Key benefits of starting business in 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 real GDP growth has been expected to pick up to 3.7% in 2017, from 1.9% in 2016, and to average 2.3% in 2018-22. The domestic economy continues to be the main driver of economic growth. Growth in fixed investment again surpassed 20% (17Q3: +21.6% year-on-year; 17Q2: +26.1% yoy), as EU funds flow into the economy and lax monetary policy pushed business confidence to all-time highs. Investment in construction and machinery, and equipment investment also grew at a sharp pace in the third quarter. Growth in private consumption decelerated marginally, but remained buoyant nonetheless (17Q3: +4.8% yoy; 17Q2: +4.7% yoy). Private consumption continues to be supported by declining unemployment, higher wages in the public sector, benign inflation and ease of access to credit. Government consumption growth rebounded from a 2.7% contraction in 17Q2 to a 2.5% increase in 17Q3, the first expansion since 17Q2 2016. Overall, domestic demand expanded 4.4% in the third quarter, significantly above the 2.6% growth in the previous quarter.

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).

Corporate tax rate is flat 9%.

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.

15% 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 2017 is HUF 1275,000 pm (EUR 425) and 138,000 pm (EUR 460) in 2018 gross; for higher educated workforce it is HUF 161,000 pm (EUR 537) in 2017 and 180,500 pm (EUR 602) in 2018 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.