Doing Business in Hungary: Legal Basics

Hungary has become a strategic location for international investors, SMEs, and startups looking to establish operations within the European Union. Its central location, skilled labor force, competitive tax system, and EU membership make it a prime destination — but foreign entrepreneurs and companies must also understand the legal framework that governs business activity in the country.

This article outlines the essential legal considerations for doing business in Hungary, with a focus on company formation, corporate governance, taxation, and compliance.

1. Choosing the Right Legal Entity

Foreign investors most commonly establish one of the following business forms:

1.1.Korlátolt Felelősségű Társaság (Kft.) – Limited Liability Company

Ideal for SMEs and startups. Minimum share capital: HUF 3 million (approx. EUR 7,500). Shareholders have limited liability.

1.2.Részvénytársaság (Rt.) – Joint Stock Company

Suitable for larger ventures. Can be private (Zrt.) or public (Nyrt.). Higher capital requirements apply.

1.3.Branch Office or Representative Office

A branch may engage in commercial activity but is not a separate legal entity. A representative office may not conduct business, only promote it.

Tip: Most international clients form a Kft., due to its flexibility, limited liability, and fast registration.

2. Company Registration Process

The company registration process in Hungary is relatively efficient, typically taking 5–10 working days if all documents are in order. Key steps include:

• Drafting bilingual articles of association;
• Appointing a managing director (foreign nationals allowed);
• Opening a Hungarian bank account;
• Submitting the application through a Hungarian attorney via the Court of Registration’s electronic system.

3. Corporate Governance

Hungarian law requires at least one executive officer (managing director), who may reside abroad. However, the company must have a registered seat in Hungary.

Important corporate documents include:

• Articles of association;
• Shareholder meeting minutes;
• Corporate resolutions;
• Register of beneficial owners.

A Hungarian legal representative must be involved in registration and major changes. For multi-shareholder structures, a shareholders’ agreement is highly recommended.

4. Taxation Basics

Hungary is known for its low corporate tax rate:

• 9% Corporate Income Tax (CIT) – currently the lowest in the EU;
• Local Business Tax – up to 2%, depending on municipality;
• VAT – standard rate of 27%, with reduced rates of 5% and 18% on specific goods/services.

Companies must register for tax and VAT, and file regular returns. Non-residents may require a fiscal representative in some cases.

5. Labor Law Essentials

Hungarian labor law is harmonized with EU standards. Key aspects include:

• Written employment contracts;
• Working time limitations (maximum 40 hours/week);
• Social security contributions and personal income tax;
• Termination rules (notice period, severance pay).

For cross-border hires or remote work structures, legal guidance is essential due to compliance risks.

6. Regulatory and Compliance Issues

Depending on the business sector, specific licenses or permits may be required. Common regulated areas include:

• Financial services;
• Pharmaceuticals;
• Food production;
• Real estate development.

Other compliance obligations:

• Anti-Money Laundering (AML) requirements for financial and service providers
• GDPR compliance for data processing activities
• Ultimate Beneficial Owner (UBO) registration in the Hungarian company register

7. Legal Representation and Ongoing Support

Foreign-owned Hungarian companies must work with a local attorney for company registration, corporate amendments, and some regulatory filings. Ongoing legal counsel is recommended to ensure compliance with evolving EU and Hungarian legislation.

Our firm offers bilingual legal support tailored to international clients — from corporate setup and contract drafting to compliance and dispute resolution.

Need Help Doing Business in Hungary?

We advise foreign entrepreneurs, investors, and legal professionals seeking to enter the Hungarian market. If you’re planning to start a business, invest in real estate, or partner with local firms, we offer clear, business-minded legal guidance in English.

Contact us to schedule a consultation and take the next step with confidence.

Email: info@radvanszki.eu

Tel.: +36304753115