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Business in Hungary

As a growing economy in the middle of Europe, and a member of the European Union, Hungary offers a great opportunity for foreign companies to invest in the country. Hungary has the lowest corporate tax rate in the EU which makes it a very attractive country to invest in.

The automotive industry is currently booming in Hungary. More and more producers open offices and attract the additional suppliers as well.

Hungary is moving towards the digital administration. More and more functions are available via internet and online platforms. It is compulsory to register every company for digital administration. Therefore it is strongly recommended for the owners and/or managers to register personally in order to access the online systems. It is a short process and makes the digital life much easier than giving proxies to accountants, employees etc.


The setup of a new company in Hungary is a simple process once all the necessary information and documents are available. The registration requests the assistance of a lawyer, and it is good to consult with the chosen accountant as well before signing the corporate documents. The registration of a company usually takes 2 weeks.

The most common legal entities that can be formed in Hungary are Limited Liability Company (KFT) and Private Joint Stock Company (ZRT). Hungarian companies have to have at least one local bank account. They can have bank accounts abroad as well, but they have to be reported to the tax authority.

Companies can have one or more owners. Owners can be private persons and companies as well.


The Hungarian Labour Code defines the rules of employment, and it applies generally for every employee regardless of their nationality.

Expats are liable to pay resident taxes in Hungary if they stay in the country for at least 183 consecutive days over 12 months period.

If the employment contract is terminated, the notice period is in general one month.


Accounting rules in Hungary are mostly defined in the Accounting Act and in the Rules of Taxation Act. These regulations comply with the general rules if the European Union, but there are some special points one should be aware of when starting a business in Hungary.


Every sales transaction has to be documented with a receipt or an invoice. A receipt can be written in case of cash sales, like the ones we receive in a supermarket. If an invoice is issued, it has to be done according to the rigid regulations.

There are usually three dates on the invoice. Two of them are compulsory, and one optional. Compulsory dates are date of delivery and date of invoicing. The latter one is the real date when the invoice is issued. The date of delivery or date of sale is the date when the transaction was completed, such as the goods were handed over to the client or a service was actually provided and completed. This is important, because this date defines the month when the invoice should be reported in the VAT return. The third, optional date is the deadline of payment. This is for the partners only, and it is useful, but not compulsory.

To keep a logical order of events, one can issue an invoice after or on the delivery date, but not before. However, there are special cases of continuous services, when the invoicing refers to a period of a long-term contract. If the invoice is issued after a period, such as mobile phone bills, the delivery date is the payment deadline, even if it is after the invoicing date.

Invoices can be written by hand on specially numbered invoice forms, but this is old fashioned and not really professional anymore. The other way is to issue invoices with computer, using installed software or online invoicing services. The software has to be approved by the National Tax and Customs Authority (NAV). The software has to be able to transfer the data of the invoices instantly to the server of NAV if the VAT of an invoice achieves the amount of HUF 100,000. Therefore, it is of utmost importance to properly register the company before the first invoice is issued.

Annual reports

Most of the companies publish a simplified annual report about the last business year by end of May. This report consists of a balance sheet, a profit and loss statement and a document called Additional Notes. This paper includes certain details about the company itself, the accounting procedures and the business figures which are not shown in the other two documents.

The annual report has to be signed by the top manager of the company. The owners approve the annual report with a resolution, showing the key figures of the documents and the decision about the net profit of the company: whether they pay dividend or not. All these documents, together with the letter of the auditor if applicable, are published electronically, and available instantly by anyone.


Equity means the total amount of the various capital items of the company provided by the owners. The elements of equity are the share capital or issued capital, the retained earnings – cumulated profit or loss – of the previous years, various reserves, and the net result of the actual year.

Share capital is the starting capital by which the owners establish the company. The most common business form of limited liability company (kft) requests at least HUF 3 million, roughly EUR 9,400. The owners have to pay attention to the total amount of equity year by year, because they have to keep it at the level of share capital. it can certainly be higher, mainly due to the cumulated profits, but it should not go below it. If the company is losing its equity, the owners have to provide further funding to balance off the losses of the company.


The Hungarian Labour Code defines the rules of employment, and it applies generally for every employee regardless of their nationality. Expats are liable to pay resident taxes in Hungary if they stay in the country for at least 183 consecutive days over 12 months period. If the employment contract is terminated, the notice period is in general one month.

Payroll in Hungary 

Payroll management in Hungary is quite a special job. It is highly recommended to contract a specialist to cover the administration of salaries and payroll taxes. The whole process is electronic, and the employer must give the proper authorizations to the service provider to submit all the forms and tax returns on his behalf.


Employees must be registered before the first working day of employment actually begins. The registration form includes the identification of the employee, the starting date, the position, and the number working hours per week. It does not include the salary. Late registrations often cause a fine, and if there is a spot check by the authority and they find workers without registration, the trouble is even bigger. There is a public black list of companies who employed people without registration.

Minimum salaries

There are two kinds of minimum salaries in Hungary, and both change year by year. People in jobs without any required skills are entitled to get at least HUF 149,000 per month. Those jobs that need any kind of education, must pay at least HUF 195,000 per month. These salaries apply for full time jobs, 40 hours per week.

Payroll taxes

The employers pay 19.5% social contribution tax and 1.5% training levy on the gross salaries every month. The monthly payroll tax return and the actual payments are due on 12th of next month.

Employers deduct from the gross salary and pay on behalf on the employees 15% personal income tax, 10% pension contribution and 8.5% health insurance contribution. The employees normally receive 66.5% of their gross salary. However, family tax discount can increase this retention rate.

Foreign employers

Foreign companies who do not have any other business activity in Hungary than employing people, can register as foreign employer and get a tax number to report and pay the related taxes. These foreign employers do not have to pay the 1.5% training levy, because they do not have local business address. The other taxes are the same as for local employers.

It is also possible to employ local employees without the registration of the company. In this case, the employee is responsible to submit the monthly tax returns and to pay the requested taxes and contributions. This is usually done if only one employee is in Hungary.


Employees from the EU are able to work in Hungary without any limitations. Local registered address is not necessary to get a tax ID and social insurance ID. However EU citizens staying in Hungary for more than 3 months have to register at the Immigration Office.

Employees from outside the EU have to get a work permit first, and it has several conditions. The proper work permit is a condition to get social insurance ID, which is a compulsory element of the employee registration form. An exception to this rule is the foreign manager of a branch office, he does not need a work permit to be registered as a Branch Office Manager.

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