Monday, 4 January 2016

LEGAL FORM OF BUSINESSES IN HUNGARY

In this guideline we will provide detailed information about the legal forms of doing business in Hungary. If you have questions about the discussed topic or about taxation in general, don't hesitate to contact us! We are dedicated to help our clients with our high quality, tailored services to find the most economic solutions in setting up their business in Hungary.



Business activities in Hungary may be carried on both by private entrepreneurs and companies. Act no. V of 2013 on the Civil Code provides for the types of companies. The sole proprietorship is regulated in Act no. CXV of 2009 on Private Entrepreneurs and Sole Proprietorships.



The following are usually used for carrying on business activities in Hungary:

  • Limited Liability Company – korlátolt felelősségű társaság (Kft.)
  • Public Limited by Shares  – nyilvánosan működő részvénytársaság (Nyrt.)
  • Private Company Limited by Shares - zártkörűen működő részvénytársaság (Zrt.)
  • Limited Partnership – betéti társaság (Bt.)
  • Unlimited Partnership – közkereseti társaság (Kkt.)
  • Sole Proprietorship – egyéni cég (ec.)
The table below indicates the most important characteristics of the abovementioned legal entities:

FORM LIABILITY OF SHAREHOLDER MINIMUM CAPITAL (HUF) MINIMUM OF FOUNDERS AND SHAREHOLDERS REGISTRATION IN COMMERCIAL REGISTER
Kft. limited 3 million one required
Rt. limited 5 million for private, 20 million for public one legal entity or at least two individuals required
Bt. unlimited + limited at least two (general and limited) required
Kkt. unlimited at least two required
Ec. unlimited, or limited one only required


Since the minimum capital prescriptions regarding the existing limited liability companies (Kft.) have significantly increased (from HUF 0.5 million to HUF 3 million), the Civil Code provides for a transitional period to comply with the new rules. Consequently, the new minimum capital provision has to be met until March 15, 2017 (after a new extension); or by the time of the first corporate change under the new legislation. Consequently, after 15 March 2017 it is no longer possible to have the capital under the new statutory minimum.

Foreign investors may also engage in business in Hungary by establishing a branch office (fióktelep). A branch office is the Hungarian-registered part of a foreign undertaking that operates in Hungary with economic independence but without legal personality. A branch office may carry on business activities, acquire property, exercise certain rights and assume liabilities in its own name.

A commercial representative office (kereskedelmi képviselet) is registered in Hungary as part of a foreign undertaking, without legal personality. A commercial representative office may represent the foreign undertaking and carry on solely preparatory and auxiliary activities for the benefit of the foreign undertaking. The commercial representative office may conclude contracts necessary to its operation, but only in the name of the foreign undertaking. The mere existence of a commercial representative office does not render the parent company subject to Hungarian corporate taxation.

Both the branch office and the commercial representative office shall be registered by the court into the commercial/company register.


If you need a reliable partner in tax advisory, accounting, payroll or auditing, don't hesitate to contact us! We will also help you finding legal assistance for the incorporation of your company or to settle other corporate or labour law issues.


LeitnerLeitner

Address: 1027 BUDAPEST, Kapás utca 6-12.
Telephone: +36 1 279 2930
Fax: +36 1 209 4874

Email: office@leitnerleitner.hu