Business in Hungary

Small and medium-sized business gets a great deal of attention in Hungary. Entrepreneurship has historically been well developed here, and even during the country's socialist period, small private business survived, albeit with many restrictions.

Today, business in Hungary is supported at the state level. The tax burden roughly matches the European average. Accounting and tax reporting are simplified.

Before explaining how to open a business in Hungary, here is some useful background on the country:

• political system - democracy, parliamentary republic;
• capital - Budapest;
• area - 93,036 sq km;
• population - 9.6 million people;
• official language - Hungarian;
• currency - forint (HUF).

What kind of business can you open in Hungary

Hungary is a country with a developed economy. It supplies food, wine, cars, machinery, and medical devices to international markets.

Many entrepreneurs are drawn to the service sector. Hungary is extremely appealing to tourists: it has a rich history and countless landmarks. Although it has no coastline, it has its own "Hungarian sea" - Lake Balaton, the largest lake in Central Europe with well-developed spa and resort infrastructure.

But working in tourism has a number of undeniable drawbacks. Whether you want to run a hotel or set up a tour agency, you will depend on the season. In the low season there will be few clients, while in the high season, on the contrary, you'll have to work hard to meet all the demand. At the same time, the profit earned in the high season has to be stretched across the whole year to keep the hotel in good shape and pay staff salaries.

Renting out housing looks more promising. There is always demand for apartments in Hungary, whether in Budapest or in other cities. So one way to start a business in Hungary is to buy several apartments priced from EUR 60,000 to EUR 120,000 and rent them out.

But it is specifically the residential rental sector that is profitable. If you try to make money on office real estate, problems may arise. Demand for office space in Hungary is comparatively low, and the market is saturated with cheap offers.

Business in Hungary: the main advantages

Business in Hungary has many undeniable advantages, shaped by the country's features and its location practically in the center of Europe. The main pluses are:

• economic and political stability - in recent years the Hungarian economy has grown steadily, although within the EU Hungary is a net recipient of subsidies, and much of its success depends on inflows from the common European budget;
• a strong international reputation - Hungary does not default and does not breach international agreements;
• double-taxation treaties signed with more than 60 countries - such a treaty is also in effect with the Russian Federation;
• a loyal attitude toward foreigners and non-residents from the state, banks and other institutions;
• you don't have to start a company from scratch - you can buy an already registered and operating business;
• there is no need to be present in Hungary to register a company;
• a well-thought-out tax system is in place.

The standard VAT rate in Hungary is high, at 27%. But in some cases it is lower, at:

• 18% for companies producing dairy and bakery products and a number of other goods;
• 5% for companies that publish books and newspapers or manufacture medicines;
• 5% for firms providing investment and financial services.

Corporate income tax is 11%. Companies pay other taxes too, but for businesses with annual revenue not exceeding HUF 20 million (about EUR 100,000) there is an EVA scheme, under which a single tax of 37% can be paid instead.

In the Republic of Hungary, a limited liability company - Korlátolt Felelosségü Társaság, KFT - has the right to carry out any activity, as long as it does not violate the law and does not require a license.

Since 2010, it has been possible to register economic partnerships whose profit is taxed at a 10% corporate rate, provided it does not exceed HUF 555 million (EUR 1.85 million). If profit exceeds this limit, the rate rises to 19%.

Business in Hungary: the registration procedure

To open a business in Hungary, you definitely need an account at a local bank. It is needed to service accounting, audit and other operations carried out within the country, and to pay taxes.

You can also hold accounts at foreign banks - there are no restrictions on this.

Setting up your own company requires roughly HUF 900,000 - about EUR 3,000. Of that:

• HUF 500,000 (about EUR 2,000) is the charter capital, which is allowed to be paid in not all at once but in parts: half at the time of registration and the other half a year later;
• HUF 240,000 (about EUR 800) covers various registration expenses.

Whereas in the past opening a company in Hungary required personal presence, since 2007 all registration matters have been handled online.

An individual opening their own business must provide a passport, the company name and the required sum, and specify a legal address. If only one person is listed as the founder, an auditor must be appointed. But this is not required if there are two or more founders - and among them there need not be any Hungarian citizens.

Every country has its own quirks that aren't always obvious, and Hungary is no exception. That's why it's worth spending some time living in the Republic of Hungary to better understand it and, if possible, build useful connections.

We also recommend consulting specialists. We will provide the necessary consultations and clarify anything you're unsure about at the moment. Talk to us, and we'll give you accurate, up-to-date information on setting up your business in Hungary.