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The number of active companies and entrepreneurs in Hungary is constantly increasing. In 2022 there were more than 1 million active organizations in the country, of which about 22 thousand had foreign participation. Foreigners can open a business in Hungary under the same conditions as Hungarian citizens. In addition, the founders of Hungarian companies have the opportunity to obtain a residence permit.
The main advantages of doing business in Hungary
1. Developing economy. Hungary's GDP has doubled in the last 10 years. The total GDP of the EU countries has grown 1.4 times in the same period. One of the factors contributing to the growth of the Hungarian economy is the lowest electricity and gas prices in the EU.
2. Low taxes. The corporate tax rate is only 9%, which is the lowest in the EU. In comparison, Germany has a corporate tax rate of 15% and Spain 25%. Personal income tax is also lower than in other EU countries and is not progressive.
3. Affordable labor costs. Hungary's low cost of living contributes to relatively low labor costs. In 2023, the average pre-tax salary in Hungary will be 550,000 HUF, or 1,370 Euros. For professionals with higher education, the average salary is 1.5 times higher.
The main advantages of doing business in Hungary
1. Developing economy. Hungary's GDP has doubled in the last 10 years. The total GDP of the EU countries has grown 1.4 times in the same period. One of the factors contributing to the growth of the Hungarian economy is the lowest electricity and gas prices in the EU.
2. Low taxes. The corporate tax rate is only 9%, which is the lowest in the EU. In comparison, Germany has a corporate tax rate of 15% and Spain 25%. Personal income tax is also lower than in other EU countries and is not progressive.
3. Affordable labor costs. Hungary's low cost of living contributes to relatively low labor costs. In 2023, the average pre-tax salary in Hungary will be 550,000 HUF, or 1,370 Euros. For professionals with higher education, the average salary is 1.5 times higher.
Obtaining a Residence Permit by Starting a Business
Foreign founders and directors of Hungarian companies may apply for a residence permit. If a company has several founders, each of them can apply for a residence permit.
When examining applications for residence permits, the Migration Board assesses the company's potential to generate stable income. For new businesses, this is confirmed by a business plan and other related documents.
All conditions for a residence permit in Hungary by starting a company.
A residence permit obtained by opening a business entitles the applicant to apply for a permanent residence permit after three years. This then opens up the possibility of obtaining Hungarian citizenship.
Hungarian residence permit for family members of an entrepreneur
Family members of an entrepreneur can also obtain a residence permit. The status is granted on the basis of the main applicant and the nature of his business. The following can apply for a residence permit
When examining applications for residence permits, the Migration Board assesses the company's potential to generate stable income. For new businesses, this is confirmed by a business plan and other related documents.
All conditions for a residence permit in Hungary by starting a company.
A residence permit obtained by opening a business entitles the applicant to apply for a permanent residence permit after three years. This then opens up the possibility of obtaining Hungarian citizenship.
Hungarian residence permit for family members of an entrepreneur
Family members of an entrepreneur can also obtain a residence permit. The status is granted on the basis of the main applicant and the nature of his business. The following can apply for a residence permit
- Spouse
- Children under the age of 18
- Parents, if they are financially dependent on the principal applicant
Main types of companies in Hungary
The following organizational and legal forms are available in Hungary:
The most popular form of business organization in Hungary is the limited liability company (LLC). Out of 100 business organizations, 80 are LLCs, 17 are partnerships and 2 are joint stock companies. Other types of companies account for only 1%.
Corporations and partnerships have the status of legal entities. However, individual entrepreneurs and sole proprietorships are also included in the unified register of legal entities.
Businesses may engage in one or more types of activities, which are specified at the time of registration. Certain activities may require licenses or employees with proven qualifications, as well as notices of commencement.
Limited liability company (Kft.):
The supreme governing body of a limited liability company (Kft.) is the founders' meeting. The number of votes of the founder is proportional to his share in the authorized capital. The meeting elects one or more directors of the company, who directly manage the business. The directors need not be the founders of the LLC or the Kft.
Joint Stock Company (Rt):
Joint stock companies are established in the form of a public company - Nyrt, or a non-public company - Zrt The shares of a public joint-stock company are placed on the stock exchange, while the shares of a non-public joint-stock company are distributed only among the founders.
The minimum authorized capital of a public joint-stock company is 4 times higher than that of a private joint-stock company - 20 million HUF or 50,000 €.
The supreme governing body of a joint-stock company is the general meeting of shareholders. The shareholders elect a board of directors consisting of at least three persons. The board of directors passes resolutions by a simple majority. In a private company limited by shares, the shareholders may appoint a managing director instead of the board of directors.
Partnerships (Kt and Bt):
There are two types of partnerships: general partnership (Kt) and limited partnership (Bt).
In a general partnership, the founders are fully liable for the business. In a limited partnership, the partners are divided into two categories: some are liable with all their property, others - only within the limits of their share in the authorized capital.
The supreme body of the partnership is the general meeting of the founders. It elects a director or a board of directors from among the partners. When voting, each partner has the same number of votes, regardless of the size of its share in the authorized capital.
Companies may engage in one or more activities as specified in the registration process. Some areas may require a license, employees with proven qualifications, or a notice of commencement.
- Company - LLC or JSC;
- Partnership - full or limited liability.
The most popular form of business organization in Hungary is the limited liability company (LLC). Out of 100 business organizations, 80 are LLCs, 17 are partnerships and 2 are joint stock companies. Other types of companies account for only 1%.
Corporations and partnerships have the status of legal entities. However, individual entrepreneurs and sole proprietorships are also included in the unified register of legal entities.
Businesses may engage in one or more types of activities, which are specified at the time of registration. Certain activities may require licenses or employees with proven qualifications, as well as notices of commencement.
Limited liability company (Kft.):
- Authorized capital - 3 million HUF, or 7,400 €;
- 1 or more founders;
- Liability for obligations - in the amount of the authorized capital.
The supreme governing body of a limited liability company (Kft.) is the founders' meeting. The number of votes of the founder is proportional to his share in the authorized capital. The meeting elects one or more directors of the company, who directly manage the business. The directors need not be the founders of the LLC or the Kft.
Joint Stock Company (Rt):
- Authorized capital - from 5 million HUF or 12,200 €;
- 1 or more shareholders;
- Liability for obligations - in the amount of the authorized capital.
Joint stock companies are established in the form of a public company - Nyrt, or a non-public company - Zrt The shares of a public joint-stock company are placed on the stock exchange, while the shares of a non-public joint-stock company are distributed only among the founders.
The minimum authorized capital of a public joint-stock company is 4 times higher than that of a private joint-stock company - 20 million HUF or 50,000 €.
The supreme governing body of a joint-stock company is the general meeting of shareholders. The shareholders elect a board of directors consisting of at least three persons. The board of directors passes resolutions by a simple majority. In a private company limited by shares, the shareholders may appoint a managing director instead of the board of directors.
Partnerships (Kt and Bt):
- The amount of authorized capital is unlimited;
- The minimum number of founders is two;
- The liability of the founders extends to their personal property.
There are two types of partnerships: general partnership (Kt) and limited partnership (Bt).
In a general partnership, the founders are fully liable for the business. In a limited partnership, the partners are divided into two categories: some are liable with all their property, others - only within the limits of their share in the authorized capital.
The supreme body of the partnership is the general meeting of the founders. It elects a director or a board of directors from among the partners. When voting, each partner has the same number of votes, regardless of the size of its share in the authorized capital.
Companies may engage in one or more activities as specified in the registration process. Some areas may require a license, employees with proven qualifications, or a notice of commencement.
Hungary Company Opening Steps
Our Hungarian lawyers register the company in Hungary.
The Register of Legal Entities and Individual Entrepreneurs is maintained by the Registration Chamber under the jurisdiction of the Tax and Customs Administration.
1. From 2 business days
Collection and processing of documents required to open a company
2. From 2-3 business days
Filing of company registration documents by our Hungarian lawyer
The founders sign the incorporation documents and the application for registration in the presence of our lawyer in person in Hungary or online via video conference. In this case, the signed original documents are sent to Hungary by courier.
The registration of a new company takes 2-3 working days. After the company has been registered, our lawyer will send notifications to the tax office.
3. From 5 business days
Opening a business account.
Opening a bank account requires personal presence.
Contact us and our experts will help you successfully pass the compliance in a Hungarian bank.
Registration at the Chamber of Commerce and Industry.
It is compulsory to register a company with the Chamber of Commerce and Industry. The mandatory annual fee is HUF 5000, or €12.
The Register of Legal Entities and Individual Entrepreneurs is maintained by the Registration Chamber under the jurisdiction of the Tax and Customs Administration.
1. From 2 business days
Collection and processing of documents required to open a company
2. From 2-3 business days
Filing of company registration documents by our Hungarian lawyer
The founders sign the incorporation documents and the application for registration in the presence of our lawyer in person in Hungary or online via video conference. In this case, the signed original documents are sent to Hungary by courier.
The registration of a new company takes 2-3 working days. After the company has been registered, our lawyer will send notifications to the tax office.
3. From 5 business days
Opening a business account.
Opening a bank account requires personal presence.
Contact us and our experts will help you successfully pass the compliance in a Hungarian bank.
Registration at the Chamber of Commerce and Industry.
It is compulsory to register a company with the Chamber of Commerce and Industry. The mandatory annual fee is HUF 5000, or €12.
The most popular business sectors in Hungary
The five most popular industries by the number of registered individual entrepreneurs and companies in Hungary:
1. Agriculture, forestry and fish farming - 25%.
2. Real estate services (real estate services, real estate maintenance and management) - 12%.
3. Professional, scientific and technical services - 11%.
4. Wholesale and retail trade, repair of motor vehicles - 10%.
5. Construction - 8%.
Ranked sixth through tenth are: industrial production, administrative services and support, hotels and restaurants, IT and communications. The number of organizations in each of these sectors is about the same - 4% each.
The most popular sector among foreign entrepreneurs is wholesale and retail trade, repair of motor vehicles - about 29% of companies with foreign capital operate in this sector.
Hungary's GDP grows by an average of 3% per year - this dynamic is demonstrated by the data of the last 10 years, starting from 2014. During this period, the country's economy has doubled.
Industrial production remains the leading sector in terms of contribution to GDP, while agriculture ranks only 13th.
The largest contribution to the Hungarian economy, apart from industrial production, is made by the following sectors: real estate services; wholesale and retail trade, repair of motor vehicles; construction, as well as professional, scientific and technical services.
The fastest growing sectors are professional services; industrial production; trade and hospitality, showing an annual growth of 0.5% on average since 2014. The service sector as a whole is growing at 2% annually, outpacing other industries in terms of growth.
1. Agriculture, forestry and fish farming - 25%.
2. Real estate services (real estate services, real estate maintenance and management) - 12%.
3. Professional, scientific and technical services - 11%.
4. Wholesale and retail trade, repair of motor vehicles - 10%.
5. Construction - 8%.
Ranked sixth through tenth are: industrial production, administrative services and support, hotels and restaurants, IT and communications. The number of organizations in each of these sectors is about the same - 4% each.
The most popular sector among foreign entrepreneurs is wholesale and retail trade, repair of motor vehicles - about 29% of companies with foreign capital operate in this sector.
Hungary's GDP grows by an average of 3% per year - this dynamic is demonstrated by the data of the last 10 years, starting from 2014. During this period, the country's economy has doubled.
Industrial production remains the leading sector in terms of contribution to GDP, while agriculture ranks only 13th.
The largest contribution to the Hungarian economy, apart from industrial production, is made by the following sectors: real estate services; wholesale and retail trade, repair of motor vehicles; construction, as well as professional, scientific and technical services.
The fastest growing sectors are professional services; industrial production; trade and hospitality, showing an annual growth of 0.5% on average since 2014. The service sector as a whole is growing at 2% annually, outpacing other industries in terms of growth.
Individual business in Hungary: individual entrepreneurs and the self-employed
There are a number of nuances to registering a new Individual Entrepreneurship or becoming self-employed in Hungary that can be clarified in our consultation. Citizens of EU and EEA countries have the right to run an individual entrepreneurship under the same conditions as Hungarian residents.
Forms of individual entrepreneurship include:
An individual entrepreneurship, sometimes referred to as a "private company", is set up solely by an individual entrepreneur. However, this form does not create a legal entity.
In Hungary there are 2.5 times more sole proprietors and self-employed persons than companies: there are 1,300,000 sole proprietors and about 500,000 registered companies. At the same time, there are very few individual entrepreneurships - only 400 out of 600,000 individual entrepreneurships.
Whatever the form of enterprise, the financial responsibility of an entrepreneur is full: he is liable for his obligations with all his assets.
Registration of Individual Entrepreneurship in Hungary
The procedure for registering an Individual Entrepreneur is similar to that for a company: Individual entrepreneurs are registered in the unified register of legal entities. Registration takes only one working day, provided that all the necessary documents have been prepared.
Self-employed persons are given their own tax number for the purpose of carrying out their activities.
Forms of individual entrepreneurship include:
- Individual entrepreneurship (egyéni vállalkozó);
- Self-employed (önálló vállalkozó).
An individual entrepreneurship, sometimes referred to as a "private company", is set up solely by an individual entrepreneur. However, this form does not create a legal entity.
In Hungary there are 2.5 times more sole proprietors and self-employed persons than companies: there are 1,300,000 sole proprietors and about 500,000 registered companies. At the same time, there are very few individual entrepreneurships - only 400 out of 600,000 individual entrepreneurships.
Whatever the form of enterprise, the financial responsibility of an entrepreneur is full: he is liable for his obligations with all his assets.
Registration of Individual Entrepreneurship in Hungary
The procedure for registering an Individual Entrepreneur is similar to that for a company: Individual entrepreneurs are registered in the unified register of legal entities. Registration takes only one working day, provided that all the necessary documents have been prepared.
Self-employed persons are given their own tax number for the purpose of carrying out their activities.
Taxes and accounting in Hungary
Hungary has a single basic tax system for companies, individual entrepreneurs and the self-employed. There are also simplified tax regimes for the self-employed and for small and medium-sized enterprises.
Basic tax regime
The basic regime includes the following types of tax
Employees pay income tax and social security contributions at the rates set by law.
When using the basic system, income and expenses are recorded in detail and must be supported by documents: invoices, delivery notes and bills.
Simplified tax regime
The simplified tax regime allows profit to be defined as a fixed proportion of income:
The tax rates under the simplified regime are the same as under the basic regime.
Simplified KATA Scheme
The KATA system is a fixed monthly payment that replaces income tax and social security contributions.
VAT in Hungary
Companies and individual entrepreneur ships whose annual turnover exceeds a certain threshold are subject to value-added tax (VAT).
- The basic VAT rate is 27%.
- Reduced rates:
Taxes for company founders
Company founders are obliged to pay
Annual accounts
All companies in Hungary are required to file annual accounts. The form depends on the size of the balance sheet, the turnover and the number of employees.
Types of reports:
A full report includes:
Basic tax regime
The basic regime includes the following types of tax
- Personal income tax - 9%;
- Municipal tax - up to 2%;
- Social tax - please ask for details during the consultation.
Employees pay income tax and social security contributions at the rates set by law.
When using the basic system, income and expenses are recorded in detail and must be supported by documents: invoices, delivery notes and bills.
Simplified tax regime
The simplified tax regime allows profit to be defined as a fixed proportion of income:
- 60% - for any activity;
- 20% - agriculture, manufacturing, construction, services;
- 10% - retail trade.
The tax rates under the simplified regime are the same as under the basic regime.
Simplified KATA Scheme
The KATA system is a fixed monthly payment that replaces income tax and social security contributions.
VAT in Hungary
Companies and individual entrepreneur ships whose annual turnover exceeds a certain threshold are subject to value-added tax (VAT).
- The basic VAT rate is 27%.
- Reduced rates:
- 18% - on basic foodstuffs
- 5% - on medical equipment, pharmaceuticals and heating.
Taxes for company founders
Company founders are obliged to pay
- Income tax on dividends - at the rate prescribed by law. If a founder performs the duties of a director, income tax and social security contributions are withheld from his salary.
Annual accounts
All companies in Hungary are required to file annual accounts. The form depends on the size of the balance sheet, the turnover and the number of employees.
Types of reports:
- Simplified report;
- Full report;
- Consolidated report.
A full report includes:
- Balance sheet;
- Profit and Loss Statement;
- Cash Flow Statement.
Labor Law in Hungary
The Hungarian Labor Code is the main document regulating the relationship between employees and employers. The Code is based on the provisions common to all EU countries. In Hungary there is a judicial practice of interpreting the provisions of the law and employment contracts in favor of the employee.
An employment contract in Hungary is concluded for an indefinite or fixed term. A contract is recognized as indefinite even if it is not explicitly stated - it is sufficient that the term of the employment contract is not specified.
Work permits for foreigners. EU and EEA citizens have the right to work in Hungary without additional permits, while other foreigners - third-country nationals - receive a residence permit and a work permit.
In order to employ a foreigner from outside the EU and the EEA, a company applies to the Employment Service. The service confirms that there are no unemployed Hungarian citizens with the qualifications required by the employer.
The employer independently checks the foreign worker's documents: residence permit or seasonal residence permit, work permit in Hungary.
The standard working time in Hungary is 40 hours per week: 5 days per week for 8 hours. It is allowed to work overtime not more than 250 hours per year.
An employment contract in Hungary is concluded for an indefinite or fixed term. A contract is recognized as indefinite even if it is not explicitly stated - it is sufficient that the term of the employment contract is not specified.
Work permits for foreigners. EU and EEA citizens have the right to work in Hungary without additional permits, while other foreigners - third-country nationals - receive a residence permit and a work permit.
In order to employ a foreigner from outside the EU and the EEA, a company applies to the Employment Service. The service confirms that there are no unemployed Hungarian citizens with the qualifications required by the employer.
The employer independently checks the foreign worker's documents: residence permit or seasonal residence permit, work permit in Hungary.
The standard working time in Hungary is 40 hours per week: 5 days per week for 8 hours. It is allowed to work overtime not more than 250 hours per year.
Key points when opening a company in Hungary
1. Foreigners can open a company in Hungary without any additional restrictions. There are certain nuances for sole proprietorships.
2. Opening a company gives the right to obtain a residence permit for several years at once.
3. The most popular form of company in Hungary is the LLC (Kft). The minimum authorized capital of a limited liability company is 3 million HUF, or 7400 euros.
4. Hungarian companies pay the lowest corporate income tax in the EU - 9%. Entrepreneurs can choose between the basic taxation system with detailed accounting of income and expenses or the simplified taxation system.
5. Most companies with foreign capital in Hungary operate in logistics, trade, IT and real estate services.
IST Hungary is a popular Hungarian international consulting company dealing with company formation, business consulting, migration and other legal issues in Hungary and beyond.
Schedule a meeting with our experts in our office or online.
2. Opening a company gives the right to obtain a residence permit for several years at once.
3. The most popular form of company in Hungary is the LLC (Kft). The minimum authorized capital of a limited liability company is 3 million HUF, or 7400 euros.
4. Hungarian companies pay the lowest corporate income tax in the EU - 9%. Entrepreneurs can choose between the basic taxation system with detailed accounting of income and expenses or the simplified taxation system.
5. Most companies with foreign capital in Hungary operate in logistics, trade, IT and real estate services.
IST Hungary is a popular Hungarian international consulting company dealing with company formation, business consulting, migration and other legal issues in Hungary and beyond.
Schedule a meeting with our experts in our office or online.
To order the service and consultations:
📲 Phone: +36205977777
📲 What's App: +36205977777
📧 E-mail: business@isthungary.hu
🌐 Website: https://immigrationlive.hu/
📍Our office in Budapest:
Budapest, Szervita tér 8, 1052, Hungary
✅ Subscribe to our Telegram channel: https://t.me/immigrationlivehu
📲 Phone: +36205977777
📲 What's App: +36205977777
📧 E-mail: business@isthungary.hu
🌐 Website: https://immigrationlive.hu/
📍Our office in Budapest:
Budapest, Szervita tér 8, 1052, Hungary
✅ Subscribe to our Telegram channel: https://t.me/immigrationlivehu