Doing business in Hungary is attractive to foreign investors due to its strategic location in Central Europe, its EU membership, and its highly competitive corporate tax rate.
Here is a comprehensive guide to the key aspects of setting up and operating a business in Hungary:
1. Choose Your Business Structure
The most popular and recommended legal form for foreign investors is the Limited Liability Company.
| Entity Type | Hungarian Name (Abbreviation) | Key Features |
| Limited Liability Company | Korlátolt Felelősségű Társaság (Kft.) | Most Common: Owners’ liability is limited to their capital contribution. Can be established by one shareholder (individual or legal entity) and one director (who can be the same person). |
| Minimum Capital | HUF 3 million (approx. €7,500). This capital must be made available to the company, but it no longer needs to be deposited in a bank account at the time of registration. | |
| Private Limited Company | Zártkörűen Működő Részvénytársaság (Zrt.) | Used for larger enterprises; shares cannot be publicly traded. Minimum capital is HUF 5 million. |
| Branch Office | Fióktelep | An extension of a foreign parent company, not a separate legal entity. The parent company is fully liable for the branch’s obligations. |
2. Company Registration Steps
The company registration process in Hungary is relatively fast, typically taking 5–10 working days once all documents are finalized. By law, you must work with a local Hungarian lawyer for the process.
- Select Company Details: Decide on the company name, business activities (which must be clearly defined), registered address in Hungary, and appoint the director(s) and shareholder(s).
- Engage a Local Attorney: A Hungarian lawyer will prepare all the necessary legal documents.
- Prepare Founding Documents: The attorney drafts the Articles of Association/Deed of Foundation. This is a crucial step that legally establishes the company’s structure.
- Sign Documents: The documents can be signed in person in Hungary, or remotely via a notarized power of attorney granted to the Hungarian lawyer.
- Submit to the Court of Registry: The attorney submits the registration application and required documents to the Hungarian Court of Registry electronically.
- Register for Tax and VAT: Once the company is registered, the lawyer will ensure the company is registered with the Hungarian National Tax and Customs Administration (NAV) for a tax number and VAT number.
- Open a Corporate Bank Account: A local Forint (HUF) bank account is mandatory for all domestic companies. You may also open accounts in other currencies (EUR, USD).
- Note: Many traditional banks require the company director to visit the branch in person to open the account, though some financial service providers offer fully online options.
- Deposit Capital: The minimum capital must be made available to the company, usually via transfer to the corporate bank account shortly after registration.
3. Taxation
Hungary offers one of the most favorable corporate tax regimes in the European Union.
| Tax Type | Rate | Key Details |
| Corporate Income Tax (CIT) | Flat 9% | This is the lowest rate in the OECD/EU. It applies to a company’s taxable profit. |
| Local Business Tax (LBT) | Up to 2% | A local municipal tax imposed on net sales revenue (with certain adjustments). The rate varies by municipality but cannot exceed 2%. It is deductible for CIT purposes. |
| Value Added Tax (VAT) | Standard Rate: 27% | The highest standard VAT rate in the EU. |
| Reduced Rates: 18% & 5% | Apply to specific goods and services (e.g., certain foods, pharmaceuticals, books, accommodation). | |
| Withholding Tax | 0% | Generally, there is no withholding tax on dividends, interest, or royalties paid to non-resident companies. |
| Personal Income Tax (PIT) | Flat 15% | Applicable to the income of individuals residing or earning income in Hungary. |
4. Other Key Considerations
- E-Invoicing and Reporting: Hungary has advanced digital tax compliance requirements. Companies must use an electronic system for invoicing and are required to report certain VAT data to the tax authority (NAV) in real-time.
- Registered Seat: You must secure a legal registered office address in Hungary before registration. This can be a rented office space or a virtual office service provided by a company formation agent.
- Residence Permit: Registering a company in Hungary can be a pathway for non-EU/EEA nationals to apply for a “Guest Self-Employed” (business) residence permit, provided they meet certain criteria (e.g., submitting a business plan, having sufficient funds, and potentially proving the company’s benefit to the Hungarian economy).
- Accounting and Auditing: Companies are required to keep accurate financial records in accordance with Hungarian accounting standards. An audit is generally required for medium and large companies or if specific thresholds are met.