As a member of the EU, the Visegrad Four, and similarly to the Czech Republic, a former member of the Eastern Bloc, Hungary is historically a great partner for Czech foreign trade. Low taxes and prices (corporate tax only 10%) together with geographical proximity make Hungary an attractive country for Czech entrepreneurs. You can do business with us right away in Hungary. We’ll set-up a company and prepare documentation for you according to your requirements.
Basic information on the country:
- Hungary became a member of the European Union in 2004 along with the Czech Republic.
- The country is also a member of other international organisations such as the United Nations, NATO, OECD, etc.
- Hungary is part of the Schengen area.
- Hungary was chosen by many large companies, such as Slovnaft, HBO, or Spa in Mariánské Lázně.
- The VAT rate is 27%, a company is required to register for the payment.
- Hungary hasn’t adopted the Euro. Therefore, the Hungarian Forint (HUF) remains the currency in Hungary.
Why set-up a company in Hungary?
- As an entrepreneur who is interested in the possibility of offshore investment, you are likely to be interested in having an appropriate tax structure. It’s possible in Hungary. The basic corporate tax rate is 10%, which is one of the lowest rates across the European Union!
- Only limited bureaucracy - nothing that you wouldn’t be accustomed to at home, which should save both your nerves and health.
- If you’re a sole businessman, you don’t have to worry, because the rules require only one shareholder and one director - so you can manage yourselves.
- Hungarian companies can optimise their tax burden very well.
- The country has signed more than 60 agreements regarding double taxation.
- The most common form of company is Korlátolt Felelosség Társaság (KFT), which is the type of company that corresponds to the Czech limited liability company.
What you need to be careful about:
- A minimum capital of 500,000 HUF (about 1,600 EURO) is required, of which at least half must actually be deposited in a bank account.
- The company must keep accounts and file tax returns.
- If the company's profit exceeds 500 million HUF (i.e. about 1,600,000 EURO) per year, the tax rate is increased to 19%.
- The company register in Hungary is publicly accessible, but you can use a service nominee.
- The foundation of the company in Hungary is suitable for both holding structures and for active business activities.
What will business in Hungary bring you?
- Hungary has an extensive network of double taxation agreements.
- There are now two income taxes for legal entities, 19% and 10%. The reduced rate can be used on the basis of tax up to 500 million forints (42 million CZK). In the Czech Republic it’s 19%.
- In Hungary, dividends are exempt from withholding tax, regardless of where they are paid to. It doesn’t matter if it goes to an English Ltd. or the Seychelles.
- Another benefit is the exemption of income from capital profits and income tax resulting from royalties of 5%
- Billing to Seychelles or from Seychelles is exempt from withholding tax
- Offers an interesting tax environment for foreign capital
- Hungarian companies can be used for holding purposes as well as for active business activities.
- Excellent knowledge of the Hungarian market and Hungarian language is our added value.
By summarising sums when compared to conditions in the Czech Republic, you can easily quantify how much you save on taxes ... and that’s often the reason why companies move their business to Hungary.
Companies in Hungary:
- Selection of the largest companies owned in Hungary:
- Slovnaft Česká republika, spol. s.r.o. (share 99.98%)
- BorsodChem MCHZ, s.r.o.
- Léčebné lázně Mariánské Lázně a.s. (95.36%)
- Česká programová společnost spol. s r.o.
- HBO Netherlands Holdings s.r.o.
- KORONA Lochovice,spol. s r.o. (99.99%)
- Hadovka Property, s.r.o.
- EGIS Praha, spol. s r.o.
- K+K Hotel a.s.
- INNO-COMP BOHEMIA, s.r.o. (86.50%)
- PMP PAL International s.r.o.
- Infinity a.s.
- ACTUAL PROFIL spol. s r.o.
- Samsung Electronics Czech and Slovak, s.r.o. (31.42%)
- FADESA Česko, s.r.o. (99.23%)
- HBO Česká republika, spol. s r.o.
- Gedeon Richter Marketing ČR, s.r.o.
- COMFORT PLUS Praha, a.s.
- Le Cheque Déjeuner – production, s.r.o. (33.20%)
- Service Point, spol. s r.o.
Other important facts about business in Hungary:
- With an Hungarian k.f.t. company you’re billing excludes VAT registered in Hungary to all other EU Member States, including the Czech Republic and Slovakia.
- Hungarian Kft: (corlatolt felellőségű társaság - abbreviation is k.f.t.) Presentation of financial statements / YES
- Presentation of the annual report / When legal conditions are met
- Compulsory company audit / When legal conditions are met
- Tax return required / Yes
- Corporate tax rate up to HUF 500 million (CZK 44 million, EURO 1.77 million): 10%
- Corporate tax rate above HUF 500 million (CZK 44 million, EURO 1.77 million): 19%
- VAT - Basic: 27%
- VAT - Reduced: 5% and 18%
- General Meeting: obligation for a general meeting / YES
- The possibility of using double tax avoidance agreement / YES
- The company receives its VAT ID at its establishment
- With an Hungarian registered VAT company, you’ll invoice and purchase
EXCLUDING VAT to and from other European Union Member States
How to set-up a company, and what is needed?
We confirm the order, issue an advance invoice, after the payment we we’ll prepare all the documents needed for foundation and we’ll ask you to:
- Select the appropriate name, with KFT behind the name
- Provide at least 1 Managing Director and Partner and their personal data
- A partner may be both an individual as well as legal entity
- The manager doesn’t need a permanent residence in Hungary
- Obligation to have a registered office – we’ll arrange it in Budapest, including mail forwarding
- Minimum capital of 500,000 HUF / approximately 2,000 EURO
- Subjects of the business activity
- Verification of signatures by a notary, one visit is required to sign all documents
- a valid ID, extract of the criminal record isn’t needed
Are you ready?
Type of legal entity: KFT
Founding time: 10 days
Number of shareholders: at least 1, any nationality is possible
Shareholders: members may be FO or business entities.
Registered capital: at least 10,000 EURO
Bearer shares: not allowed
Registered address is mandatory but needn’t be physical
A company secretary isn’t obligatory
Directors: at least 1, maximum isn’t defined
Resident function of director: the director needn’t be a resident of Hungary
Corporate tax rate 10% (for first 500 million HUF of income, 19% over this)
Branch Tax rate 10% (for first 500 million HUF of income, 19% over this)
Dividends, interest paid to companies 0%
Dividends, interest paid to individuals 16%
Net operating losses can be transferred up to 5 years.
The state VAT rate is 27%
Agreements to avoid double taxation with different countries have been applied, determining the rates of dividend, interest and royalties.
Accounting. Accounting and accounts preparation is necessary
Audit isn’t required
Anonymity and privacy. Information regarding directors (managers) and shareholders is open in the Commercial Register.