Peculiarities of doing business in Hungary

Peculiarities of doing business in Hungary

What features about doing business in Hungary you should know?

Like the major part of the nations in Central and Eastern Europe, Hungary has rather effective systems in place to draw in money, including international investors. Additionally, it is a good place for commerce activity since it provides the lowest corporation tax in the whole European Union. World market leaders in business, including Mercedes-Benz and Audi, chose Hungary as a location for their manufacture.

Moreover, the government’s investment and trade promotion agenda is being put into action with the assistance of the Ministries of National Development and Economy. For instance, the government of Hungary gives businesses with a cost cap of €10,000 some advantages.

The supply of non-refundable money from Hungary or the EU, additional tax breaks for the beginning phases of an investment project for a fixed period, and subsidies of up to €5,000 for job creation are a few examples of such preferences.

Three essential ways of doing business in Hungary

  1. Company. This kind of business is always considered to be a legal entity.
  2. Private company. In comparison with the previous one, this is not a legal entity, it is an individual following the Hungarian legislation.
  3. Representative offices and branches. They are connected with a parental company, all actions are compared to the parent company’s commercial pursuits.

Private company

To establish a private firm for a client that isn’t a Hungarian citizen or a citizen of any other country of the EU, it is necessary to hold a permanent permission to stay, residence permission with studying in Hungary and having a family.

As an LLC (limited liability company), so it can be opened by a resident and non-resident of the European Union, who is a legal entity or individual.

Client as an individual

To launch a business in Hungary, an individual has to have a valid passport, confirmation of an address in Hungary or in another country of residence, and a personal taxpayer number (issued free of charge; an application for a receipt can be submitted in person or by proxy directly in Hungary), and social security numbers for the manager and employees (self-employed must have a local social security number).

Client as a legal entity

In cases where foreign companies or other legal entities become owners, they need the following documents and their official translation into Hungarian: a valid passport of a representative of a legal entity; confirmation of the presence of a permanent or temporary address in Hungary (Hungarian address card) or address that client has in another state; a copy of the document that certifies state registration or other document confirming the legitimacy of the creation of a person, with an apostille and a certificate of validity of the document.

About Employees

The Hungarian Labor Code is the main law governing working conditions in Hungary. A work contract with an employee may be concluded for a fixed period or be open-ended. The essential terms of the contract are the mandatory indication of the employee’s salary and the name of his position.

The employer determines the length of a shift, which, as a general rule, does not exceed 40 hours. As for extracurricular work, the duration of such work ought not to exceed 250 hours in a calendar year.

EU citizens have the right to operate in Hungary without any permits, unlike citizens of other countries. Officially, an employer, when hiring a foreign worker, must make sure that in the process of searching for a candidate for a position, he did not find a suitable Hungarian citizen (with the help of an job center).


Individual income tax

It is 15% and includes income from private enterprises, employee salaries, regular commissions, dividends, and income from the alienation of property and capital.

Value Added Tax

This tax is typically paid as part of local consumption. The country’s three VAT rates are 27%, 18%, and 5%. Certain types of products and services are subject to reduced VAT rates.

A business with a turnover of under $28,000 may choose a taxation scheme without VAT.

Social security taxes

Every insured citizen in Hungary needs to pay contributions to the social insurance fund under the state-run social insurance system. Funds from this fund are used to pay pensions and unemployment insurance and pay for health care services.

Local sales tax

The applicable municipal authorities in the enterprise’s location will receive payment of this tax. The local tax is split between the several areas of company operations that take place in many locations. Local governments unilaterally choose this tax rate, which is capped at 2%.

Corporate Income Tax

The corporate income tax rate is 9%, it applies to those companies that do not use preferential tax regimes such as KATA or KIVA.


KATA is a simplified income tax.

Paid monthly, has a flat tax rate of $180 per month, and replaces income tax, dividend tax, and social security tax. The maximum amount of profit at which such a taxation system can be used is $43,000, if this amount exceeds, then an additional tax of 40% is paid.

KIVA is an income tax for small businesses.

The tax rate is 16% and includes income tax and social security tax. But the calculation of the tax base is quite laborious and may be beneficial for some businesses compared to corporate income tax.

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