Are you looking to open a business in Europe? There’s a lot that speaks for Hungary. Hungary is one of the most developed economies in Europe and a very attractive region for investment and company formation. Before taking any steps to start working in Hungary, you have to set up a subsidiary in the country.
Subsidiaries are types of legal entities established by foreign companies to perform commercial activities that may not be in the same field as the foreign company.
In Hungary, foreign subsidiary entities are treated as equals to domestic businesses.
Advantages of establishing a subsidiary in Hungary
As a member of the European Union, Hungary is a gateway to a market of over 500 million people. And it’s strategic location makes it an excellent logistics point. Outlined below are other significant advantages of establishing an entity in Hungary:
- Hungarian company formation is straightforward and it takes only a few work days.
- Hungary Subsidiaries are taxed the same as any other resident company, and they also benefit from double tax treaties.
- The Hungarian workforce is cost-effective and highly qualified, as also benefits from low administration costs.
- Together with its government legislation, favorable investment policies, financial stability, and tax incentives, Hungary is a very attractive region for investment.
- Hungary also boasts a highly educated workforce, with a highly developed financial system.
- With a corporate income tax rate of 9%, Hungarian companies benefit from the lowest corporate tax burden in the European Union.
How to establish a Hungarian Subsidiary
Hungarian subsidiaries can only be registered as a corporate body, so they must take the form of a company that has its own, distinctive legal personality. In most cases, you can choose between a General partnership (Közkereseti Társaság), Limited partnership (Betéti Társaság), Limited liability company (Korlátolt Felelősségű Társaság), Private company limited by shares (Zártkörűen működő részvénytársaság), Public company limited by shares (Nyilvánosan működő részvénytársaság),, Representative office (Kereskedelmi Képviselet), or Branch office (Fióktelep)
After deciding on the best company type that fits the nature of your business. You have to acquire a business address in Hungary and prepare the property documents for registration. You also have to register the company’s address with the Chamber of Commerce and Industry.
Next, you have to retain legal representation from a legal professional in Hungary and register for a commercial license with the Hungarian Ministry of Economy.
After registering for a commercial license, you must prepare the applicable registration documents. If the documents are written in a foreign language, you should take the essential steps to provide an official translation of such documents into the Hungarian language. You must also notarize and legalize the registration documents at a notary’s office. Next, you have to open a local bank account and deposit the applicable share capital (usually 50% of share capital).
The registration of the Hungarian subsidiary continues by registering the company at the Company Registry, and registering for a VAT Number and a Tax Identification Number (TIN) with the regional and national tax authorities. Followed by registering in the municipality with the Court of Registration.
The last step of establishing a subsidiary in Hungary is registering for a social security number with the National Office for Health Insurance.
After registering the subsidiary, you’ll receive a Tax Identification Number, a certificate of registration, and a personal registration number.
Post incorporation, it’s recommended that the company should hire an accountant who will be in charge of maintaining the company’s books and other accounting documents in accordance with the applicable law.
If you require help in establishing your company in Hungary or would like to know more about forms of business in Hungary, let’s go ahead and contact your Damalion experts now.