Hungary company formation
05 June, 2014
Located in the central of Europe, Hungary has a vast network of well-developed roadways, railways, waterways and airports which significantly facilitate product distribution between European countries. Hungary company registration offers multiple benefits for global entrepreneurs including tax, affordable business operation costs, and simple corporate structure.
Hungary is an ideal place to set up a global holding company. Dividends, royalties and interest payments to a non-resident company are exempt from withholding tax. Also, dividends from a foreign entity are legally tax exempt in Hungary if DTAs are in place and at least 50% of the revenue of the foreign entity is derived from onshore activities. Capital gains resulting from sale of an investment will be completely tax exempt if a Hungarian national has been a 10% shareholder in the company for at least 1 year.
In addition, Hungary boasts a favorable environment for trading companies with many incentives. First, companies in Hungary do not require an audit if their average annual revenue for 2 years is less than 321,000 and they hire less than 50 fulltime employees. Second, in case of bad debt, 20% of the receivable amount expired for at least a year can be deducted from tax base over the next 5 years. Moreover, foreign companies in Hungary enjoy an 80% corporate tax rebate for 10 years if they invest at least 321,000 in projects relating to environmental protection, broadband internet service, infrastructure for existing food production, and movie production. Last but not least, the average monthly rental costs for office space in Hungary are the lowest in Central Europe at 0.9 per sq. ft.
Before starting a business in Hungary, there are important compliance regulations that should be taken into account. A typical Hungary company can be formed with 1 shareholder and 1 director, who can be of any nationality and all business transactions in Hungary take place in Hungarian Forint (HUF) rather than in Euro (). During the company incorporation process, entrepreneurs will be required to lodge reports confirming relevant details for the public register including names and addresses of all directors, business address, details of all shareholdings and an estimate of annual taxable profits.
It should also be noted that a Hungary company must obtain due diligence in compliance with the anti-money laundering law, information about the beneficial owner must be submitted to the authorities if the transaction value exceeds 6,500. A resident must appoint a supervisory board of three members if the number of full-time employees exceed 200. Furthermore, Hungary competition act bars firms from engaging in predatory behavior such as forming monopolies, restricting manufacture of certain products, fixing prices and concluding tie-in contracts.
Hungary's EU membership is one of the factors that attract more foreign investments as many benefits are offered such as free movement of capital and labor, access to the vast European market of 500 million, and absence of withholding tax on payments to other European countries.
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