How to Open a Company in Hungary? – Requirements and Guideline
There are many economic benefits to setting up a company in Hungary. Having a business in Hungary, unlike some other countries, means fewer expenses when it comes to companies register and upkeep. And compared to many Western European countries, the average wage is still relatively low.
This is one of the main reasons many new business owners are attracted to the idea of starting a company in Hungary. Another one would be that taxes are one of the lowest in the entire European Union. The EU membership also means that the company will have the EU VAT number and will be able to do business in a much more straightforward manner.
In recent years, Hungary has enjoyed a very stable economic and political system, and it doesn’t seem like that’s going to change anytime soon. The infrastructure is constantly developing, and most lines of communication and transport are up-to-date. This article will discuss company formation requirements and offer exact steps.
Why Start a Business in Hungary?
There are many benefits of forming a Company in Hungary. The standard corporate income tax rate in Hungary is 9%, which is the lowest corporate tax rate in Europe. And the flat corporate tax rate isn’t the only tax benefit either. Starting your business in Hungary means having no withholding tax. Also, tax-free is the dividend payment to both non-residents and residents. Additionally, when it comes to the share capital, it can be paid later.
Another significant benefit of opening a company in Hungary is that you’ll get access to a workforce that is mostly highly-educated. And you can expect that most people under the age of 65 speak English as their second language.
The geographic position is another exciting benefit of starting a Hungarian company. It sits in Central Europe and has the unique position of being close enough to the most prominent cities and markets in Europe.
Depending on what kind of company you want to open in Hungary, there will be some differences in the requirements. Here are some must-haves you should know about before taking the first step:
- Hungarian bank account
- English-speaking proxy
- Registered business address
When it comes to documentation, you will need:
- A valid passport
- Specimen of signature
- Agreements of assignment
- Declaration of the CEO & founding documents
There’s more than one type of company in Hungary. Limited Liability Company, Kft. in Hungarian, is a type of company best suited for the small or medium-sized enterprise. Limited Liability Companies need to have at least one managing director. The members of the company aren’t liable and only present the initial capital.
Limited Partnerships is another type of company, and it means that there needs to be one limited and one general partner. The general partner is the one able to represent the company and has unlimited liability towards it.
You can also have a branch office or representative office. All foreign companies can open branch offices, and unlike representative offices, they’re allowed commercial activities inside Hungary. Representation offices mostly do market research.
In terms of cost, starting a business in Hungary is very effective. The initial capital is the most important thing. An LLC requires €10,000, which is significantly less than what other EU countries, like Germany, require. Also, the entire process of opening the company doesn’t take more than one-to-two weeks.
Open Company in Hungary in Six Steps
Once you’re ready to open a company in Hungary, you will have to make sure to follow all the steps that are required.
Step 1 – Company Specifics
Before you do anything else, you have to decide on the name of the company you want to open. Then you have to find a property where the registered office will be. In case you don’t need a rented office, you can use a virtual office instead.
Next, you’ll have to decide on the management and the type of company. And depending on that, you’ll have to decide on the amount of share capital. You can register a company in Hungary in a single business day, so it’s one of the quickest steps.
Step 2 – Preparing Documents
Before you even get into preparing documents, you have to hire a Hungarian lawyer. They will do all the prep when it comes to corporate paperwork. This includes things like articles of association and statutory declarations from management. This is an essential step, and you can’t go through the process of starting a company in Hungary without a lawyer who is a resident of the country.
Step 3 – Signing the Documents
All of the prepared documents have to be signed in front of the Hungarian lawyer in Hungary. However, the corporate documents can also be signed outside of Hungary. For that to happen, it will be necessary to notarize the documents before sending them.
There also might be a need for super legalization, which would mean that the documents were issued by the proper authority. This process might delay the registering process somewhat.
Step 4 – Opening a Hungarian Bank Account
Unsurprisingly, one of the most important steps to take when opening a new company is to open a bank account. It’s important to remember that this is the bank account for depositing the share capital going into the company. The process of opening a bank account in Hungary is very quick and can be done in one business day.
Step 5 – Filing the Documents
Once everything has been signed by all parties, notarized, and there’s a valid bank account, it’s time for the filing. The resident lawyer takes all the corporate documents and fills the electronic application that is necessary in order to register the business. This is the last requirement and step that you need to do. Provided that all the steps have been followed correctly.
Step 6 – Court of Registration
Once everything is filed, the Court of Registration proceeds to register your company. Things are somewhat automated from there, and then you’ll also get the VAT number and the statistical number. There’s a possibility of an expedited registration, but you’d need to have articles of association prepared in advance. In general, the registration process is quick and simple and won’t take more than two weeks.
Starting a business in Hungary has so many benefits. Apart from the benevolent tax authority, which is one of the first things future business owners look for, there are many other things to appreciate.
Most companies will be opened in Budapest, Hungary’s capital. It’s one of the most visited and most beautiful cities in Europe. It’s also a business center with a unique location that attracts both the Western and Eastern parts of Europe. There’s a lot of potential in starting a company in Hungary, especially because of the young and educated workforce.
The registration process is pretty straightforward, and there shouldn’t be any delays at all. You only need to decide what type of company you’re going to have, what the name would be, and the amount of share capital. You can also choose to either have a headquarters and address,
or a virtual office.
Also, starting the entire process of registration is impossible without a lawyer who is a resident of Hungary. There’s a lot of paperwork to tend to, and it’s the lawyer’s job to file everything to the Court of Registration. Opening a company in Hungary has its challenges too, but the advantages are clear and manifold.