Lowest EU tax rate : Hungarian company registry
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We create your Hungarian company within 15 days
9% FLAT corporate tax – 0% Dividend tax – Registrar efficiency – Banking stability – Stable monetary policy
Our team of expert will call you back during office time (UTC+1) Monday to Friday from 9am to 5pm.
Our team of expert will call you back during office time (UTC+1) Monday to Friday from 9am to 5pm.
Hungary: the LOWEST RATE of corporation tax in the EU
Nowadays, working with offshore companies is becoming increasingly difficult and sometimes impossible, as a result it is necessary to choose between several jurisdictions which offer relatively low tax rates. Hungary is one such country.
- “Flat” Corporate Tax 9% 9%
- Dividend Tax 0% 0%
Why should you register your company in Hungary?
- Such preferential tax rates make Hungary a unique country for the registration of companies within the EU. An additional «bonus» is that Hungary does not sound “offshore” and is accepted without question as a partner by any company in the world
- Tax rebates on income from certain types of intellectual property;
- Possibility to open a current bank account in Hungary (company + account in one country) relatively quickly, even if the owners and directors of the company are non-residents;
- Automatic receipt of Hungarian and European VAT numbers;
- Full EU membership;
- A wide network of treaties for the avoidance of double taxation;
- The company is considered tax resident in Hungary through registration, regardless of the place of management.
- The existence of a municipal tax (0% to 2% on profit);
- High level of VAT – 27%;
- High level of social contributions to employees (23%);
- The company’s initial capital must be paid up.
In accordance with the law, the foundation documents can only be prepared and filed with the Court of Registration by a local, qualified lawyer.
- Generally, the company’s founding documents must be signed by the owners and directors in the presence of a local lawyer. It is possible to have them signed without appearing before the Hungarian lawyer in person, but in this case they must be signed in the presence of a notary public, and then apostilled.
- Once the founding documents of the company have been signed, a temporary bank account can be opened for the company, and the initial authorized capital is paid in to it.
- If the director decides not to pay the amount of the company’s authorized capital in to the bank account, he signs a statement confirming that the money is at his disposal in the company’s cash desk. In this case, the preliminary bank account is not opened, but the amount of the authorized capital becomes accountable and must appear in the company’s accounting records.
- The company documents are then submitted to the Court of Registration electronically by the lawyer .
- Company registration takes an average of 1-2 weeks, depending on the workload of the Court of Registration.
- After registration, the company must then register with the tax authority, and receives a tax number and VAT number (Hungarian and, if necessary, European).
- Within 15 days of registration, the director of the companymust open a permanent bank account for the company..
- As soon as it has been registered, the company must also conclude an agreement with qualified local accountant, who will provide the company with accounting support, and ensure the transmission of company correspondence.
The founding documents of the company are prepared in Hungarian and English languages, so in the future you will not have to spend money having them translated.
When registering a company (LLC), the following documents are signed:
- Questionnaires and forms for customer identification according to the laws on advocacy and on the exclusion of money laundering;
- The company’s Memorandum and Articles of Association;
- The sample of the signature of the director of the company;
- Instructions on the receipt of correspondence (for directors and owners whose permanent place of residence is in Hungary);
- Power of Attorney for a lawyer to register and represent the company in the registration process;
- Statement of the Director confirming that the amount of the authorised capital is at his disposal (in the event that the authorized capital is not paid to the bank account of the company);
- The director’s consent to the appointment;
- Director’s declaration confirming there is nothing which would exclude him from acting as director;
- List of company owners;
- A document on the right to use a legal address (in case it is not provided by LAVECO).
Note: in the case of accelerated company establishment, the memorandum of association is prepared only in Hungarian (in this case, the Court of Registration does not allow the preparation of a bilingual version). In this case, the client receives a translation of the memorandum of association as a separate document.
A document confirming the legal address of the company is also prepared. This is also in Hungarian.
Only the constituent agreement of the company and the sample signature of the director are apostilled, the remaining documents are only notarized.
After the company is registered, the director receives all the documents listed above in the original, except for the questionnaires and forms for customer identification, copies of which can be obtained on request.
The contract with the accountant is concluded immediately after the registration of the company, as, according to the Hungarian legislation, accounting must be maintained continuously during the existence of the company.
The cost of accounting services depends on the number of transactions performed by the company. At the time of concluding the contract with the accountant, an advance is paid for the first three months of work based on a preliminary estimated number of transactions. At the end of the three-month period, a correction is made based on the actual number of transactions recorded.
LAVECO provides the services of qualified local accountants, as well as assistance in communicating with the accountant in the client’s language.
Generally, the tax authorities allow copies of documents (contracts, invoices) to be submitted for accounting. However, in the case of large contracts, or at the discretion of officers of the tax authorities, the originals of accompanying documents may also be requested. In this case the company must provide them within 8 working days.
We recommend that clients send the documents to be included in the accounts to the accountant on a regular basis (monthly, quarterly), to avoid any possible disruptions or delays in the accounting process.
It is possible to consult with the accountants and obtain their opinion on various transactions. The fees for such consultation will be based on an hourly rate.
Frequently asked question about Hungarian companies
Find here detailed answers about Hungarian company registry, Hungarian tax system and VAT regulation. If you have more questions, feel free to reach our team through the contact page or request a free call back.
Is it necessary to come to Hungary to register a company?
To register a Hungarian company one or two visits to Hungary will be necessary.
Generally, the company’s founding documents must be signed by the owners and directors in the presence of a local lawyer. It is possible to have them signed without appearing before the Hungarian lawyer in person, but in this case they must be signed in the presence of a notary public, and then apostilled. At this stage, therefore, it is not strictly necessary to come, however, it is worth bearing in mind that the certification and apostilisation of documents can be rather expensive. It is worth doing some calculations and deciding whether a visit to Hungary is worth it instead of having to have all the documents certified.
The number of documents to be signed by the owners is small, so it may be worth having their signatures certified and apostilled to save a visit to Hungary. The director, on the other hand, needs to sign a lot of documents, so it would be better for the director to visit Hungary at this stage, especially as it is also necessary to pay up the authorized capital of the company.
If the company is established with a director provided by LAVECO, and the director alone will control the bank account, then it is not necessary for the client to come to Hungary.
The second visit (or the first one, if the documents were legalized at the place of residence of directors and owners) is necessary for the opening of the company’s bank account.
Again, in the case of directors provided by LAVECO, who will have sole control of the company bank account, a personal visit by the client is not required.
What company form should I choose?
There are several forms of company in Hungary, among the most common – LLC (Kft.), JSC (Rt.) and partnership (Bt.). The most optimal in terms of costs for the creation and maintenance of the company, management and distribution of liability is the LLC.
Of course, the staff at LAVECO can also provide information on other company forms on request.
Limited Liability Company
The Limited Liability Company is the most common form of company. The liability of its owners is limited by the company’s authorised capital.
When the company is created, the owners sign the Memorandum and Articles of Association of the company and appoint a managing director. Once a year, it is necessary to hold a meeting of shareholders.
Unlike countries with Anglo-Saxon law, where companies are registered with the widest range of activities, in Hungary it is necessary to indicate accurately the planned activities of the company, with each activity having its own number. It is possible to form a company with several activities, while only doing some of them. It is also possible at any time to add new activities, by making the appropriate amendments to the company’s Memorandum of Association.
The minimum authorised capital of an LLC is 3 000 000 HUF (about 10,000 EUR). The company’s authorised capital must be paid into the bank even before the submission of the constituent documents to the Court of Registration.
It is also possible to avoid paying the authorised capital in such a way that the director of the company signs a written statement that the amount of the capital is at his disposal and has been paid into the company’s cash desk. However, in this case the amount of the company’s authorised capital becomes accountable, and it is reflected in the company’s accounts.
The company’s authorised capital can be spent on the running of the company.
Company address, provision of real office space
Each Hungarian company must be registered with a valid Hungarian address. A company’s registered address can not be a mailbox.
The company is registered by the relevant branch of the Court of Registration, in accordance with the location of its registered address, and will remain under that branch in the future. If, for example, a company has its registered address in Debrecen, the registration will be done through the Debrecen branch of the Court of Registration. If the company decides to operate in Budapest, it will then need to register a local office in Budapest.
After registration, all letters to the company from the tax authorities, banks, etc. will be sent to its registered address. Thus, when registering a company, it is necessary to determine how correspondence will be passed on to the directors and owners of the company.
LAVECO can provide companies registered in Hungary with an address in our own office complex. If necessary, we can also provide real office space for doing business in our Co-working office (sharing office space and infrastructure with several companies). Also, companies are provided with dedicated telephone and fax lines, as well as an e-mail address registered on a Hungarian server.
LLC directors and their responsibility
A limited liability company must have at least one director, even if the company does not conduct any activity.
The number of directors is not limited.
The directors of Hungarian companies are not obliged to be citizens or residents of Hungary, and there are no restrictions on the nationality and place of residence of the directors.
The director of a Hungarian company can be both a physical person and a Hungarian legal entity. However, in cases where the company director is a foreign company, it becomes extremely difficult to open a bank account for the Hungarian company, and furthermore, the foreign company must declare the name of the individual responsible for the management of the company. Thus, it is better to register a company with a private individual as director.
It is not obligatory to pay a salary to the director.
The director is responsible for everything that happens in the company, and it is impossible to reduce or exclude this responsibility. In certain cases, the director may be criminally liable for the company’s misconduct.
Hungarian law does not recognize such a category as a nominee director. If it turns out that the company was managed by others and the director was just a figurehead, both the company and the director could face prosecution.
In this regard, nominee directors do not exist in Hungary. The director should have full information on all events taking place in the company. Also, the director should have the right to dispose over the company’s bank account and receive bank statements. However, it is possible to establish joint signature rights for the director and the representatives of the client (for more details see the “Company’s bank account” section).
LAVECO provides local director services for Hungarian companies, but the directors will not issue general powers of attorney to conduct business. It is only possible to provide special powers of attorney for certain transactions (holding negotiations, signing contracts, opening subsidiaries, etc.), but not for the opening of bank accounts for the company and disposing over them.
The company’s financial statements are signed by the director.
The owners of the Hungarian LLC may be both physical and legal persons of any nationality, and it is not necessary to have Hungarian resident status.
The minimum number of owners is 1.
Hungarian banks do not look favourably on multi-level corporate structures, so it is advisable to create a company with an individual owner, open an account for it, and after a while change the owner from a physical person to a legal one. In this case, the bank account will be opened, and the identification process of the new owner will not affect the company’s activity in any way.
Hungarian companies bank account?
A Hungarian company must have at least one bank account in Hungary, which must be opened personally by the director within 15 days of the company’s official registration.
The number and location of bank accounts opened by a company are not limited. Hungarian companies can have any amount of bank accounts in Hungary and abroad.
Accounts can be maintained in different currencies, including the ruble, and there is no mandatory conversion to forints.
All banking services are available for Hungarian companies, including opening letters of credit, loans, etc., depending on the policy of each individual bank.
Internet banking is available in Hungarian and English. Internet banking works either using a digipass or by SMS, depending on the bank.
Most Hungarian banks have operators who speak various languages, including English and Russian.
Where the bank account is managed jointly by the director and the client’s representative, , payment orders are signed by both and sent by fax. When using online banking, the bank makes a payment after it has been confirmed using the codes of both signatories.
To open a bank account, the persons who dispose over it must personally visit the bank.
Banks provide corporate Visa and MAESTRO debit and credit cards.
Hungarian TAX details?
Taxation of active income
Hungarian companies must register with the tax authorities immediately after registration and automatically receive a tax number.
Corporation tax of Hungarian companies is 9%, which is a single rate, applicable irrespective of the size of the company’s turnover or profit.
In addition, in Hungary there is also a municipal tax ranging from 0% to 2% of profits, depending on the location of the company’s business activity. In poorly developed provinces, there may be no municipal tax, but the company must be registered, have an office and actually operate in the province. In Budapest and other major cities, the municipal tax is 2%. The municipal tax is paid annually.
When a company is formed, its director makes a forecast of the expected profit, and on the basis of this a quarterly advanced payment of the profit tax is payable. If such payments are not made, the company will be fined, as a result of which the profit tax will be 10%, instead of the usual 9%.
Taxation of passive income
Tax on dividends
The tax on dividends in Hungary is 0% both on dividends received by the Hungarian company from its subsidiaries and on dividends paid by the Hungarian company to its owners. The absence of taxes on dividends, along with the low rate of corporation tax, makes Hungarian companies a unique tool for creating holding structures.
The dividends received by the Hungarian company are not included in the tax base, so when transferring them to the owners of the Hungarian company in the future, no profit tax is paid.
Intellectual Property Tax
Hungarian tax legislation provides privileges for certain types of intellectual property, such as copyrights, patents, etc. In general, it can be said that intellectual property is taxed from 4.5% to 9%.
Taxation of capital gains
The tax on capital gains can be 0% under the following conditions:
the share of property in the object being sold must be at least 10%;
the seller must have owned the property being sold for at least one year;
within 75 days after the sale of the property the transaction must be declared to the Hungarian tax office.
In other cases, the capital gains tax is 9%.
Taxation of other types of passive income (income from deposits, etc.)
The tax on other types of passive income of a Hungarian company is 9%.
What is the VAT rate?
Hungarian companies register for VAT, and receive their VAT number immediately after they have been incorporated. The European VAT number can be obtained immediately after the receipt of the Hungarian VAT number; there are no special conditions for obtaining it, which makes the Hungarian company particularly attractive, since in most European countries the receipt of the VAT number is a very slow and bureaucratic process involving the implementation of a number of conditions.
The rate of VAT in Hungary is 27%.
There are types of activities for which VAT is not paid, for example, the sale of certain educational services, software, etc., but before starting such activities, it is necessary to consult with the accountant, since certain conditions must be met to obtain exemption from VAT.
VAT reporting is submitted monthly, regardless of whether or not the company conducted any activities.
In the case of new companies, VAT can be refunded, but only once the amount refundable has reached at least 1 million HUF. The VAT requested for the first time will be refunded within 3 months, afterwards the refund is independent on the amount and is made on monthly basis
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LAVECO Ltd. was established in 1991, in Hungary, and since then has been registering and administering companies in Hungary and other countries, opening bank accounts and providing services related to the support of the companies it has registered.