Hungary is one of the few EU countries that provides a number of benefits to foreigners aiming to start a business there.
Investors from other countries help fuel growth of the domestic economy, which is why they are treated with the utmost respect and given all kinds of support from the state. Thanks to that, there has been some significant economic development in Hungary over the past few years. Effective reforms implemented in the early 2000s resulted in the dramatic improvement of the country’s business legislation. You can make sure of that by ordering online paper editing services — their prices are one of the lowest on the EU market.
Hungary is situated in the heart of Eastern Europe.
So, if you want to have easy access to European markets, use a simplified system of taxation and avoid excessive paperwork, this country is your number one choice.
Of course, you can face some initial difficulties if you do not speak the language and have no idea about the local traditions, but they are easy to overcome.
Organisational and Legal Forms of Enterprises in Hungary
Registering a company in Hungary is now easier than ever. To be able to do business in this country, foreign entrepreneurs can apply for several types of ownership. Let’s have a look at the most popular ones.
Limited Liability Companies
A limited liability company (Kft) is the most popular type of enterprise among foreign businesspeople. It can be registered by one or several individuals or legal entities, and they do not even have to be residents of Hungary. There can be only one CEO, while a supervisory board may consist of up to 15 persons. The number of contributions limits the founders’ financial responsibility.
The minimum authorised capital of a closed-end company is three million forints (about $ 10,000).
You can pay 50% of the share capital upon registration, while the rest must be paid within a year. An open joint-stock company (Rt) with limited liability is permitted to sell its stocks openly. The minimum share capital is 20 million Hungarian forints (about $70,000). At the time of registration, such a company must have only 25% of the required amount in its bank account.
A partnership can have both limited and unlimited liability forms. Whichever you choose, the share capital, as well as the number of partners, can be unlimited. Founders can be individuals or legal entities, as well as citizens or non-citizens of Hungary.
An unlimited liability partnership (Kkv) means that all members have the same rights and unlimited liability for debts. In a limited liability partnership (Bt), all participants are divided into two types — those who assume full responsibility and those whose responsibility is limited by the amount of their contribution. Participants with full responsibility perform managerial functions.
Purchasing a Business
You can start making money immediately by buying a company.
In Hungary, various commercial entities are regularly put up for sale. It is a good option for those business people who do not want to waste their time and effort on registering a new enterprise. However, you should order an audit of such a company because it may no longer be profitable. You should not fall for that trick.
Setting up a business in Hungary may take you at least a week. According to the Hungarian legislation, only licensed lawyers can help you with registering an enterprise of any type. The lawyer’s fee may vary, but typically it is no more than 100,000 Hungarian forints (about $350). Also, when registering a company, you will have to pay a state duty of about 50,000 forints and a registration fee of about 5,000 forints ( $175 and $17.5, respectively).
To prepare the necessary documents, your lawyer will ask you to provide them with the following information: your company’s name, type of business activity, and your legal address. You will also have to give them copies of the passports of all founders, including addresses in their home country. In addition to the statutory address, the new company must have a valid address for its head office. These two addresses may not be the same.
Optionally, you can specify your business guarantor, which must be a citizen of Hungary. All correspondence from the state authorities will be sent to the postal address of this person. If you do not have a guarantor, you should organise your activities in such a way as to be able to quickly respond to incoming correspondence. The company’s seal can be ordered from any clerical organisation by presenting the company’s constituent documents and a copy of the CEO’s passport. The company should also be registered with the Chamber of Commerce.
Once that has been taken care of, your lawyer can begin to prepare a package of documents for registering your business: charter, signature samples, power of attorney, etc. All founders must put their signatures in the presence of a lawyer. Most often, one of the founders of the new company is assigned to be a CEO. You can open a bank account in any Hungarian bank. You will have to deposit some part of the authorised capital in accordance with the selected legal type of the company.
Usually, you will have a temporary registration of your company within a few days. Once you have your tax code, account number, and health insurance, you can start doing business. The final registration of the company will take place about a month later. However, if there were no problems with the registration, that should not affect your business. To effectively deal with accounting and reporting matters, foreign entrepreneurs are advised to hire Hungarian outsourcing companies. This way, they can be sure that all the necessary reports will be submitted to tax authorities in a correct and timely manner.
Before you register a company or business in Hungary, you need to know that all forms of companies submit an annual audit report. All enterprises in Hungary pay the following taxes:
10% is paid if an income is less than 500,000,000 forints;
19% is paid if a profit is over 500 million forints.
VAT varies depending on the type of business:
25% is for services and products;
18% is for basic foodstuffs;
5% is for medication, books, and newspapers.
Dividends of foreign companies are also liable to tax.
Obtaining a temporary residence permit in Hungary is also one of the benefits of starting a business in this country. This permit is issued for one year and is to be renewed every year. If you are a CEO, you cannot leave the country for more than 183 days.
Also, you need to have some property in Hungary and annually confirm your financial viability in the amount of €5,000. You can apply for permanent residence after five years of living and working in Hungary. If your business is not profitable enough for the domestic economy, you will only be given a business visa.
To sum up, having your own business in Hungary is both prestigious and profitable. By starting one, you get to become a member of the European business community and have all opportunities to earn a consistently high income.