Doing Business in Hungary

Doing Business in Hungary

Doing Business in Hungary 2017 is a practical handbook for companies and individuals thinking about Hungary from a business point of view. The approach running through the guide makes it an essential resource for those considering establishing – and those already operating – a business entity in Hungary.

This three-part guide highlights the most important laws to be aware of during the establishment and operation of a business in Hungary, as well as numerous other issues which may arise during the “life” of a business, such as intellectual property and competition law issues.

You may wonder what makes this guide unique and different to other guides. Well, in addition to having a very business-focused approach, although written by lawyers, it is not full of legal jargon. This guide is, we hope, easy to understand, informative and filled with frequently asked questions which arise when setting up and running a business in Hungary.

We hope that our handbook provides you with many valuable tips and all the information you need on how to do business in Hungary.

 

What is the Content of the Handbook?

The table of contents provides a good overview about the topics covered. Please, click the TOC to see the original contents.

 

Overview of the main parts of Doing Business in Hungary

 

Establishing a Business Entity

This part depicts the aspects you should consider when deciding on the actual form and process of investing in Hungary (How to Invest?), and also presents the main forms of companies which can be established in Hungary (Companies). You can find in this part some practical information regarding the start of your business activity (Setting up an Office) and about the investments classified into different categories (Branch Office and Commercial Representative Office, Mergers and Acquisitions). In addition, this part shares some useful thoughts in the area of financial security in Hungary (Financial Stability) and also gives you an overview of special rules of investing in strictly regulated sectors like energy or telecommunication (Strictly Regulated Sectors).

How to Invest?

In this chapter, you will find important factors to consider when making a decision regarding the actual form of your investment. The Table on page 32 summarises some of the advantages and disadvantages of the relevant company types to facilitate your decision between those afforded by Hungarian law.

Companies

This chapter deals with the most popular Hungarian company forms. There is no legal requirement to have a Hungarian owner or co-owner in the company.

Setting up an Office

Registering an official seat and opening a bank account are unavoidable obligations for every new business entity. This chapter provides you with basic information regarding these tasks.

Branch Office and Commercial Representative Office

This chapter briefly introduces two additional forms of undertaking reserved to foreign investors for establishing and pursuing business in Hungary without setting up a local entity formally independent from them as parent companies.

Mergers & Acquisitions

In this chapter the key points of a merger and acquisition (“M&A”) transaction from Hungary’s perspective. This includes general principles and description of usual process and obligations of the parties.

Financial Stability

This chapter is to provide a brief overview of certain foreign exchange and financial regulatory characteristics also with a view of Hungary not yet being a member of the Eurozone.

Strictly Regulated Sectors

Every form of company in Hungary needs to be registered. However, in certain cases the founding of a company is also subject to special sector-based foundation licences, which means that certain companies may only file their application for registration with the Court of Registration if they have already obtained such a foundation licence. In other cases, already founded and registered companies may only commence to pursue business activities subject to licensing after having obtained such special sector-based activity licence. These rules apply to industries with detailed sector-targeted rules and where special authorities are entitled to control, authorise and even regulate the given industry. Apart from applying for licences, companies active these industries need to comply with the sector-based statutory rules or report certain fields of their activities to the competent Hungarian authority.

In this section, we aim to give a brief practical insight into some of the main strictly regulated sectors (i.e. the financial, energy, telecommunication and pharmaceutical sector), particularly in terms of the key compliance regulations, competent regulatory authorities and licences that companies need to obtain for their foundation or operation.

 

Operating a Business Entity

This part briefly outlines the most important administrative burdens (Taxation, Accounting and Auditing) of an existing Hungarian business entity. In addition, this part highlights the most important rules regarding the establishment, maintenance and termination of an employment relationship (Working in Hungary) and also gives an overview of some financial issues, such as crediting, state subsidies, insolvency (Financing Matters).

Taxation

In this article we introduce the Hungarian tax authorities, in particular, the terms of their competence, followed by an overview of the main building blocks of the Hungarian state revenue: corporate tax, personal income tax and value added tax (VAT). We also explain the anti-avoidance rules that influence tax optimisation and provide insight into the double tax treaty schemes, with a view toward the growing importance of cross-border transactions.

Accounting

This section aims to introduce the basic structure of the Hungarian accounting system. It summarises the general rules and concepts of bookkeeping and financial reporting as well as filing and publication obligations.

Auditing

This section gives an overview of Hungarian auditing requirements and introduces the basic rules related to the engagement of auditors.

Working in Hungary

This chapter provides the employers with useful information on the main rules of working in Hungary. It explains in detail under what conditions foreign citizens can be employed in Hungary, what are the main working conditions the employers must ensure for their employees, how the employment relationships can be terminated and, finally, which rules must be followed in case of change in the employer.

Financing Matters

This chapter aims to summarise various financial issues, such as how to secure bank credit in Hungary, whether there are any obstacles to repatriating the profit realised in Hungary and what kind of incentives for investment the Government ensures. In addition, a brief introduction about the possible implications of insolvency (such as bankruptcy and liquidation procedures) can be found in this chapter.

 

Other Issues in Business Life

The third part of the handbook highlights some issues not necessarily arising during the life of a business entity however, these topics are also worth noting, in particular the structure of business immigration (Immigration), the rules of Hungarian and European competition law (Competition Law) as well as some thoughts about the protection of intellectual property (Intellectual Property and Data Protection).

Immigration

Greater mobility brings new opportunities and challenges. The EU promotes the integration of non-EU nationals into EU societies and highlights the need to give equitable treatment to third-country nationals being EU residents for a given period of time by granting rights and benefits similar to what EU citizens enjoy. This chapter provides a brief summary concerning immigration opportunities to Hungary, especially the basic rules of business immigration for foreign investors.

Competition Law

This section aims to introduce the agreements restricting competition in the relevant market (the apropos word is "cartel"). It also summarises what a dominant market position is and what market behaviour is considered an abuse of such dominant market position. It then elaborates on the rules of merger control that need to be taken into account when preparing an M&A transaction. Finally, this section provides a summary of the main rules of EU competition law.

Intellectual Property and Data Protection

Intellectual property is a key asset of businesses, especially for those operating in the information technology, communication and health sectors. It is also an important fact that data protection matters are increasingly attracting the attention of businesses from numerous commercial sectors. This chapter introduces the structure of intellectual property as a whole and we provide a practical overview on those issues, which may emerge during operating a business in Hungary. This chapter briefly summarises the Hungarian regulations concerning data protection.