Starting Business in Hungary

Starting Business in Hungary | Bestar

Hungary Business Startup Guide Detailed

Starting Business in Hungary

Starting a business in Hungary can be an attractive option due to its strategic location within Europe, relatively low corporate tax rate, and access to the EU market. Here's a comprehensive guide to help you navigate the process:

1. Choose a Business Structure:

Hungary offers several types of business entities. The most common for foreign entrepreneurs are:

• Limited Liability Company (Korlátolt Felelősségű Társaság - Kft.): This is a popular choice due to its flexibility and the limited liability of its members. The minimum registered capital is HUF 3,000,000 (approximately €7,200 as of April 2025), although this amount doesn't necessarily need to be deposited upfront.

• Private Company Limited by Shares (Zártkörűen Működő Részvénytársaság - Zrt.): This structure is suitable for larger businesses and requires a minimum share capital of HUF 5,000,000 (approximately €12,200 as of April 2025).

• Branch Office: Foreign companies can also establish a branch office to operate in Hungary without forming a separate legal entity.

• Sole Proprietorship (Egyéni Vállalkozó): This is simpler but offers no limited liability and is generally more suitable for individuals already residing in Hungary.

2. Prepare the Necessary Documents:

The specific documents required will depend on the chosen business structure and the

individuals involved. Generally, you'll need:

• Passport or other valid ID for all owners and managing directors.

• Proof of address for the owners and managing directors.

• Articles of Association/Foundation Deed: This is the founding document of your company, outlining its purpose, structure, and other essential details. It must be drafted and countersigned by a Hungarian lawyer.

• Deed of Foundation (for Kft.): Similar to the Articles of Association.

• List of Shareholders: Detailing the owners and their stakes in the company.

• Managing Director's Declaration: Several declarations are needed, including consent to act as a director, a statement confirming the legal use of the registered office, and a declaration that they are not subject to any disqualifications.

• Proof of Payment of Registered Capital (if applicable).

• Specimen Signature of the Managing Director.

• Power of Attorney (if using a representative).

• Name Clearance Certificate: To ensure your chosen company name is unique and complies with Hungarian regulations.

3. Company Registration Process:

The company registration process is primarily electronic and managed by the Hungarian Court of Registration (Cégbíróság). The typical steps include:

• Engaging a Hungarian Lawyer: Legal representation is mandatory for company registration. The lawyer will assist with drafting the necessary documents and submitting the application.

• Submitting the Application: The lawyer will electronically file the required documents with the Court of Registration.

• Court Review: The court reviews the submitted documents for compliance. The simplified procedure can take as little as 1 business day after receiving the VAT number, while the standard procedure may take up to 15 business days.

• Obtaining the Certificate of Incorporation: Once approved, the court issues an electronic Certificate of Incorporation, confirming the company's legal existence.

4. Tax Registration:

After incorporation, your company needs to register for taxes with the National Tax and Customs Administration (Nemzeti Adó- és Vámhivatal - NAV). This typically includes:

• Tax Number (Adószám): This is automatically generated during the court registration process.

• VAT Registration (ÁFA regisztráció): Mandatory if your annual revenue exceeds a certain threshold (currently HUF 12 million, approximately €32,000 as of April 2025). The standard VAT rate in Hungary is 27%, the highest in the EU, with some reduced rates for specific goods and services.

5. Open a Corporate Bank Account:

You will need to open a Hungarian bank account for your business transactions. This usually requires the Certificate of Incorporation and the personal identification documents of the company's representatives.

6. Appoint an Accountant:

Hungarian law requires businesses to maintain proper accounting records. It's essential to engage a qualified local accountant to handle bookkeeping, tax filings, and other financial compliance matters.

7. Registered Office:

Your company must have a registered office address in Hungary. This can be a physical office space or a virtual office service.

Taxes and Regulations in Hungary:

• Corporate Income Tax (CIT): Hungary has a flat corporate income tax rate of 9%, one of the lowest in the European Union.

• Local Business Tax (LBT): Municipalities may levy a local business tax, with a maximum rate of 2%. Not all localities impose this tax.

• Value Added Tax (VAT): The standard rate is 27%, with reduced rates of 18% and 5% for certain goods and services.

• Social Security Contributions: If you hire employees, you will need to register for payroll taxes and social security contributions, which include pension, health insurance, and unemployment contributions.

• Accounting Rules: The Act on Accounting (Act C of 2000) sets out the accounting rules, which are harmonized with EU directives and international accounting principles.

• Filing Requirements: Companies must file their financial statements and, if applicable, the auditor's opinion with the Ministry of Justice electronically by the end of the fifth month following the balance sheet day.

• Labor Laws: Hungary has regulations regarding employment contracts, working hours (standard 40-hour week), overtime pay, and mandatory benefits like paid vacation and sick leave. Written contracts are mandatory.

Important Considerations:

• Language Barrier: While English is spoken in business contexts, official documents are in Hungarian. Professional translation services are crucial.

• Legal and Regulatory Compliance: Hungary has specific legal and regulatory requirements. Engaging legal and accounting professionals is highly recommended to ensure compliance.

• EU Membership: Operating in Hungary provides access to the European Union's single market, facilitating trade with other member states.

• Government Support and Incentives: Hungary offers various investment incentives and support programs, particularly for manufacturing and R&D activities.

• Minimum Wage: As of January 1, 2025, the minimum wage is HUF 290,800 for unskilled jobs and HUF 348,800 for jobs requiring at least a high school diploma. These figures are subject to annual adjustments.

Starting a business in Hungary involves several steps, but with careful planning and professional guidance, it can be a strategic move for entrepreneurs looking to establish a presence in Europe.

Can a Foreigner Set Up a Company in Hungary

Foreigners can absolutely set up a company in Hungary under the same conditions as Hungarian citizens. Hungary actively encourages foreign investment and offers a relatively straightforward company registration process.   

Here's what you need to know as a foreign entrepreneur looking to establish a business in Hungary:

Key Points for Foreigners Starting a Business in Hungary:

• No Restrictions on Nationality: Hungary allows natural persons of all nationalities to establish companies without any specific restrictions. You do not need to be a resident of Hungary to register a company.   

• Popular Company Structure: The Limited Liability Company (Korlátolt Felelősségű Társaság - Kft.) is the most common and recommended structure for foreign entrepreneurs due to its limited liability and relatively lower capital requirements (minimum registered capital is HUF 3,000,000, approximately €7,200 as of April 2025, although this doesn't always need to be paid upfront immediately).   

• Other Business Structures: You can also choose other forms like a Private Company Limited by Shares (Zártkörűen Működő Részvénytársaság - Zrt.), Branch Office, or other partnership types.

• Mandatory Legal Representation: You must engage a Hungarian lawyer to assist with the company registration process. The lawyer will draft the necessary documents (like the Articles of Association/Foundation Deed) and submit the application to the Hungarian Court of Registration (Cégbíróság) electronically.   

• Required Documents: While specific documents may vary based on the business structure and individuals involved, common requirements for foreign owners and directors include:

  • Valid passport or other government-issued ID.

  • Proof of current residential address.

  • Articles of Association/Foundation Deed (drafted and countersigned by a Hungarian lawyer).   

  • Shareholder details.

  • Managing Director's declarations (consent to act, no disqualifications, legal use of registered office).

  • Specimen signature of the Managing Director.

  • Power of Attorney (if using a representative).

  • Name Clearance Certificate.

• Company Registration Process: The process is primarily electronic and relatively quick, often taking just a few business days for the court registration itself, although the overall preparation might take longer.   

• Tax Registration: After registration, your company will automatically receive a tax number. You will need to register for VAT with the National Tax and Customs Administration (NAV) if your revenue exceeds the threshold (currently HUF 12 million per year).   

• Bank Account: You will need to open a Hungarian corporate bank account.   

• Registered Office: Your company must have a registered address in Hungary.

• Accounting: Maintaining proper accounting records through a local accountant is mandatory.

• Language: While English is used in business, all official documents are in Hungarian, so professional translation services are essential.   

• Residency and Work Permits:

  • Company Owners/Directors: Foreigners who establish and actively manage a Hungarian company may be eligible to apply for a residence permit based on gainful activity. This often requires demonstrating that the business can provide sufficient income (around €1,500 per month is often assessed).

  • Employees: If you plan to hire foreign employees (non-EU citizens), they will generally need to obtain a work permit in addition to a residence permit. EU citizens have the right to live and work in Hungary without limitations.   

• Low Corporate Tax: Hungary has a corporate income tax rate of 9%, which is one of the lowest in the European Union, making it an attractive location for businesses.   

In summary, Hungary offers a welcoming environment for foreign entrepreneurs to establish and operate businesses. While there are legal and administrative procedures to follow, the process is generally efficient, and the low corporate tax rate and access to the EU market are significant advantages. It is highly recommended to work with experienced Hungarian legal and accounting professionals to ensure a smooth and compliant setup.   

How Much does it Cost to Start a Business in Hungary

The cost of starting a business in Hungary can vary significantly depending on the chosen business structure, the complexity of the setup, and the professional services you engage. Here's a breakdown of the potential costs involved:   

1. Registration Fees:

• Court of Registration Fees: These fees are paid to the Hungarian Court of Registration (Cégbíróság) for the official registration of your company. The amount depends on the business structure:

  • Limited Liability Company (Kft.): Typically ranges from HUF 50,000 to HUF 100,000 (approximately €120 - €240 as of April 2025) for the standard electronic filing procedure. Simplified electronic filing may have lower or no stamp duty. [Registration Fees:

    For a Limited Liability Company (Kft), the registration fee is around €150.] 

  • Private Company Limited by Shares (Zrt.): Expect to pay around HUF 100,000 (approximately €240 as of April 2025).

  • Limited Partnership (Bt.) and Unlimited Partnership (Kkt.): Registration fees are often HUF 50,000 or sometimes even waived for simplified procedures.

  • Public Company Limited by Shares (Nyrt.): Higher fees, potentially around HUF 600,000 (approximately €1,440 as of April 2025).

• Publication Fee: There might be a small publication fee (around HUF 5,000, approximately €12 as of April 2025) for announcing the company registration, although this can be free under the simplified procedure.   

• Name Clearance Certificate: Reserving a unique company name may incur a small fee, typically between HUF 10,000 to HUF 15,000 (approximately €24 - €36 as of April 2025).

2. Legal and Administrative Fees:

• Lawyer's Fees: Engaging a Hungarian lawyer is mandatory for company registration. Their fees will cover drafting the Articles of Association/Foundation Deed, submitting the application, and providing legal advice. These fees can vary significantly based on the lawyer's experience and the complexity of the case, potentially ranging from HUF 40,000 to HUF 200,000 or more (approximately €95 - €480+ as of April 2025). Some service providers offer packages that include legal fees.   

• Translation and Notarization Costs: You may need to translate official documents into Hungarian and have some documents notarized, incurring additional costs. [Legal and Notary Fees:

  These can range from €500 to €2,000 depending on the complexity of the business and the services required.] 

3. Share Capital:

• Limited Liability Company (Kft.): The minimum registered capital is HUF 3,000,000 (approximately €7,200 as of April 2025). However, it's important to note that this amount doesn't necessarily need to be deposited in full upfront. The founders must declare how and when the capital will be paid in, with specific deadlines outlined by law.

• Private Company Limited by Shares (Zrt.): The minimum share capital is HUF 5,000,000 (approximately €12,000 as of April 2025).

• Other Structures: Unlimited and limited partnerships generally have no minimum capital requirements.   [Minimum Share Capital:

  For a Kft, the minimum share capital is 3,000,000 HUF (approximately €8,000). Public limited companies require a minimum of HUF 20 million (€51,900).]

Important Note: The share capital is not necessarily an "expense" in the traditional sense, as it remains within the company and can be used for business operations.

4. Registered Office Costs:

• You need a registered office address in Hungary. If you don't have your own physical office space initially, you might use a virtual office service, which can cost around HUF 20,000 to HUF 30,000 per year (approximately €48 - €72 as of April 2025). Renting a physical office will significantly increase costs depending on location and size (starting from around €250 per month).   

5. Accounting and Tax Compliance:

• Engaging a local accountant is crucial for ongoing compliance. Accounting fees can start from around €100 - €400 per month depending on the volume of transactions and employees. [Ongoing Costs:

  • Annual compliance costs (including tax filings and financial statements) start at around €300 per year. Accounting and auditing services can start around HUF 100,000 annually.] 

6. Other Potential Costs:

• Bank Account Setup Fees: Some banks might charge a fee for setting up a corporate bank account.

• Business Licenses and Permits: Depending on your industry, you may need specific licenses or permits, which will have associated fees.   

• Translation Services: Ongoing needs for translating documents and communications.   

• Marketing and Website Development: Essential for establishing your business presence. [Other Potential Costs:

  These may include bank account setup fees, translation fees for official documents, and VAT registration fees.]

Estimating the Initial Costs:

Based on the above, a rough estimate for the initial costs of starting a simple Limited Liability Company (Kft.) in Hungary, including legal fees and the initial administrative steps, could range from €1,000 to €3,000 (excluding the share capital that remains within the business). This can increase if you require more complex legal structures or immediate physical office space. [Starting a business in Hungary can cost between 3,000 and 4,000 EUR. This includes registration fees, legal fees, notary costs, and potentially other expenses like obtaining a registered office address.]

Key Takeaway:

While the official registration fees are relatively low, the mandatory legal assistance and the need for a registered office are significant initial costs. The required share capital for a Kft. (HUF 3 million) is a substantial amount, although it can be contributed over time.

[Additional ongoing costs include accounting services, tax filings, and compliance-related fees. 

How Bestar can Help

When starting a business in Hungary, engaging Bestar can significantly streamline the process, ensure compliance, and set your venture up for success. Here's how Bestar can help:   

• Company Registration: Bestar drafts and countersigns the Articles of Association/Foundation Deed and submits the company registration application to the Court of Registration.   

• Legal Advice and Structuring: We can advise you on the most suitable legal structure for your business based on your goals and liabilities.

• Document Preparation: We ensure all legal documents are correctly drafted, compliant with Hungarian law, and protect your interests.   

• Navigating Regulations: We can help you understand and navigate the complex legal and regulatory landscape in Hungary.   

• Contract Drafting and Review: We can assist with drafting and reviewing commercial contracts, employment agreements, and other legal documents.   

• Financial Record Keeping: We will handle your company's bookkeeping, ensuring accurate and compliant financial records.   

• Tax Compliance: We will manage your tax obligations, including VAT filings, corporate income tax returns, and other relevant taxes, ensuring you meet all deadlines and minimize liabilities.   

• Payroll Management: If you hire employees, we will handle payroll processing, social security contributions, and related tax obligations.

• Financial Reporting: We will prepare financial statements and reports required by Hungarian law.

• Financial Planning and Advice: We can provide insights into your company's financial performance and offer advice on financial planning and budgeting.

• Compliance with Accounting Standards: We ensure your accounting practices comply with Hungarian and relevant international accounting standards.

• Specialized Tax Expertise: Bestar can provide in-depth advice on tax optimization strategies, international tax implications, and navigating complex tax regulations.   

• Tax Planning: We can help you structure your business and transactions in a tax-efficient manner.

• Tax Audits and Disputes: We can represent you in case of tax audits or disputes with the National Tax and Customs Administration (NAV).

• Market Research and Analysis: We can help you understand the Hungarian market, identify opportunities, and assess potential risks.

• Business Plan Development: We can assist in creating a comprehensive business plan to guide your strategy and secure funding.

• Strategy and Growth Advice: We can provide expert advice on business strategy, market entry, and growth strategies.

• Networking and Connections: We may have valuable connections within the Hungarian business community.

• Operational Efficiency: We can help you optimize your business operations and improve efficiency.

• Setting up a Corporate Bank Account: We will guide you through the process of opening a business bank account and explain the available services.

• Payment Processing: We can help you set up payment solutions for your customers.

• Finding a Registered Office or Business Premises: We can assist you in finding suitable office space, retail locations, or industrial facilities for your business.

• Negotiating Leases: We can help you negotiate favorable lease terms.

In summary, engaging Bestar can provide you with:

• Expertise and Knowledge: Access to specialized knowledge of Hungarian laws, regulations, and business practices.

• Time Savings: We can handle complex procedures, freeing up your time to focus on your core business activities.

• Risk Mitigation: We can help you avoid costly mistakes and ensure compliance, minimizing legal and financial risks.

• Efficiency: We can streamline processes and help you navigate bureaucracy more effectively.   

• Peace of Mind: Knowing that experts are handling critical aspects of your business setup and operation can provide significant peace of mind.

Investing in professional help, especially at the initial stages, can be a wise decision that pays off in the long run by ensuring a solid foundation for your business in Hungary.

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