- 23 Aug 2017 8:40 AM
Hungary’s commercial landscape is diverse, and offers possibilities in mining, construction, pharmaceuticals, and automotives - to name just a few of its growing industries.
Before your organisation can begin to take advantage of opportunities in Hungary, however, you will need to lay the appropriate foundations - which means successfully navigating the set-up process….
1) Know your territory…
Like any international destination, prospective entrepreneurs should take the time to understand the basic principles of Hungarian business before the set-up process begins. As an owner, this means making sure there is a market for your goods and services, developing an understanding of the legal and regulatory framework in which you will be operating, and creating a viable business plan.
Small details are also important at this stage: registering a property in Hungary can take up to two weeks, obtaining construction permits and can take over 100 days, while connecting electricity and other utilities can take even longer. Ensure your business is prepared to hit the ground running by planning ahead.
2) Prepare your documents...
Before a business can be registered in Hungary, certain preparatory steps need to be taken, including drawing up a constitutive document which must be countersigned by both the company founders and a Hungarian lawyer. Business-owners also need to open a Hungarian bank account for their organisation - and deposit their starting capital.
3) Decide on a legal structure...
Before the formal process of incorporating your business can begin, you will need to decide what legal structure it will assume in Hungary. There are a number of options for the form a business can take, including:
Unlimited Partnership (‘Kkt’ in Hungarian)
Joint Stock Company (Rt)
Limited Partnership (Bt)
Limited Liability Company (Kft)
Of the above options, the Kft (LLC) and Rt are the most common legal structures for small to medium start-ups in Hungary. LLCs are especially popular since they require only one member, and protect their shareholder’s financial liability. The minimum investment for an LLC in Hungary is HUF 3 million (approximately $11,500).
4) Incorporate your business...
To incorporate a business in Hungary, companies must register with the competent Court of Registration. The process involves an electronic application (by a legal representative of the company), and requires documents of incorporation, including:
Business address, and member details
Details of business activities
Proof and details of equity capital
Necessary commercial licenses
The standard registration process takes approximately 3 working days. A simplified, ‘one-stop shop’ option, which takes less than 1 day (and only hours in some cases), is available to limited liability companies, partnerships, and private limited companies.
Depending on the type of company, registration costs vary - from HUF 25,000 (for limited partnerships) to HUF 600,000 (for public limited companies). Those costs are reduced however, in simplified applications..
5) Post-incorporation obligations...
After incorporation, businesses still have certain obligations before set-up can be considered complete. Most importantly, businesses must register with a variety of national and regional authorities, including:
The Hungarian Tax Authority
The Chamber of Commerce
The Central Office of Statistics
The Central Administration of National Pension Insurance
Post-registration, it may also be necessary for businesses obtain further licenses and permits in order to begin legally trading in Hungary. These may include a premises licence, operating licence, or activity licence - all of which involve their own application procedures.
Finally, it is worth remembering that beyond legal and administrative obligations, there is another side to setting-up a business. To ensure your organisation is able to build a strong workforce, and attract clients in Hungary, you should become familiar with the local business culture. Practically, this means knowing how to address other members of your professional community, understanding the local language, and getting to grips with any other relevant customs or best practices that might affect your organisation.
Author’s bio: Graham McKechnie has over twenty-five years of global mobility experience and heads up activpayroll’s Global Mobility Division. He is a qualified tax professional and a member of the Association of Tax Technicians (ATT).