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Table of contents:
1. Five-step process: Starting a company in Hungary
2. TOP 3 disadvantages?
3. Residence outside Hungary?
1. Starting a company in Hungary in 5 steps
23 March 2025 3874 6Step 1: Choose a company type (No mailbox company)
Before every incorporation, these questions arise: What types of companies exist? And what are the business and tax implications of each type of company?
Residence in Hungary or outside – Which type of company to choose?
A company in Hungary, like the Kft (limited liability company)is the most common form for starting a business, which is equivalent to the USA LLC. However, there are also other options such as: Bt. (Betéti Társaság) – a limited partnership or Zrt. (Zártkörűen Működő Részvénytársaság) – a closed joint-stock company.
Starting a company in Hungary allows foreigners to easily incorporate a business 100% remotely, meaning no travel required. The Hungarian Kft is treated as a limited liability company under corporate and liability law, with no personal liability under tax law. In addition, the Kft is subject to corporate tax of only 9% and this is without an upper limit on annual revenue. Unlike in Romania, where the annual turnover cannot exceed 250,000 EUR in order to remain within the micro-taxation range of 1-3%. The profit of a Hungarian company is taxed at 9%, with the ability to deduct business expenses. In contrast to Bulgaria, where a 10% flat tax applies and business expenses outside of Bulgaria are generally not recognized.
The share capital of a Kft is 3,000,000 HUF (approximately 7,500 euros). The shareholders have limited liability, which means that, in principle, they are not responsible for the company’s debts.
1. 15% withholding tax
2. 9% corporate tax
Another advantage is the relatively affordable labor costs. Compared to other European countries, wages and salaries in Hungary are lower.
The minimum share capital is 3,000,000 HUF (7,500 euros). It is not necessary to pay this amount into the LLC's bank account; a declaration that the company has 7,500 euros in cash is sufficient.
With this declaration, the incorporating company can prove to the Commercial Court that an amount of 3,000,000 HUF (8,000 euros) has been made available to them.
Ongoing operating costs per year in Hungary: Accounting and the annual financial statements are generally required to be prepared in forints according to the double-entry bookkeeping principle. It is also possible to carry out accounting and financial reporting in euros.
Costs for annual financial statements start from 1000.00 EUR
Step 2: Why Hungary
Hungary has the lowest corporate tax rate in the entire EU at 9%. This makes starting a business in Hungary a tax paradise for those who are also residents.
Discretion & Anonymity:: In several areas of Hungary, such as outside Budapest, there is no requirement for the founders of a Kft company, the members of the company entity (shareholders), or the owners (managing directors) to be named in the commercial register.
Tax policy: International EU-compliant tax policy: Tax increases have also affected Hungary. The location of Hungary is also an international marketplace for well-known multinational corporations.
OECD information exchange: This is also implemented by Hungarian banks. As a result, foreign accounts in participating countries like other countries within the EU are always reported to the tax authorities of your country of residence.
Step 3: Requirements for starting a company
In order to establish a company in the form of a Kft, the following questions arise: Is it possible to start a company completely remote? What documents must be submitted?
The Hungarian LLC must be notarized - Do I have to go to a notary in Hungary?
Starting a business remotely, without any travel, is often not entirely possible! However, with GO EU, it's definitely possible!
Many providers promise company formation without any notary appointment on-site. In reality, however, a notary appointment in Hungary or even in your country of residence is often necessary. The notarized documents then need to be officially certified with an Apostille, which can be a lengthy process.
Upon opening a bank account or authorizing the tax advisor, a physical notary appointment on-site will be required, contrary to what was previously stated!
--> Exclusively at GO EU - Company formation, account opening and tax advisor authorization 100% remote and without physical notary appointment possible!
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Company formation process:
- The share capital is at least 3 million forints
- Payment of the share capital
- Shareholder agreement
- Checking and applying for the Company Name
- Preparation of the formation documents
- License application
- Notarial certification
Required information:
- Determine the amount of share capital
- Specify the company's object and business purposes
- Allocate shareholder shares
- Establish the company's registered office
- Define the Rights and Obligations of the Shareholders
Step 4: Costs / Prices
The costs of company formation depend on a number of factors. Are there additional costs for traveling to Hungary for company registration or bank account opening?
Ideally, no travel is necessary at all, and all services can be completed 100% remotely. The company formation costs are around 3,000 - 4,000 EUR.
Company formation & account opening only with GO EU 100% remote! - But what additional costs arise?
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Additional costs: Company address including mail forwarding, bank account opening, and costs for monthly accounting and annual administration fees.
Attention: Lawyer and tax accounting fees are often more expensive than in Western Europe as the wages of tax advisors are higher.
Accounting costs average from 200 EUR per month plus the costs for annual financial statements.
Attention: Even poorly trained lawyers or large tax firms, where no one is available when it becomes urgent, charge these prices.
--> Exclusively at GO EU - Access to our own tax advisors and English-speaking employees included at a fixed price! (Costs well under 200 EUR per month)
Step 5: Choosing the right company set up provider
Self-employed individuals and entrepreneurs benefit from the advantages of starting a business in Hungary, including a corporate tax rate of 9%. The economic opportunities, despite bureaucratic hurdles, language barriers, and cultural differences, make Hungary an extremely attractive location with the right partner.
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2. Disadvantages of starting a company in Hungary?
Hungary has experienced an upsurge in recent years thanks to its economy and tourism, and the country continues to attract new residents with financial and business opportunities.
Here are the 3 biggest disadvantages against starting a business in Hungary, especially for Europeans. For each disadvantage, we will provide an alternative or solution proposal.
1.) Banking system in Hungary
A company in Hungary can be set up quickly, but opening a bank account with a local Hungarian bank can present some challenges:
The key requirements for opening an account in Hungary are:
Proof of residence in Hungary
Creditworthiness from the country of origin
Some business partners in Hungary
Requirement for a local bank account: Residence in Hungary.
Not only is opening a company account in Hungary nearly impossible without residence, but it can also have far-reaching consequences.
For companies that are truly internationally oriented in terms of their customer base, a Hungarian company can still function well.
Do you not want to emigrate to Hungary, or can’t you imagine establishing a second or primary residence in Hungary just to get an account?
But is there an alternative?
Yes, there is!
At GO EU, we specialize in Romania, Bulgaria, Dubai, and the USA, and we have permanently employed staff on-site in these countries.
This means with our own team and extensive network in Bucharest, as well as in the city of Russe in Bulgaria (only 1.5 hours by car from Bucharest Airport). We also have our own tax consultants and operate as a family-run business. Their sons are part of our accounting team.
We manage to obtain a corporate tax rate of 7.5% for newly established companies in Bulgaria instead of the usual 10%.
However, if my residence is in Western Europe can I still benefit from this? Yes, you can set up a company with substance in your home country within the EU or emigrate to Romania or Bulgaria. If done correctly, you will only pay your taxes in the source country, not in your home country a second time.
2.) High one-time and ongoing formation costs
«Starting a company in Hungary costs an average of 3,000 - 4,000 EUR, with ongoing costs averaging 2,000 - 4,000 EUR per year.»
In comparison: In Bulgaria, you can expect to pay at least 50% less in all areas.
The company formation can be done entirely remotely. A unique feature at GO EU: The bank account can also be opened without travel. In short: The complete setup can be done 100% remotely in 2-3 weeks!
3. 9% corporate tax, 2% trade tax, 15% dividend tax and 27% VAT
Highest VAT rate in the EU. In the B2B sector, the Reverse Charge mechanism can be applied. However, for entrepreneurs with many private clients, 27% VAT is quite high.
The flat tax in Hungary of 9% has not changed for years and is expected to remain in place in the future.
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Residence in Western Europe: Alternative Bulgaria
In Bulgaria, the tax system is very simple. 10% flat tax for everyone! This results in a tax burden on the profit of 10%. Unfortunately, expenses that are not from Bulgaria are not considered for deductions or to reduce the profit. Therefore, it can almost be considered as a 10% VAT.
But here comes the big advantage of GO EU! We specialize in the three countries: Romania, Bulgaria, and the USA and have permanent employees on-site. We also have our own tax consultants and operate as a family-run business. Their sons are part of our accounting team.
Based on this expertise, we have created a setup that allows us to request a corporate tax rate of 7.5% instead of 10% from the tax authorities. And it is completely legal and can be implemented by almost anyone via GO EU!
If the topic of company formation in Romania, Bulgaria, and the USA is of interest to you, we look forward to your contact.
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Niclas
Published on 05 February, 2025 / Answer
I didn’t expect that getting an account would be so difficult. What about direct banks like WISE or Revolut?
Klaus
Published on 07 February, 2025 / Answer
WISE works with a Kft, but it is also often rejected. I would never trust direct banks! A local account is a must.
Wasily
Published on 10 Febuary, 2025 / Answer
If I set up a company in Bulgaria instead of Hungary… I still have to pay 10% income tax in Bulgaria, right?
Thomas Hofmann
Published on 10 February, 2025 / Answer
Income tax does not apply to corporations! If you start a company in Bulgaria, the corporate tax rate is between 7.5% - 10%, and there is a 5% dividend tax on profit distributions. No additional income tax applies.
Lollo Rosso
Published on 18 February, 2025 / Answer
If I live in Bulgaria, I can operate as a freelancer with 7.5% taxes and run a sole proprietorship.
Thomas Hofmann
Published on 18 February, 2025 / Answer
Correct, there are also social contributions in the form of health insurance, as you don’t pay yourself a salary in Bulgaria. The costs are very moderate.
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