Destination: Hungary

Key benefits of starting business in Hungary

Destination: Hungary

Destination: Hungary

You’re thinking about opening a new company, and Hungary is the place where you want to build your dreams. Here are the benefits that opening a Hungarian company may offer to you.

 

Hungary has a stable economic and political system

Real GDP growth accelerated to +3.6% in 2014 from +1.5% in 2013. Fixed investment was the key growth driver as one-off factors (subsidized loans to SMEs and accelerated absorption of EU funds) led to an increase of +12% in 2014. Private consumption growth improved slightly but remained modest at +1.6% while government consumption expanded by +3.4%. Import growth (+10%) outpaced exports (+8.7%), so that net exports had a small negative effect on 2014 growth.

In Q1 2015, real GDP grew by +0.8% q/q, season-ally adjusted, and +3.5% y/y. Private consumption growth picked up to +2.6% y/y, supported by lower energy prices and declining unemployment. Government consumption declined by -5.4% y/y, and fixed investment went down by -6.7% y/y, though base effects played a strong role as it grew by +2.7% q/q. Exports (+10.3% y/y) expanded faster than imports (+7.8% y/y) so that net exports became the key growth driver in Q1. Euler Hermes expects the recovery to continue in the coming years but GDP growth should become more balanced and moderate to around +3% in 2015 and +2.5% in 2016 as the investment boom from 2014 will abate.

Hungary is located in Central-Europe, in close proximity to major European core markets.

Budapest is the capital of Hungary, having a population of around 2 million. Public services are good, crime rating is low, and there’s a low threat from terrorism. Hungary is well connected with Europe, either by means of road, rail, or air transport. Telecommunication services are good, mobile and landline phones are easily available, internet is cheap and reliable.

Hungary is a member of the EU, NATO and the OECD and the World Trade Organisation

The very obvious advantage is that by opening a Hungarian company your business will get EU VAT number too. This allows companies to freely trade within the EU. New companies may apply for EU VAT number right at the time of formation, and it is activated in a few days. With valid EU VAT number business-to-business trading is VAT exempt.

A Hungarian KFT Company provides a legitimate tax-efficient solution

KFT is a limited liability company, where the liability of the members is limited to providing the initial share capital. From their on the members are not liable for he liabilities of the company. The minimum share capital of KFT is HUF 3,000,000 (cca EUR 10,000).

Standard corporate tax rate is 10%, increased corporate tax rate for large taxpayers is 19%. The latter applies for taxpayers with taxbase (pre-tax profit) above HUF 500 million.

There is no withholding tax and payment of dividends to any resident or non-resident person are tax free

There is no dividend tax or withholding tax paid either to companies or private individuals.

16% personal income tax plus 14% health care contribution is payable on dividend payments to resident individuals. For non-resident individuals the personal income tax on dividend is payable by the guidelines of double taxation agreements.

Highly educated, multi-lingual local workforce

Hungarian wages and salaries are quite low compared to Western-Europe’s. Minimum wage in 2015 is HUF 105,000 pm (EUR 350) gross; for higher educated workforce it is HUF 122,000 pm (EUR 405) gross.

Hungarian workforce is typically highly educated. Skilled workers and university degree employees are easily available on the jobmarket. Youngers usually speak English, or even further languages, while the not-so-young employees usually don’t speak  or speak badly foreign languages.

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