Business in Hungary

The company must have an account in a Hungarian bank to pay taxes, as well as accounting, auditing and other expenses arising in Hungary. In foreign banks, the company can open accounts without any restrictions.

The minimum amount required to “open” is about € 3 thousand (900 thousand HUF), of which 2 thousand (500 thousand HUF) is the authorized capital. This amount can be withdrawn after completing the registration process. Another about € 800 (240 thousand HUF) will be required for registration. The authorized capital can be paid in two installments: half at the time of registration, and the other half - a year later.

Previously, you had to be present in person to complete the registration process. This took 3-4 days. However, since 2007, under Hungarian law, electronic registration of companies has been allowed.

If the founder is one person, then an auditor is appointed, if there are two, then mandatory cooperation with the auditor is not required. An individual who is going to establish his business in Hungary presents a passport, company name and the required amount.

Legal system of Hungary

Hungary is an independent democratic constitutional state in which the Romano-Germanic system of law operates. The fundamental law with supreme force in Hungary is the Constitutional Law. In addition to it, there are acts of parliament, government and ministerial regulations and regulations of local authorities. On May 1, 2004, Hungary became a member of the European Union, respectively, European legislation is valid on its territory. The executive, legislative and judicial branches of government in the state are separated from each other. The highest court in the Hungarian court system is the Curia.

In most cases, first instance jurisdiction rests with the local courts, which ensures that most cases are decided locally. In parallel with local courts, there are administrative and labor dispute courts that specialize in reviewing decisions of state authorities and labor disputes.

Appeals against decisions of local courts can be filed with higher courts (regional and regional), which play the role of appeal. The main function of the Curia is to ensure the uniform application of the law and to consider applications for review of final judgments. Legislative regulation of business entities is contained in Part 3 (Business Persons) of Book 3 (Legal Persons) of the Hungarian Civil Code.

“Korlátolt Felelősségű Társaság” – Kft. (Limited company)

An enterprise founded with initial (subscribed) capital, consisting of capital contributions of participants of a certain amount, which limits the liability of participants for the debts of the company.

“Reszvenytársasag” – Rt. (Joint-stock company)

An enterprise founded with a share (subscribed) capital consisting of a predetermined number of shares and their nominal value, which limits the liability of the participants (shareholders) of the company for its debts. Joint-stock companies can be public – (“Nyilvánosan muködo Részvénytársaság” – Nyrt.), which are listed on the stock exchange, or private (“Zártkören Muuködo Részvénytársaság” – Zrt.), whose shares cannot be sold publicly.

Societas Europaea (European company)

The name must contain the ending "SE". This legal form applies to companies that operate or intend to operate in more than one Member State of the European Union.

Transfer pricing rules in Hungary

Transfer pricing rules apply for transactions between related parties as defined in the Hungarian Corporate Income Tax Law (CIT). A company will be considered a related party for income tax purposes if it meets at least one of the following criteria:

In addition, the Hungarian head office and foreign representative offices/branches, as well as the Hungarian representative offices/branches and foreign head office, qualify as related parties. Accordingly, transfer pricing rules also apply to such entities. The EIT Law specifies that if the price used by related parties by their agreement is lower or higher than the consideration used by unrelated parties under comparable conditions, entities are required to apply transfer pricing adjustments.

Profit before tax must be changed by adjusting transfer pricing in two cases:

CFC Regulations (CONTROLLED FOREIGN COMPANIES) in Hungary

A foreign entity may qualify as a controlled foreign company if it does not qualify as a resident taxpayer for corporate income tax purposes and is not a foreign establishment.

Under EU rules, a foreign entity can become a controlled foreign company if:

A foreign enterprise or a foreign permanent establishment does not qualify as a controlled foreign company unless it has the appropriate personnel, equipment, assets and premises with which it can carry on substantial business activities.

The taxpayer - the Hungarian parent company - may need to increase the tax base in relation to the CFC rules. Part of the CFC income (tax base) is added to the taxpayer's tax base, which is entered in a certain line: interest, royalties, participation in holdings, write-offs, financial leasing, banking and insurance activities. However, the above rule applies only if the income from the above income, on the one hand, reaches one third of the total income (tax base) of the controlled foreign company, and on the other hand, if the controlled foreign company operates in the field of financial leasing, banking, insurance or other financial activities and one third of its total income is derived from transactions with the taxpayer or related parties.

The taxpayer must prove that the business does not qualify as a controlled foreign company.

Currency control in Hungary

There is no currency control in Hungary.

International agreements of Hungary in the tax field

Hungary has signed double tax treaties with more than 70 states. Among them:

In addition to the multilateral agreement on the exchange of financial information, to which about a hundred countries have joined so far, Hungary has also concluded bilateral agreements on the exchange of tax information with the following countries:

• Bailiwick of Guernsey
• Jersey