How to enter the European Union market with low tax?

The European Union market with low tax

Did you know that Hungary runs the lowest 9% corporate tax regime in Europe? Why don’t you benefit from the lowest tax rate in the EU by opening a company in Hungary?

Enter the European Union’s market through a favorable, tax-efficient company in Hungary.

Our guide will help you find out more about the procedure of forming a company in Hungary.

Foreign individuals and companies are freely allowed to pursue their business activity in Hungary. Moreover, a Hungarian company is fully permitted to trade not only in the European Union but all over the world.

Individuals may obtain a sole trader’s license, while companies shall be registered at the Court of registration.

It takes usually from 4 days to 2 weeks to register a company in Hungary. This includes consultation, preparation of the legal documents, and registration at the court.

It is advisable to reach out to a reputable consultant, who provides the full scope of the services from opening a company in Hungary to offering accounting and tax services in order to run the company smoothly. The consultant will explore your needs in-depth and share information that is essential for the initial financial and tax planning of the new company and gives you the best solutions for the particular requirements.

The company formation comprises preparing the constitutive documents of the company, which the founders need to sign. The lawyer will countersign the paperwork and then submit it to the court for registration. The registration process is fully electronic. Hard copy certificates are not issued in the process, but the court releases an electronically signed registration certificate.

When the company is registered, it will also be registered for a VAT number. EU VAT number is also available right at the time of the registration, and so the company may immediately start a business within the territory of the European Union.

A Hungarian bank account is a must for Hungarian companies. You can open the Hungarian bank account after the company got registered. The banks will ask for the electronically signed registration documents, and no hard copy paper documents are needed.

Important to know that the personal presence of the managing director is expected. Hungary has firm ties to the OECD, and accordingly, anti-money-laundering provisions require the banks to carry out client screening. This includes the identification of the ultimate owner(s) of the company.

The most used corporate forms are the private limited liability company and the company limited by shares.

Unlimited partnership (Közkereseti társaság; Kkt)

In this company, the shareholders have unlimited liability in their joint undertakings.

Limited partnership (Betéti társaság; Bt)

In this company form there at least one partner with unlimited liability for the joint obligation. Other partners have limited liability. To be noted: the partner with unlimited liability is not allowed to take any other unlimited liability shareholder position.

Joint Stock Company (Részvénytársaság, Rt)

A Joint Stock Company may be private (called Zrt) or public (called Nyrt). The latter one can get listed and traded on the Stock Exchange. Joint-stock companies may have a single shareholder. The board of directors has 3 to 11 members. A private joint-stock company can be managed by a CEO or a board of directors. The minimum share capital is HUF 5 million for private joint-stock companies.

Limited liability company (Korlátolt Felelősségû Társaság ; Kft)

A KFT company may not raise capital from the public, unlike an RT company. The shareholders’ liability is limited to providing the initial capital. The minimum share capital is HUF 3 million.

Two members are required in order to set up a partnership company in Hungary, and (at least) one member is required to establish a limited liability company or a joint-stock company.

What are the key benefits of opening a company in Hungary?
The standard corporate tax rate is as low as 9%, the lowest in Europe.

  1. There is no restriction on the nationality of the shareholders or the directors.
  2. There is no withholding tax and payment of dividends to any resident or non-resident person is free of withholding tax.
  3. Dividend payment to corporate shareholders is tax-free.
  4. The economic, political, and banking systems are stable.
  5. Hungary is located in Central-Europe, in the heart of the European market.
  6. The country is a member of the EU, NATO and the OECD, and the World Trade Organisation.

Leave a Comment