Hungary: An ideal location for investment
Szabolcs Szeles, HLB Hungary
Home to Liszt, Zsa Zsa Gabor and goulash, Hungary has plenty to offer tourists. But it’s not just culture vultures who should consider a trip to Hungary – the country has lots to offer investors too.
With Austria to its West, and Ukraine to its East, Hungary has a central position in Europe, with well-developed infrastructure and excellent transport links to neighbouring countries. The country is well-known for its highly skilled workforce and long tradition in education of technical universities. In addition, the country’s relatively inexpensive (and well-educated) labour force guarantees value for investors.
Tax benefits and incentives
Hungary is keen to encourage investment, and offers firms and investors an array of tempting schemes and incentives.
From 1 January 2017, the standard rate of corporate income tax for Hungarian (and in some cases foreign) companies decreased to 9%.
In addition, as Hungary is a member of the European Union, various financial sources for investment or development supported by the EU are available for companies. Certain tax credits are available as well.
One of the most important tax incentives for companies is ‘development tax allowance’ – awarded to businesses investing in selected industries and regions. This allowance can be deducted from the amount of corporate income tax (up to 80% of total corporate income tax).
Besides the development tax allowance, there are additional allowances or credits for companies supporting the cultural, sport and film sectors. Tax base deduction is available also for those investing in start-ups and up to the direct costs of research and development.
Costs of setting up a company
The costs of setting-up a business varies based on the form of business – the most common forms are the limited partnership, limited-liability company and company limited by shares.
Costs include administrative charges and minimum contribution. Administrative charges are similar for each form, however the minimum capital requirements to establish a business with are significantly different. For a limited partnership, no minimum initial capital is required. Meanwhile a limited-liability company can be established with a minimum capital of HUF 3m, a company limited by shares can be unquoted with a minimum capital requirement of HUF 5m, or quoted with a minimum capital requirement of HUF 20m.
The minimum administrative charges of establishing a business consist of duty payable on the registration application (HUF 100,000 i.e. approx. € 330), duty payable on the simplified registration application (HUF 50,000 i.e. approx. € 165), disclosure fee for publication in the Company Gazette (HUF 5,000 i.e. approx. €17) and registration at the Chamber of Commerce and Industry (HUF 5,000 i.e. approx. €17). There can also be other charges for signature specimens, official translations etc., but these out-of-pocket costs vary case-by-case.
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