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Private company in Hungary with VAT registration and bank account

COST OF COMPANY – EUR 1940

Cost includes VAT registration and opening a bank account.

Hungary offers the LOWEST RATE of Corporate tax in EU – 9%.
Moreover, the withholding tax on dividends (regardless of whether received or paid by the company) is 0%.

Such preferential tax rates make Hungary a unique country for the registration of companies in EU. Other good point is that Hungary does not sound offshore and is well taken as a partner by any company in the world.

Advantages of Hungary

A) Low Corporate tax – 9%;
B) Withholding Tax on dividends – 0%;
C) Tax allowances for income from certain types of intellectual property;
D) It is possible to open a current bank account in Hungary (company + account in the same country) quickly enough even if the owners and directors of the company are non-residents;
E) Automatic VAT registration in Hungary and in EU;
F) Full membership in EU;
G) Wide network of treaties for the avoidance of double taxation;
H) A company becomes a tax resident of Hungary upon registration, regardless of the place of management.

Disadvantages

A) Municipal tax (0% to 2% of the profit);
B) High VAT rate – 27%;
C) High social contributions for employees (23%);
D) It is required to pay up the authorized fund of the company.

LIMITED LIABILITY COMPANY (LLC (Kft.))

Limited Liability Company is the most common form of business. The liability of its owners is limited by the authorized fund of the company.

When establishing a company, the owners sign the Articles of Association and the Charter of the company and appoint the Managing Director. The reporting meeting of shareholders is to be held on a yearly basis.

Unlike countries with Anglo-Saxon law, where companies are registered with the widest range of activities, in Hungary it is necessary to specify the exact planned activities of the company, and each of the activities has its own number. The company can be established with several activities, while only carrying out some of them. New activities can be added at any time by making appropriate amendments to the Articles of Association of the company.

The minimum authorized capital of the LLC shall be HUF 3,000,000 (ca. EUR 10,000). The authorized fund shall be paid to the bank prior to submitting the constituent documents to the Registration Chamber.

It is also possible to avoid paying the authorized fund. To do this, the Director of the company shall sign a written statement that the amount of the authorized fund is at his/her disposal and cash deposited with the company. However, even in this case the amount of the authorized fund is accountable and shall be reported by the company.

The authorized fund of the company can be spent on the company itself.