What do I need to create a business in Hungary

hun-fx10cHungary’s accession to the European Union has made adjustments in company law and, in particular, in the regulation of offshore companies, registration of which until recently has been quite popular for foreign investors. Preferential treatment for offshore companies in Hungary ends with 31 December 2005.

In Hungary, the company can create all kinds of organizational – legal forms, of which the main and most popular among potential investors are:

  • Korlatolt Felelossegu Tarsasag (Kft) – private limited liability company
  • Betiti tarsasag (Bt) – a limited liability partnership
  • Reszvenytarsasag (Rt) – Open Joint Stock Company Limited Liability Company
  • Kozkereseti tarsasag (Kkt) – a partnership with unlimited liability

Korlatolt Felelossegu Tarsasag (Kft) – private limited liability company has the following features:

  • The minimum share capital is 3 000 000 HUF (approximately € 1 is equal to 100 HUF). At the same time, at least 30% of the capital and at least 1 million HUF has to be paid in cash at the time of establishment.
  • If payment of capital occurs in the form of non-monetary assets, an evaluation of this property by an independent expert in Hungary.
  • The company may have one or more shareholders whose liability is limited to their shares in the capital stock of the company.
  • Shareholders may be individuals and legal entities, residents and nonresidents of Hungary.
  • The Company can not offer its shares in the open market.
  • The Company may be managed by one director who may be a legal entity.
  • If the capital of the company exceeds 50 million HUF, the company has more than 200 employees, the company is required to elect the Supervisory Board for the company’s control.

Reszvenytarsasag (Rt) – Open Joint Stock Company Limited Liability Company has the following features:

  • The minimum share capital is 20 million HUF (€ 1 is approximately 100 HUF). At the same time, at least 30% of the capital and at least 10 million HUF has to be paid in cash at the time of establishment.
  • If payment of capital occurs in the form of non-monetary assets, an evaluation of this property by an independent expert in Hungary.
  • The company may have an unlimited number of shareholders whose liability is limited to their shares in the capital stock of the company.
  • Shareholders may be individuals and legal entities, residents and nonresidents of Hungary.
  • The Company may issue bearer shares and registered shares and may offer its shares in the open market.
  • The company should be governed by the Board of Directors, which may consist of 3 to 11 members. Directors may not be legal entities.
  • The Company is obliged to elect the Supervisory Board for the company’s control.

Kozkereseti tarsasag (Kkt) – a partnership with unlimited liability has the following features:

  • The minimum share capital is no partnership.
  • The total capital is distributed in the form of shares between partners.
  • Affiliates can have a minimum of 2 partners.
  • All partners are equal (the general partner), and bear the full and equitable unlimited liability for the debts and obligations of the partnership.
  • Partners may be individuals and legal entities, residents and non-residents in Hungary.
  • Partners are not free to transfer their shares to third parties and to the relevant entries in the register of partners required appropriate decision of the general meeting.
  • Management of the Partnership carried out by the General Partner in accordance with the provisions recorded in the memorandum.

Betiti tarsasag (Bt) – a limited liability partnership has the following features:

  • The minimum share capital is no partnership.
  • The total capital is distributed in the form of shares between partners.
  • Affiliates can have a minimum of 2 partners.
  • Partners may be individuals and legal entities, residents and non-residents in Hungary.
  • All partners are divided into general partners and limited partners.
  • General partners have equal rights and bear the full and equitable unlimited liability for the debts and obligations of the partnership.
  • Limited partners have limited liability for the debts and obligations of the partnership only to the extent of its share.
  • Partners are not free to transfer their shares to third parties and to the relevant entries in the register of partners required appropriate decision of the general meeting.
  • Management of the Partnership carried out only by the General Partner in accordance with the provisions recorded in the memorandum.

All Hungarian companies must annually take the tax service financial report, which must be certified by an auditor.

Taxation

Hungary systematically pursued a policy of support for small businesses and it is recommended for more consultation on the future of the enterprise tax regime prior to the registration of the company in Hungary.

All Hungarian companies and partnerships pay taxes on profits earned in Hungary and abroad at the rate of 16%.

Taxes on capital gains of companies in Hungary there.

Dividends paid by Hungarian companies to non-residents are taxed at a rate of 20%, unless a lower rate applies under the agreement for the avoidance of double taxation.

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