Hungary LLC (Kft.)
Formation of Limited Liability Company in Hungary
Recurring Maintenance Fees as from the 2nd year - $ 1300
Please note: If applying for a corporate bank account outside of Hungary, you will need to order a full set of apostilled company documents duly translated into English.
FACTS & INFO
The Company Act of July 2006 determines six different corporate forms that may serve for investors as a basis to carry out business activity in Hungary. All of these forms can exclusively be established and operated by foreign owners and management: Unlimited Partnership (Kkt.), Limited Partnership (Bt.), Limited Liability Company (Kft.), Company Limited by Shares (Rt.) which may be privately founded (Zrt.) or publicly founded (Nyrt.), Association (egyesülés).
The Limited Liability Company is very popular with small or medium sized businesses in Europe. The Hungarian Kft. form is very close to the German and Austrian GmbH (Gesellschaft mit beschränkter Haftung) and similar to the British Ltd (private company limited by shares). With this type of company, it is possible to establish a single-member Kft. The Kft is the most common company form for wholly owned subsidiaries.
Companies registered under Hungarian law may undertake obligations and acquire rights in their own name (i.e. they have the right to acquire property, may conclude contracts, file lawsuits or be subject to actions brought against them). Even a single person can found a joint-stock company (JSC, or Rt. in Hungarian) or a limited liability company (LLC, or Kft. in Hungarian).
A Company name must necessarily end in “Kft.” or Korlátolt Felelősségű Társaság and must be approved by the Court of Registry.
MEMORANDUM & ARTICLES OF ASSOCIATION
To register a Company, Articles of Association must be prepared by a licensed law practitioner and signed by all members (or their authorized representatives holding a power of attorney). An attorney or notary public must countersign this document. The Articles of Association specifies the activities in which the Company may engage, the name and registered address of the company, contribution of the founders and other matters required by the Companies Act for the different forms of business associations.
Shareholders may be of any nationality and may reside anywhere. Only one shareholder is required. This can be the same person as the director. There is no limit to the number of shareholders. The shareholder can be a natural person or a body corporate.
The capital of the company is comprised of the capital contributions of the individual members, which can be funded in cash and in kind. The amount of initial capital may not be less than HUF 3.000.000. At least 50% of the subscription amount must be deposited in a bank account and a certificate of deposit is issued in order to be used in the incorporation process. Each shareholder has an identified percentage share of the total capital and a single share may be owned by more than one person. For Kft.s, a share cannot be less than HUF 100,000.
DIRECTORS AND SECRETARY
A director can be either a physical person or a corporate body. The name of physical person who represents a corporate director will be disclosed to public records. There are no restrictions regarding nationality, meaning that foreign investors can become company directors. Directors are elected by the Members’ Meeting (General Assembly) for a limited or unlimited term. Officers may be re-elected or recalled at any time by the General Assembly. Legal entities cannot be appointed as directors.
There is no law requirements to appoint a local secretary.
Every Company must have a registered office and address in Hungary which should be notified at the Court of Registry.
The supreme body of a company is the members' meeting. Members' meetings shall be convened at least once every year. The members' meeting has quorum if at least half of the initial capital or the majority of the eligible votes are represented. The articles of association may stipulate a higher rate of participation.
Normally between 2 to 15 working days, after the filing of the articles of association.
RECURRING MAINTENANCE FEES AS FROM 2ND YEAR
- Chamber of Commerce annual registration fee
- Registered office and mail forwarding fee per annum
- Minimum Accounting fee
BASIC TAX PRINCIPLES
Resident companies are taxed on worldwide income; non-resident companies pay tax on Hungarian-source income only. Taxpayers are treated as resident for tax purposes if they are created under Hungarian law or (from January 1st 2005) if they are managed or controlled in Hungary. Tax is charged at a flat rate of 15%, and the special rate of 4% applied to the profits of Hungarian offshore companies was abolished on December 31st 2005. As of January 1st 2006, for up to HUF 5m taxable income, a lower tax rate of 10% up to the first approx. US$ 1.8 million taxable income was introduced.
Corporation tax is imposed on a company’s accounting profits, adjusted by certain items. Normal business expenses generally are deductible in computing taxable income.
Capital gains are taxed as part of the accounting profit at 10%/19; however there is no tax due if the participation exemption applies. Capital gains realized by a shareholder resident in a non-treaty country on the sale of its shares in a Hungarian real estate company are taxable at a rate of 19%. Depending on the provisions of the specific applicable treaty, taxation may apply to a resident of a treaty country as well.
No withholding tax is levied on dividends paid to a nonresident legal entity. Dividends paid to a nonresident individual may be subject to withholding tax at 15%, unless the rate is reduced under an applicable tax treaty.
There is no withholding tax on interest paid to a legal entity. Interest paid to an individual is subject to withholding tax at 15%, unless the rate is reduced under an applicable tax treaty.
There is no withholding tax on royalties paid to a legal entity. Royalties paid to an individual are subject to personal income tax at 15%, unless the rate is reduced under an applicable tax treaty.
The standard VAT rate is 27%, with reduced rates of 18% and 5%. VAT is levied on the domestic supply of goods and services and on imports.
FINANCIAL STATEMENTS AND AUDIT
Hungary companies are obliged to prepare a report based on the bookkeeping records maintained in accordance with the law, representing the company s operations, assets and financial position.
A statutory auditor is required to be appointed:
- if the registered capital of a Kft. exceeds 50 million HUF, or if there is only one registered owner;
- if the total net revenue of the company exceeds 50 million HUF in two years average;
- as per law requirements (insurance companies, banks and etc.).
In order to be appointed as an auditor, the individual person or audit company must be registered in the list of registered accountants. The auditor must be named in the Articles of Association and can be appointed for a period not exceeding five years.
Our Services & Requirements
OUR SERVICES FOR THE COMPANY FORMATION IN HUNGARY INCLUDE:
- Name check and approval
- Provision of registered address and mail forwarding for one year
- Provision of registered agent for one year
- Chamber of Commerce Annual Registration fee
- Notarial fee
- Stamp duty
- Minimum accounting fee
- A standard set of apostilled originals of corporate documents consisting of:
- Certificate of Incorporation
- Articles of Association, By-Laws
- Minutes of first meeting
- Appointing of Director
- Bank introduction and bank account opening
- Certificate of Tax Residency under Apostille
- Register of Shareholders/Members
- Register of Managing Directors
- Copy of Business Registry in English language under Apostille
- Rubber stamp
DOCUMENTS REQUIRED FOR THE COMPANY FORMATION
Please provide the following documents for all Directors, Shareholders, Beneficial Owners, Authorized Signatories:
- Notarized copy of valid passport.
- Original or Certified copy of utility bill / bank statement (as verification of residential address, dated within 3 months).
- Original or certified copy of Banker’s reference letter (dated within 3 months).
- In cases where shareholders and/or directors are corporate bodies, full apostilled set of corporate documents and Certificate of Good Standing (for companies registered more than 1 year).
If you conduct any activity without required license or authorization granted by a relevant authority in any jurisdiction, STARTING BUSINESS will not be able to assist you with the company formation or bank account opening related to such unlicensed activity.
Licensable activities include, but not limited to: provision of financial services involving trading/brokerage in foreign exchange, financial and commodity-based derivative instruments and other securities; offering investment advice to public; insurance and banking business; operation and administration of collective investment schemes and mutual funds; payment processing services; money exchange, money transmission or money brokering; asset management; safe custody services; gaming, gambling and lotteries.
Please contact us if you need our assistance in licensing of your financial, Forex brokerage or gambling company.
Shipping of corporate documents or banking kits to your destination requires an extra charge and will be automatically added to the invoice during checkout. Shipping costs for international courier services are set automatically and will be USD 130. Please be advised that there will be some exceptions where the fee might be higher.