows foreigners to stay in Hungary and travel to any Schengen area. It offers a stay of up to 90 days for business and travel purposes.

Resident permit

Offshore company registration in Hungary requires a resident permit to show that such an individual has resided there for quite some time. Generally, recent utility bills are enough to prove an individual’s residence in Hungary. A Hungarian residence permit is crucial for opening bank accounts and registering businesses, as banks typically reject applications from non-residents.

Corporate document package

The corporate document package includes short information about the prospective business areas, suggestions for the company name, the name of the shareholders of the company and the amount of capital they have contributed, other legal documents, and a registration certificate.

Types of Business Structures in Hungary

The different types of business structures in Hungary are enumerated as follows:

Limited liability company

A Limited Liability Company means which has a predetermined share capital at the time of incorporation. Limited liability company incorporation in Hungary is a popular one where shareholders have obligations under the contribution of their share capital. However, the company’s members will not be liable for the company.

The dividend rates and voting rights vary according to the contribution of shareholdings. Features of a Limited Liability Company in Hungary are stated as follows:

• The minimum requirement for share capital is HUF 30,00,000.
• Share capital contributions can be calculated based on cash and kind.
• General meetings and executives are the two obligatory bodies in an LLC.
• A bank account and disclosure of annual financial reports are mandatory.
• Mandatory requirement of performance of the annual audit.

Limited liability companies are the most common business structure in Hungary, with specific requirements for minimum authorized capital and residency permits for founders.

Joint stock company

Joint stock company incorporation in  Hungary can be private and public, depending upon the division of shares. However, the minimum share Capital requirement of a private joint stock company is 5 million HUF, whereas a public joint stock company requires a minimum share capital of 20 million HUF.

A joint stock company has to have a board of directors that are the company’s stakeholders and monitor all the activities. The features of a joint stock company can be stated as follows:

• A public joint stock company must have a board of directors, a general shareholders meeting, a supervisory body, and an audit committee.
• An audit committee is a must for a public joint stock company.
• A private joint stock company may or may not establish a supervisory body.
• A minimum of 5% of voting rights is provided to all the shareholders in a private joint-stock company.

General partnership

In cases where individuals own a business and do not want to form a large board as owners, they generally enter into partnerships. To know how to start a company in Hungary, it is also essential to know the features of a general partnership, which are listed as follows:

• The partners have joint liability, which is unlimited.
• If one partner does not oblige to the agreement, that partner may lose his partnership rights.
• They have a general liability regarding the assets and properties of the business.
• There is no bar on minimum share capital.
• In a general partnership, one founding member is the minimum requirement.

Limited partnership

The limited partnership requirements to do business in Hungary are enumerated as follows:

• At least two founding members are required to form a limited partnership.
• Partners have limited liability following capital contribution, but at least one partner should have unlimited liability.
• There is no minimum share capital requirement in a limited partnership.

Enterprises of foreign entity branch offices

Many businesses work based on opening branches in different cities and countries. However, this is not the formation of a new company but only the opening of a new branch of an existing company in a new city or country. Setting company in Hungary with foreign entity branches includes the following features:

• The existing company will be liable for the activities of the branch.
• It misses out on having a legal personality, which is why the business operations are carried as an extended part of the founding members.
• The foreign entity branch office has to be registered with the Court of Companies.
• The appointment of a head of the branch office is compulsory, preferably someone of Hungarian nationality.
• The branch office must indicate the name of its foreign parent company to comply with legal and tax regulations.

Acquiring a company registration for starting a business in Hungary is mandatory. The process of establishing a legal entity for a company to carry out transactions in a business is known as the registration process. Company registration in Hungary includes the following steps:

Company Registration Process

Pre-registration: Market Research and Business Plan

Before diving into the company registration process in Hungary, it’s crucial to conduct thorough market research and develop a comprehensive business plan. This foundational step helps identify potential risks and opportunities, ensuring your business is well-prepared to thrive in the Hungarian market. A well-crafted business plan should encompass market analysis, target audience identification, marketing and sales strategies, financial projections, and operational plans. By understanding the market landscape and having a clear business plan, you can set a strong foundation for your company in Hungary.

Registration: Reserve and Register a Company Name, Appoint a Hungarian Resident Director, Draft the Articles of Association

To officially register a company in Hungary, follow these essential steps:

1. Reserve and Register a Company Name: Ensure your company name is unique and get it approved by the Hungarian Company Information Service (Cégközlöny). This step is vital to avoid any legal issues related to name duplication.
2. Appoint a Hungarian Resident Director: Every Hungarian company must have a resident director. This individual can be a Hungarian citizen or an EU resident living in Hungary. The director plays a crucial role in the company’s operations and compliance with local laws.
3. Draft the Articles of Association: The Articles of Association outline the internal governance structure, shareholder rights, and other critical provisions. These documents must be notarized, and in Hungary, lawyers can approve the signatures. This step ensures that your company operates within the legal framework and has a clear governance structure.

Post-registration: Taxation and VAT Registration, Business License and Permits

Once your company is registered, there are a few more steps to complete:

1. Taxation and VAT Registration: Register your company for taxation and obtain a Value Added Tax (VAT) number if your business engages in taxable activities. Hungary’s corporate tax rate is an attractive 9%, making it a favorable destination for business operations.
2. Business License and Permits: Depending on your business activities, you may need to obtain specific licenses and permits. Different industries have unique regulatory requirements, so ensure you comply with all necessary regulations to operate legally in Hungary.

Pre-registration

Gather all the corporate documents, prepare them properly, and decide on a name for your company. Then wait for the approval.

Registration

The procedure for incorporation of a company in Hungary has a minimum standard of registration that needs to be done. The company registration process in Hungary includes the following essentials:

• The companies’ permanent office addresses are required for seat registries.
• Mandatory documents that constitution the details of the company should be signed in the presence of a lawyer or through Skype.
• The following requirement is to register the company portal or client gate.
• Obtaining the Hungarian Personal tax number is entirely the discretion of the company.
• Following these, the company will be registered under the Court of Registration of Hungary to achieve the EU tax ID.
• Disclosing the authorized share capital and opening a company bank account by the shareholders.
• Registration agreement is to be signed in the presence of a local accountant who is qualified to provide accounting support.
• Obtaining the registered and authorized document from the Chamber of Commerce and Government Municipality.

Business registration is also a pathway for foreigners to obtain residency in Hungary, provided they meet the legal requirements.

Post-registration

After a waiting period of 4 to 5 days, the company will receive an electronic document containing the following information:

• The corporate contract by company by-laws
• List of the company shareholders
• Signatures of the company officers
• A bank statement as proof of the charter capital
• A letter of consent from a local agent
• A document certifying the company’s registered legal address
• A designated GLS Hungarian letter

The procedure for incorporation of a company in Hungary is relatively simple compared to the other States in the continent.

How Much Does it Cost to Incorporate a Company in Hungary?

Hungary’s new company incorporation is very cost-effective as it only has the lowest and most affordable corporate tax of 9%. This is the lowest corporate tax in the European continent, making Hungary’s business incorporation very affordable and cost-effective.

The cost of incorporating a company in Hungary ranges from 2500 to 5000 Euros. This amount excludes the additional charges of opening a bank account, accounting cost submission of corporate documents, etc. The cost of such services may vary from company to company.

Government Assistance for Foreign-owned Businesses

Support for foreign investors

The Hungarian government offers a range of support mechanisms to attract and assist foreign investors:

1. Investment Incentives: To encourage foreign investment, the government provides various incentives, including tax breaks and subsidies. These incentives aim to make Hungary an attractive destination for international businesses.
2. Business-friendly Environment: Hungary boasts a streamlined company registration process and a competitive tax system, creating a business-friendly environment. This ease of doing business is a significant draw for foreign entrepreneurs.
3. EU Funding: As a member of the European Union, Hungary has access to EU funding, which can be leveraged to support foreign-owned businesses. These funds can be instrumental in helping businesses grow and expand their operations.
4. Government Agencies: The Hungarian government has established agencies, such as the Hungarian Investment Promotion Agency (HIPA), to support foreign investors. These agencies provide valuable assistance throughout the company registration process and beyond, ensuring that foreign businesses have the resources they need to succeed.

By taking advantage of these support mechanisms, foreign investors can navigate the company registration process more smoothly and set up a successful business in Hungary.

Are Foreigners in Hungary on Certain Passes Allowed to Start a Business in Hungary?

The general Hungary company incorporation requirements apply to non-Hungarian citizens as well. Foreigners can start a business in Hungary with the required documents, as mentioned earlier.

The only additional permit foreigners must possess is the sole trader’s license. With the sole trader’s license, foreigners can set up any business. With a valid resident permit, one can quickly get a sole trader’s license, after which establishing a business is valid. Foreigners can obtain residence permits through business registration, which involves meeting specific legal and financial criteria.

The Hungarian government provides grants for starting a business in Hungary. Two forms of government assistance are:

• Cash incentives: The government of Hungary provides financial incentives with three primary objectives, which are; job creation, employee training, and investment implementation.
• Tax incentives: Tax incentives are available for future business transactions. Before initiating, grant applications must be submitted to the concerned Hungarian authority.

How Can Multiplier Help?

Foreign individuals who want to set up a business in Hungary can take the help of to make the process convenient for themselves. We have all the infrastructure and means of employing talent in more than 150 countries. We provide business assistance so you don’t feel tangled in the company incorporation process.

Multiplier is an excellent means for attracting a talented workforce at a cheaper cost. We help SMEs in the following areas:

• Generation of employment contract
• Grants, insurance, and benefits
• Assistance for startups
• Multi-country payroll
• Multi-currency payments and many more
• EOR