In this article, we will mention starting a business and other details as company forms and its responsibilities in Hungary.
BASIC LEGAL DEFINITIONS
Above all, one must understand the very basic legal terms about enterprises in Hungary before starting a business in Hungary. Here you may find some definitions you should review before going ahead with the article.
- Unlimited liability: the owner of the enterprise, in a proportion of his ownership, has full financial responsibility for all the debts of the company. I.e. his private holdings could also be subject to diligence.
- Limited liability: the owner of the enterprise is only responsible for the liabilities of the company up to the capital he provided.
- One-person company: there is only one owner of the company who, usually, also acts as a CEO.
- Limitation in size: limitation of revenue, number of employees, registered capital, or number of business relationships.
- Private enterprise: an enterprise run by a private individual. Private enterprise is not a legal person.
- Company: an enterprise that is a separate legal person.
The state provided the founding documents template: if a template determined by local legislation is applied during the company registration, the fees and time may be significantly reduced.
The template allows little customization, however that usually satisfies the needs of most of our Clients.
COMPANY FORMS IN HUNGARY
- You should decide what type of business you would like to start with.
Below is a very simplified and brief but well understandable comparison of the possible legal business forms in Hungary (not considering public limited liability company – NYRT – as an option).
STARTING A BUSINESS IN HUNGARY STEP BY STEP
- It is always advisable that you gather information about the local legislation and business possibilities before you start your company.
Taxation, accountancy, company, and civil regulations tend to be in the focus of your interest.
✔︎ MAKING THE DECISION ON THE LEGAL FORM OF THE ENTERPRISE
- Depending on the activity you would like to carry out, a different legal form might be appropriate for you. However, as a rule of thumb, a limited liability company is considered the most suitable company form in Hungary and it may be your best choice.
✔︎ NOMINATING THE OWNERS AND THE CEO
- You may establish a one-person enterprise. If not, you will need at least one additional partner. You also need to decide the ownership ratio.
- Please note that in Hungary the age of 18 is the limit for maturity. CEOs cannot be under the age of 18, but owners might be.However, in this case, the person in charge (i.e. parent) must agree on the ownership of the child. This is usually complicated for foreign citizens, therefore, we do not recommend to include persons under the age of 18 in the company.
✔︎ CHOOSING A PROPER AND UNIQUE COMPANY NAME
- The company name must be unique (no similar name is registered in the Hungarian company register), should not contain a historical reference, although, applying foreign country names is possible (e.g. Solutions of Germany Hungary Szolgáltató Kft.). A full English name is also possible.
✔︎ CHOOSING THE MAIN BUSINESS ACTIVITY
- You should pick at least one main activity, for which we can provide the proper statistical code (TEÁOR).
✔︎ RAISING THE NECESSARY FUNDS FOR THE REGISTERED CAPITAL AND THE REGISTRATION COSTS
- Depending on the company form, you should be able to pay the necessary funds. Legally, registered capital must not be paid at the time of establishment. None-person companies may postpone it for a maximum of 1 year. However, in practice, registered capital is usually paid with petty cash.
✔︎ PICKING A PROPER ACCOUNTANT
- The company, from the very beginning, needs some administrative tasks to be completed, even if it does not carry out any actual business activity. An expert is essential for a newly established company.
✔︎ REGISTERING THE COMPANY
- For this, you will need to visit a lawyer in person, using an attorney is not possible.Our team is ready to help you at this stage too. We will book an appointment well in advance before your arrival based on prior communication. All you have to do is to visit our office.The company is established by the founders’ contract which must be signed by every owner in person, in front of the lawyer.
Gurcan Partners is a corporate member of:
✔︎ PREPARING THE SPECIMEN OF SIGNATURE (SOS)
- If the CEO is a foreign citizen, he will need to visit a public notary to obtain a bilingual Sos or accept a Hungarian version prepared by the lawyer. The general manager also has to provide an Assignment for Delivery.I.e. foreigners should nominate a person who will take and forward their deliveries in Hungary. We undertake this responsibility as part of our seat providing service.
✔︎ PREPARING DOCUMENTS
- You will need the following documents:
- Passport or any other documents that certificates the identity (e.g. EU driving license) of all the owners and general managers
- Any document that certifies your local address
- Any document that certifies your personal tax ID number – if any (Hungarian local personal tax number will be obtained by us)
- The founders’ resolution or article of foundation and the specimen of the signature, if the owner will be another domestic or foreign company or legal person
Please note that official translation may be required for some of the documents.
✔︎ DOCUMENTS THAT YOU'LL HAVE TO SIGN:
- The article of foundation/incorporation – this is the founding document of your company
- List of shareholders – the listing of all the owners of the company
- Managing director declaration on the use of the place for the seat – the CEO must officially certify that the official seat is legally used
- Managing director declaration on forbiddance – The CEO must declare that he or she is not under the scope of any forbiddance
- Managing director declaration on delivering a financial contribution to the company – CEO’s certification on the fact that the registered capital is paid to the company by all the owners
- Managing director declaration on the acceptance of the position and conflicts of interest – CEO accepts his or her position and declare that he or she is not affected by any obstructions
- Agreement on the assignment of delivery – for every foreign owners and CEO’s, a local delivery agent should be assigned (this assignment will be undertaken by us), who will receive and forward every mail to the owners
- Agreement of assignment – an assignment that allows the lawyer to register the company at the court
✔︎ MANDATORY REGISTRATION
After the company is incorporated by the Hungarian court, there are other mandatory registrations to be carried out:
- Local tax office
- The central tax office (NAV)
- Chamber of Commerce
- Statistical Office (KSH)
The obligations listed above will be fulfilled by us. All the documents will be sent to you electronically.
✔︎ OPENING A HUNGARIAN BANK ACCOUNT
It is required by the law for every domestic company to open a local forint (HUF) bank account. Of course, bank accounts in other currencies (EUR, USD) may be opened also.
Opening a bank account in Hungary is free of charge, however, maintaining it will cost you a certain sum every month.
You do not need to make any deposits in the beginning, however, to keep up your bank account, you may need to transfer some amount to your account regularly.
We recommend OTP Bank since it is the largest bank in Hungary, however, any other bank may be suitable.
Usually, banks do not allow you to open your bank account unless your company is registered. Do not panic, here is what you can do:
- Stay 2 additional days and open the bank account personally
- Open the bank account by an attorney
In the former case, we will accompany you and do all the necessary translations. In the latter case, we will open the bank account for you at a discount fee (the actual fee depends on the time we have to spend on the opening which is greatly influenced by the bank itself.)
WHICH DOCUMENTS ARE NEEDED FOR REGISTERING A COMPANY IN HUNGARY?
- A valid passport for each of the owners and the CEO. This document may be sent in a scanned version
- Founding documents and declarations of the CEO. If the owners and/or the CEO are foreign persons than an official translation should also be prepared in order to submit it to the court. We may prepare the translation for a much lower fee by legally undertaking the responsibility of translation.
- A specimen of signature. This will be prepared by a public notary or the lawyer.
HOW MUCH TIME DOES IT TAKE TO REGISTER A COMPANY IN HUNGARY?
If you send all the necessary documents in advance, we are able to book all appointments well before and you will have to visit Hungary only once. The administration, in this case, will take about 1 day. Please note that the public notary may have a suitable appointment between 7 and 14 days.
By using the template, the registration procedure itself may be reduced to 2 days. That means you will have your company officially registered within 2 days. We will send you the registering documents by email, you will not have to come to Hungary for taking the documents.
After the company is registered, you will have to open a bank account in Hungary, however, for an additional fee, we may undertake these tasks as an attorney.
HUNGARY HAS THE LOWEST CORPORATE TAX IN THE EU WHICH IS JUST %9.
To understand how this amount has an advantage when we compare the other European Countries:
- Germany: %30 (Check our article on Company Taxation in Germany)
- Switzerland: %18
- Poland: %19
- Bulgaria: %10 (Not the part of the Schengen Area)
- Czech Republic: %19
- Estonia: %20
However, Hungary has also one of the highest value-added taxes (VAT), which is up to %27. But If you are an IT business owner or any business, which have clients outside of Hungary, then you do not have to pay VAT at all.
Export services are exempted from the VAT in Hungary.
For more information please check our article about Taxation in Hungary
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Starting a Business in Hungary
All rights reserved. All rights of the Starting a Business in Hungary article belong to Gurcan Partners International Law Firm. The author has no responsibility for the information in this article. This article is prepared just to inform.
Att. Bedrettin Gürcan
Budapest Office: +36 1 808 94 49
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