Company Formation in Hungary for Foreign Entrepreneurs in 2026 – Legal and Tax Guide

Company Formation in Hungary

Hungary remains one of the most attractive jurisdictions within the European Union for foreign entrepreneurs due to its 9% corporate income tax rate, stable legal environment, and strategic geographical position.

However, company formation in Hungary for foreign owners is not merely an administrative procedure. Without proper legal structuring and tax planning, foreign founders may face significant risks, including NAV (Hungarian Tax Authority) audits, tax number suspension, or even forced deregistration.

Major Gábor Law Firm, based in Budapest, specializes in supporting foreign entrepreneurs with company formation, tax structuring, and long-term legal compliance in Hungary.

I. Legal Framework of Company Formation in Hungary

Company formation in Hungary is governed primarily by:

• Act V of 2013 – Civil Code (Ptk.)

• Act V of 2006 – Act on Company Registration and Public Company Information (Ctv.)

• Act CL of 2017 – Act on the Rules of Taxation (Art.)

• Act C of 2000 – Accounting Act

Under Hungarian law, companies must be established with the involvement of a Hungarian attorney, and the entire registration process is conducted electronically before the competent Company Court.

Foreign individuals and foreign legal entities are fully entitled to establish and own Hungarian companies.

II. Choosing the Right Company Form

Selecting the proper legal structure is the most critical strategic decision during Hungarian company formation.

1. Limited Liability Company (Kft.)

The Kft. (Korlátolt Felelősségű Társaság) is the most common and recommended form for foreign entrepreneurs.

Key characteristics:

• Minimum registered capital: HUF 3,000,000 (Civil Code Section 3:161)

• Liability limited to the capital contribution

• Can be established by one or multiple members

• 100% foreign ownership permitted

• Flexible management structure

The Kft. is particularly suitable for:

• E-commerce businesses

• Manufacturing operations

• Real estate investment

• Holding structures

• International trading companies

For most foreign founders, Kft. formation in Hungary provides the safest and most stable structure.

2. Limited Partnership (Bt.)

The Bt. (Betéti Társaság) is a simpler form but carries higher risk.

Characteristics:

• No mandatory minimum capital

• At least one general partner with unlimited liability

• Less commonly recommended for foreign investors

Due to unlimited liability exposure, the Bt. structure is typically not ideal for foreign business owners unless specific strategic reasons justify it.

3.Private Company Limited by Shares (Zrt.)

The Zrt. (Zártkörűen működő Részvénytársaság) is a private company limited by shares under Hungarian law. It represents a more complex but highly structured corporate form, often used for investment-oriented or holding structures.

The legal framework is governed by Act V of 2013 (Civil Code), Sections 3:211–3:263.

Key Characteristics:

• Minimum share capital: HUF 5,000,000

• Shareholders’ liability limited to their share contribution

• Shares are not publicly traded

• Can be established as a single-shareholder company

• 100% foreign ownership permitted

When Is Zrt. Formation Recommended for Foreign Entrepreneurs?

Zrt. formation in Hungary for foreign owners is particularly suitable if:

• External investors are expected

• Venture capital financing is planned

• A multi-layer holding structure is being built

• Share option programs are intended

• Future public listing (conversion to Plc.) is envisioned

The Zrt. structure allows:

• Different share classes

• Preferential dividend shares

• Voting rights customization

• Board of Directors or CEO-based management model

NAV Risk Considerations for Zrt.

The Hungarian Tax Authority (NAV) pays special attention to:

• Related-party transactions

• Transfer pricing documentation

• Economic substance of holding companies

• Dividend tax compliance

• Cross-border structuring

Proper legal and tax planning during company formation is essential to prevent compliance risks.

III. Step-by-Step Process of Company Formation in Hungary

Hungarian company formation for foreign entrepreneurs typically includes the following steps:

1. Company name availability check

2. Determination of registered seat

3. Structuring ownership and management

4. Appointment of managing director(s)

5. Drafting Articles of Association

6. Electronic submission to the Company Court

7. Tax number issuance

8. Registration with NAV

9. Opening a corporate bank account

In simplified procedures, registration may be completed within 1–3 business days.

IV. Tax Environment in Hungary

Hungary offers one of the most competitive tax systems in the EU.

Corporate Income Tax (CIT)

• Flat rate: 9%

• Governed by Act LXXXI of 1996 on Corporate Tax

Dividend Taxation

• 15% personal income tax

• Double taxation treaties may reduce withholding

VAT

• Standard rate: 27%

• Special rules for EU cross-border transactions

Local Business Tax

• Maximum 2%, depending on municipality (Budapest applies up to 2%)

For foreign shareholders, international tax coordination is essential to avoid double taxation and compliance risks.

V. NAV Risk Factors for Foreign-Owned Companies

NAV (National Tax and Customs Administration) applies risk-based analysis, particularly regarding foreign-owned companies.

The most common risk triggers:

1. Lack of Economic Substance

Under the Act on the Rules of Taxation, NAV may investigate whether the company has real business activity in Hungary.

2. Improper Registered Seat

According to the Company Act (Ctv.), the company must be reachable at its registered seat.

3. Inactive or Unavailable Managing Director

Failure to cooperate with authorities can result in tax number suspension.

4. Transfer Pricing Violations

Mandatory documentation applies to related-party transactions.

5. Tax Residency and Double Taxation Issues

Improper residency assessment may lead to significant tax exposure.

Proper structuring during company formation significantly reduces these risks.

VI. Foreign Managing Director – Legal and Tax Considerations

If the managing director is a foreign individual, special attention must be paid to:

• Hungarian tax identification number

• Social security status

• Tax residency determination

• Representation rights

• Banking authorization

Under Civil Code Section 3:24, managing directors may bear personal liability if they violate their duties.

VII. Common Mistakes in Hungarian Company Formation

Foreign entrepreneurs frequently encounter problems due to:

• Template-based Articles of Association

• Inadequate tax planning

• Delayed accounting setup

• Ignoring NAV correspondence

• Incorrect dividend distribution

• Failure to assess cross-border taxation

Preventive legal planning is significantly less costly than corrective procedures.

VIII. Economic Substance and Compliance Strategy

In 2026, regulatory scrutiny across the EU has intensified. Hungarian authorities increasingly examine:

• Real office presence

• Local decision-making capacity

• Active bookkeeping

• Contractual documentation

• Genuine business partners

A long-term compliance strategy includes:

• Structured ownership model

• Periodic tax review

• Accounting supervision

• Legal risk assessment

• NAV audit prevention planning

  
  

IX. When Is Advanced Tax Planning Necessary?

Advanced structuring is particularly important in cases involving:

• Holding structures

• Cross-border dividend flows

• EU and non-EU shareholders

• E-commerce platforms

• Real estate investment vehicles

• Manufacturing and export businesses

International coordination and treaty analysis are essential for sustainable operation.

FAQ Section:

Can a foreigner own 100% of a Hungarian company?

Yes. Foreign individuals and foreign legal entities can fully own Hungarian companies. Ownership is registered by the Company Court, and the company must comply with Hungarian corporate and tax rules regardless of the owner’s nationality.

What is the fastest way to form a company in Hungary?

In most cases, a Hungarian company can be registered electronically through a lawyer. If the documentation is complete and the structure is straightforward, registration may be completed within a few business days. Timing depends on the company type, ownership structure, and the required tax registrations.

Can a foreigner own 100% of a Hungarian company?

Yes. Foreign individuals and foreign legal entities can fully own Hungarian companies. Ownership is registered by the Company Court, and the company must comply with Hungarian corporate and tax rules regardless of the owner’s nationality.

How long does company formation take in Hungary?In simplified procedures, 1–3 business days.

Can a foreigner own 100% of a Hungarian company?

Yes. Foreign individuals and foreign legal entities can fully own Hungarian companies. Ownership is registered by the Company Court, and the company must comply with Hungarian corporate and tax rules regardless of the owner’s nationality.

What is the main NAV risk for foreign-owned companies?

NAV commonly focuses on economic substance, proper bookkeeping, timely filings, the registered seat’s accessibility, and cross-border tax compliance (e.g., transfer pricing). Early structuring and ongoing compliance help prevent tax number suspension or cancellation.

What is the minimum capital for a Kft?

A Kft. (limited liability company) has a statutory minimum registered capital of HUF 3,000,000. The capital can be provided in cash or in kind, depending on the structure and the Articles of Association.

What is the minimum capital for a Zrt. in Hungary?

A Zrt. (private company limited by shares) generally requires a minimum share capital of HUF 5,000,000. This structure is often used for investment-ready setups or holding structures with more complex ownership needs.