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Why Hungary ?

Hungary, officially known as the Republic of Hungary, is a landlocked country located in Central Europe, which makes the country optimal for manufacturing, services, and logistics. Hungary is the ideal base for investors who are planning cross-border business developments. Foreign capital is attracted mainly by the highly skilled and highly educated labor force, particularly in the engineering, information technology (“IT”), pharmaceutical, economics, mathematics, physics, and professional services sectors. Around two-thirds of the workforce in Hungary have a secondary, technical, or vocational education.

Hungary has a well-developed and industrialized market economy. Key sectors include automotive manufacturing, electronics, pharmaceuticals, information technology, agriculture, and tourism. The country has attracted significant Foreign Direct Investment (“FDI”), mainly from Western European countries. The Hungarian currency is the Forint (“HUF”).


Strong market economy

Hungary has a developed and industrialized market economy. It offers a stable economic environment with sound macroeconomic policies, low inflation rates, and a favorable business climate. The country has undergone significant economic reforms and has a strong industrial base, making it an attractive market for various sectors.

Favorable tax system

Hungary has implemented a competitive tax system to attract businesses and encourage investment. This favorable tax rate contributes to cost savings and increased profitability for businesses.

Investment incentives

The Hungarian government offers various investment incentives to attract foreign direct investment. These incentives include grants, tax benefits, subsidized loans, and support for research and development projects.

Strong industrial base

Hungary has a diverse and competitive industrial sector. Key industries include automotive manufacturing, electronics, information technology, pharmaceuticals, food processing, and renewable energy.

Simple Tax Regime

Corporate tax

The tax rate is 9% of the favorable tax base amount. Business associations must submit their Companies Income Tax (“CIT”) returns by May 31st following the tax year. For taxpayers with a different tax year, the filing deadline is the last day of the fifth month following their business year.

Personal income tax

In Hungary, flat-rate personal income tax applies as 15%. For resident taxpayers, the tax base is their whole income, while for non-resident taxpayers, it represents their locally taxable income.


The VAT general tax rate in Hungary is 27%. Nonetheless, there are two reduced VAT rates in use: 5% and 18%. VAT returns are required to be submitted monthly, quarterly, or yearly. The deadline for filing the return is the 20th day of the month following the given period.

Hungary Companies

Limited liability company (“Kft.”)

The limited liability company is the most popular and widely used company type in Hungary. It is denoted by “Kft.” after the company name. A Kft. provides limited liability protection to its shareholders, meaning their assets are separate from the company’s liabilities. The minimum share capital requirement for a Kft. is HUF 3 million (approximately EUR 10,000). There is a mandatory requirement for at least one director and one shareholder.

Joint stock company (“Nyrt.”)

Joint stock companies are suitable for larger businesses or those planning to go public. They are denoted by “Nyrt.” after the company name. A Nyrt. allows for the issuance of shares to shareholders, and the liability of shareholders is limited to their capital contribution. The minimum share capital requirement for a Nyrt. is HUF 20 million (approximately EUR 66,000).

Branch office

Foreign companies can establish a branch office in Hungary to conduct business activities. A branch office is not a separate legal entity but rather an extension of the foreign company. The branch office can engage in commercial activities in Hungary, but it is subject to the regulations of the parent company’s home country. Hungary offers several types of companies that can be established based on the needs and preferences of investors.

Representative office

A representative office serves as a liaison office for a foreign company in Hungary. Its primary purpose is to engage in market research, promotional activities, and gathering information. Representative offices are not allowed to engage in commercial activities or generate revenue.

Sole proprietorship (“Egyéni Vállalkozó”)

A sole proprietorship allows an individual to conduct business under their name. It is suitable for small-scale businesses and freelancers. There is no legal distinction between the individual and the business, so the owner has unlimited liability for the company’s debts.

General partnership (“Bt.”)

A general partnership is a company formed by two or more individuals or legal entities. The partners have joint and several liability for the partnership’s debts and obligations. A general partnership is denoted by “Bt.” after the company name.

Limited partnership (“Kkt.”)

A limited partnership is a type of partnership that consists of one or more general partners and one or more limited partners. The general partners have unlimited liability, while the limited partners’ liability is limited to their capital contribution. A limited partnership is denoted by “Kkt.” after the company name.

Hungary, officially known as the Republic of Hungary, is a landlocked country located in Central Europe, which makes the country optimal for manufacturing, services, and logistics. Hungary is the ideal base for investors who are planning cross-border business developments.

Author: Chandrawat & Partners

Topic: Doing Business in Hungary

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