Global expansion into Hungary generally means that you need to set up an in-country entity. This can be difficult and comes with many complexities and requirements. However, by partnering with us you create the possibility to bypass this process and utilize our Hungarian entity. By using our PEO-service we take care of the complicated paperwork.
Expanding into a new country is always an adventure, but we believe this adventure should be exciting instead of just frustrating and time-consuming. Therefore, we have been supporting companies in over a hundred countries with their expansion plans.
In this guide, we will share which documents you need to establish an entity in Hungary, but also where you will need to register your business address and company’s name. We will also break down the advantages and disadvantages of setting up an entity in Hungary.
Set up an entity in Hungary
In Hungary, foreign subsidiary entities hold the same company standing as any other conventional company in the country and are treated as equals with domestic businesses. They enjoy independence from their parent company and are subject to all national laws of Hungary.
The registration process comes with some variation (depending on the company type), but it is generally straightforward and can be done with little difficulty. Once that is done, however, setting up a subsidiary in Hungary involves a heavy workload.
However, you can lighten this load by partnering with Bradford Jacobs, an Employer of Record (EOR) company. We Professional Employer Organization (PEO) international recruitment specialists to obtain your new personnel, and our EOR experts handle all legal and compliance requirements. Use our services and be up-and-running with a presence in your new territory within days, rather than months.
How to set up a Hungary Subsidiary
- Decide on the best company type that suits the nature of your business and expansion plans. Common company types in Hungary include: The Limited Liability Company (KFT), The Joint Stock Company (JSC), a branch office, a representative office, a trust, or a foundation.
- Obtain a business address in Hungary and prepare the property documents for registration.
- Acquiring legal representation from a legal professional in Hungary and/or acquire the services of a domestic law firm.
- Register for a commercial license with the Hungarian Ministry of Economy.
- Prepare the appropriate registration documents and have them translated to Hungarian or English (depending on the document types).
- Open a local bank account in Hungary and deposit the appropriate share capital.
- Notarize and legalize the registration documents at a notary’s office.
- Register your company at the Company Registry.
- Register for a VAT Number and a Tax Identification Number with the regional and national tax authorities.
- Register in the municipality with the Court of Registration.
- Register the company’s address with the Chamber of Commerce and Industry.
- Register for a social security number with the National Office for Health Insurance.
- Receive a Tax Identification Number, a certificate of registration and a unique registration number.
Registration Times & Fees
- Open a bank account - Depends on the bank, and takes 1 business day
- Translate documents - Depends on translator rates and document volume, and takes at least 3 business days
- Company Registration (in-person) - 100,000 HUF, and takes up to one week
- Company Registration (online) - 50,000 HUF, and 1 day
Overall, the company registration process should take no more than 2 weeks to complete (if there are no delays). The registration procedures regarding employment will take more time, especially if you are bringing in employees from non-EEA countries.
- Company registration can take place in-person or online.
- General Applications take place at the Court of Registration offices and can take up to a week for approval.
- Online applications are the fastest method of registration – however, an attorney is required throughout the entire registration process. Either an attorney or notary must countersign the Articles of Association and the application form.
- The Companies Register provides an online standard charter form which can be filled in, and the registration process can be completed in one business day through this process.
What you need to set up a Hungary Subsidiary
For foreign companies wishing to expand into Hungary, certain requirements must be met:
- A Hungarian business address – leased or purchased with all relevant documentation.
- A local bank account with the appropriate share capital deposited (which varies according to the subsidiary type).
- Completed registration documents:
- The application form
- The Memorandum of Association and The Articles of Association of the parent company
- Articles of Association of the subsidiary
- The resolution of the parent company detailing its decision to form the subsidiary
- A Certificate of Good Standing of the parent company (or similar)
- A bank account statement confirming payment of the appropriate share capital
- Document of the shareholders’ records with a full composition of shareholders and division of the shares
- Business address documentation
- Confirmation of the payment of statutory fees.
- A commercial license/permit (if applicable)
- Founders’ information (for both private individuals and legal persons/entities)
- Power of Attorney for the legal representative
- Signature specimens of the signatories of both the parent company and the subsidiary
- Notarized and legalized registration documents in their Hungarian or English translations.
- A company incorporation certificate.
- A tax identifier number.
- A social security number.
- A VAT Number.
Benefits of Setting up a Hungary Subsidiary
Hungary is a compelling destination in the Baltics for subsidiary establishment and growing a business’ influence. There are also other significant benefits to establishing an entity in Hungary:
- Subsidiaries in Hungary are taxed the same as any other resident company.
- Subsidiary entities in Hungary also benefit from double tax treaties, in which there are significant reductions in tax payments on dividends, interests or royalties paid to the foreign country.
- Hungary has the highest adult literacy rate of the region with, according to the UNESCO Education and Literacy Report (2020).
- Hungary boasts strong industrial sectors, with specialties in automation, electronics, and pharmaceutical and medical technology.
- Hungary benefits from the lowest tax rate in Europe, and no withholding taxes.
- Hungary also benefits from low administration and labor costs.
- Hungary also boasts a highly educated workforce, with a particular emphasis on engineering, medicine, and economics.
- Hungary’s well-established infrastructure gives entities high-quality logistics options to access markets easily and affordably to the rest of Europe.
Hungary Subsidiary Laws
In Hungary, subsidiary laws vary depending on the subsidiary entity type you wish to establish – but all are regulated under The Company Act. Compliance entails meeting certain requirements:
Registration & Documentation
- A Limited Liability Company (KFT) requires 1 director and 1 shareholder, who can be of any nationality, as well as a minimum share capital of HUF 3,000,000 or EUR 10,000 (with at least 50% deposited at registration).
- A Joint Stock Company (JSC) requires at 1 shareholder and at least 3 directors of any nationality, as well as minimum share capital (public – HUF 20 million, private – HUF 5 million) which must be paid in full upon registration. This company type must also be listed on the stock exchange.
- All companies must issue a request for a commercial license by the Hungarian Ministry of Economy.
- All entities are regulated the Companies Register.
- Entities must also be registered for a tax identification number and VAT with the tax authorities, as well register with the National Health Insurance Fund (NEAK).
- Entity Founders Documentation – foreign founders must submit certain documents that confirm their identities, for both private individuals and legal persons/entities, including parent company information, information on beneficiaries and shareholders, etc.
Accounts and Taxation
- All subsidiary companies must pay a corporate income tax rate of 9%, as well as a local business tax of 2%, and an innovative contribution of 0.3%.
- All subsidiary entities must prepare annual financial statements and file them in the Company Register every year.
- Joint Stock Companies must also prepare an annual balance sheet, and all accounts must be managed by an appointed and certified accountant.
- All entities in Hungary must also apply for VAT.
- Annual statutory audits are required for all other subsidiary entities expect a limited liability company.
- Hungary also benefits from a Double Taxation Treaty on with-holding payments.
- There are no withholding taxes on dividends, interest, or royalties that are paid to non-individuals.
- Management bodies of subsidiaries must include an annual general meeting of shareholders, and a board of directors.
- In a private joint stock company, the shareholders may appoint a CEO instead of a board of directors.
- All subsidiary entities may also require a supervisory board if the annual number of full-time employees exceed 200.
Working with Bradford Jacobs
Establishing an entity takes considerable time and resources, despite the ease of establishment you can find in Hungary. To do this, you need to acquire the right people and the right resources, which will not be easy. A cost-effective and time-saving alternative to this is engaging the services of a Professional Employer Organization (PEO) such as Bradford Jacobs.
With over two decades of global recruitment expertise and our Employer of Record (EOR) solutions, we can have employees operational within days, ensuring that all laws and regulations (employment, payroll, tax) are followed. Our Human Resources’ experts will ensure a smooth transition of your onboarded employees into your new territory. International borders should not stand in the way of international expansion.
Contact us today to make your expansion goals a reality, with ease and confidence.