How to Start a Company in Hungary as a Foreign Entrepreneur
Are you considering starting a business in Hungary as a foreign entrepreneur or as part of an international corporate group?
Setting up a Hungarian company is often a straightforward legal process, but the decisions made before incorporation can have long-term consequences.
For a foreign owner, it is important to consider not only the company registration itself, but also the appropriate legal structure, ownership, management, taxation, accounting and ongoing compliance requirements.
Hungary can be an attractive location for international businesses, but the right structure should be considered before the company is incorporated.
1. Can a foreign entrepreneur start a company in Hungary?
In general, foreign ownership is possible in Hungarian companies, although the exact requirements can depend on the planned activity, ownership structure and the legal form chosen.
For an international business, the first question is therefore not simply:
“Can I open a company in Hungary?”
but rather:
“What is the appropriate legal and tax structure for my business in Hungary?”
This becomes especially important when the Hungarian company will be a subsidiary of a foreign parent company or part of an international corporate group.
A foreign-owned Hungarian company may also need to deal with Hungarian tax and registration requirements before starting its business activities. NAV states that taxpayers generally have to fulfil their registration obligations before commencing business activities in Hungary.
2. What type of company should I establish?
The most common structure for many foreign investors is a Hungarian limited liability company (Kft.), but other forms may also be appropriate depending on the business model.
Hungarian Kft. – a local subsidiary
A Kft. is a separate legal entity and is one of the most common forms used for operating a business in Hungary.
For many foreign-owned businesses, a Hungarian Kft. can provide a practical structure for local operations, employees, contracts and banking.
The choice of company form should nevertheless be based on the actual business model rather than simply on the popularity of the Kft.
Branch office
A foreign company may, in appropriate circumstances, operate in Hungary through a branch office rather than establishing a separate Hungarian subsidiary.
A branch office and a Hungarian Kft. are legally different structures, so issues such as liability, management, taxation and the relationship with the foreign parent company need to be considered separately.
Commercial representation
For businesses that primarily intend to establish market presence, develop contacts or carry out promotional activities, a commercial representation structure may also be relevant.
The appropriate solution depends on what the business actually intends to do in Hungary.
Choosing the structure before incorporation can prevent unnecessary legal and tax complications later.
3. How much capital is required for a Hungarian Kft.?
The minimum registered capital of a Hungarian Kft. is:
HUF 3,000,000.
The registered capital consists of the members' capital contributions. The rules also provide flexibility regarding how and when the monetary contribution is paid, depending on the company's constitutional document and the applicable statutory requirements.
For a foreign investor, the relevant question is therefore not only how much capital is required, but also how the company's ownership and financing structure should be designed.
4. What documents and information are needed?
The incorporation process normally requires a range of information about the company, its owners and its management.
Depending on the structure, this may include:
the proposed company name;
the registered office;
the company's principal and other activities;
shareholder information;
ownership percentages;
the amount of registered capital;
managing director information;
representation and signing rights;
incorporation documents and declarations.
Where a foreign company or foreign shareholder is involved, additional corporate documents, powers of attorney or certified translations may also be required depending on the circumstances.
This is one reason why international company formation should be prepared carefully rather than treated as a simple registration exercise.
5. Is a lawyer required to establish a company in Hungary?
Yes. Legal representation is mandatory in the Hungarian company registration procedure.
Under the Hungarian Company Act, legal representation is compulsory in company registration and amendment registration proceedings, and the application for registration must be submitted through a legal representative. The procedure is electronic.
For a foreign entrepreneur, this means that a Hungarian lawyer can already play an important role before the company starts operating.
The lawyer's role may include preparing or reviewing the incorporation documents, handling the company registration procedure and helping the owners understand the legal structure of the new company.
6. Why should tax issues be considered before incorporation?
Tax planning should not necessarily begin after the company has already been established.
Before incorporation, it may be useful to consider:
what activities the Hungarian company will perform;
who its customers and suppliers will be;
whether it will trade within the EU;
whether it will provide services internationally;
whether employees will be hired in Hungary;
how invoices will be issued;
what regular tax and accounting obligations will apply.
NAV states that companies subject to registration generally fulfil their tax-registration obligations in connection with the company registration process, while other cases may require direct registration with the tax authority.
The tax structure should therefore be considered alongside the legal structure.
7. What should I know about a foreign managing director?
A foreign-owned Hungarian company may have a foreign managing director, but the company's practical administration still has to function within the Hungarian legal and administrative system.
It is therefore important to decide in advance:
who is authorized to represent the company;
who communicates with NAV;
who handles accounting;
who manages official electronic administration;
who can sign documents;
and whether a local representative or service provider will be required.
For foreign-owned companies, clear responsibility for Hungarian tax and administrative matters can prevent significant problems later.
8. What happens after the company is incorporated?
Company registration is only the beginning of operating a business in Hungary.
Once the company starts operating, it will generally need to deal with matters such as:
bookkeeping;
tax returns;
invoicing;
tax payments;
annual financial statements;
payroll and employment matters, where applicable;
maintaining up-to-date company information;
communication with Hungarian authorities.
The Hungarian tax system also requires taxpayers to comply with registration and notification obligations before and during their business activities.
The objective should therefore be to establish an operating structure that works from the first day, rather than fixing administrative problems after they arise.
9. Why legal and accounting support can both matter
For many foreign-owned businesses, a local accountant is essential for ongoing compliance and bookkeeping.
However, accounting and legal work are different areas.
An accountant may be responsible for:
bookkeeping;
tax returns;
accounting records;
financial reporting;
payroll administration.
A lawyer can assist with matters such as:
company structure;
incorporation documents;
contracts;
management responsibilities;
representation;
NAV proceedings;
tax audits;
tax number issues;
forced deletion;
liquidation and other legal matters.
For an international company, cooperation between the accountant and the lawyer can therefore be particularly valuable.
10. Common mistakes made by foreign entrepreneurs
Focusing only on the incorporation process
Creating the company is only the first step. Accounting, tax compliance, banking and legal obligations continue after registration.
Choosing the structure too quickly
The cheapest or simplest-looking structure is not necessarily the most appropriate one for the actual business model.
Failing to define responsibility for Hungarian administration
A foreign owner should know in advance who will communicate with NAV and other Hungarian authorities.
Treating accounting and legal issues as completely separate
In straightforward matters this may not cause difficulties. In more complex situations, however, accounting and legal issues can become closely connected.
Relying only on an English translation of Hungarian legislation
English-language information can be very useful, but a specific legal question should always be assessed under the applicable Hungarian rules and the actual circumstances of the company.
11. When should a foreign entrepreneur speak to a Hungarian lawyer?
Legal advice can be useful before incorporation, especially where:
a foreign parent company will own the Hungarian business;
several shareholders are involved;
a foreign managing director is planned;
the ownership structure is complex;
the company will be part of an international group;
significant tax questions arise;
contracts will be concluded between the Hungarian company and foreign group companies;
or the investor wants to establish a longer-term legal and tax structure.
The objective is not simply to register the company, but to establish a business that can operate within the Hungarian legal framework from the beginning.
Frequently Asked Questions
Can a foreigner establish a company in Hungary?
In general, foreign ownership of Hungarian companies is possible, although specific requirements may depend on the activity, legal form and ownership structure.
How much capital is required for a Hungarian Kft.?
The minimum registered capital of a Kft. is HUF 3 million.
Do I need a lawyer to establish a company in Hungary?
Yes. Legal representation is mandatory in the Hungarian company registration procedure. The registration application must be submitted through a legal representative.
Can a foreigner be the managing director of a Hungarian company?
A foreign person may generally participate in the ownership and management of a Hungarian company, subject to the applicable rules and the circumstances of the business.
Do I need a Hungarian accountant?
A Hungarian company must comply with Hungarian accounting and tax rules, so appropriate local accounting and tax compliance support is an important part of operating the business.
Can I operate in Hungary without establishing a Hungarian company?
In some circumstances, a foreign company can carry out business activities in Hungary without establishing a Hungarian branch, but specific tax-registration and reporting obligations may still apply. NAV provides separate rules for foreign companies operating in Hungary without a branch office.
Can a foreign entrepreneur operate as a sole entrepreneur in Hungary?
This depends on the person's citizenship and residence status. NAV maintains specific eligibility rules for foreign nationals who wish to start a sole entrepreneurial activity in Hungary.
Starting a Business in Hungary as a Foreign Entrepreneur?
Setting up a company in Hungary involves more than registering a legal entity.
The right company structure, ownership arrangement, management, tax position and ongoing compliance framework should be considered together.
Dr. Gábor Major provides legal assistance in English and Hungarian to foreign entrepreneurs and foreign-owned companies operating in Hungary.
