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 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.
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.
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.
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
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.
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.
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.
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.
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.
EMPLOYMENT & Payroll
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
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.
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
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.
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.
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.
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.