Company Formation in Hungary for US Entrepreneurs

Expanding a business overseas is undoubtedly a big step. Hungary has become an attractive place for U.S. entrepreneurs hoping to establish a European presence.

In this article, we’ll explore why Hungary is appealing to foreign business owners, outline how to register a company, discuss the costs and tax obligations, and much more.

We'll also discuss the Wise Business account. The global account that can help your company with all things cross-border.

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Why Choose Hungary for Company Formation?

Among the many reasons U.S. entrepreneurs choose Hungary as a business location are its strategic positioning, relatively low taxes, and the ease of incorporation.

We will cover these advantages in more detail below, but here’s a brief overview:

• Access to the European Market: Hungary’s central location makes it a strategic gateway to the EU. A Hungarian company can trade across EU countries with ease, and all new companies receive an EU VAT number immediately, allowing cross-border business from day one.
• Low Corporate Tax Rate: Hungary’s corporate income tax is the lowest in the EU at 9%. The overall tax burden is far below that of many Western European countries, creating substantial savings for profitable businesses.¹
• Quick and Easy Incorporation: You’ll usually be able to complete the company formation process in a few business days.
• Skilled Workforce and Stable Environment: Hungary offers a well-educated, skilled workforce and a stable economy.²
• Pathway to EU Residency: Company formation can make you eligible for a business residence permit. This gives you the option to live and work in Hungary and travel freely within the Schengen area.

These factors make it an ideal springboard for American companies planning to go international.

Business Structures in Hungary: Choosing a Legal Entity

When registering a company in Hungary, one of the first steps is to choose the appropriate legal form for your business. Hungary provides several types of business entities, but the most common choice for foreign entrepreneurs is the limited liability company, known in Hungarian as a “Kft.” (Korlátolt Felelősségű Társaság).

Key Features of a Hungarian Kft

A Kft. is analogous to an LLC in the United States: it offers limited liability protection (owners are only liable up to the amount of their capital contribution) and has a flexible management structure.

A Hungarian Kft can be founded by a single person or multiple partners, and it requires a minimum share capital of HUF three million (about €7,700 to €8,000).

The good news is that this capital does not have to remain locked in a bank account. Once the company is registered, the funds (whether cash or assets contributed) can be used for business operations immediately.³

Besides the Kft., Hungary also allows other structures:

• Branch or Subsidiary: A subsidiary is a Hungarian Kft. owned by the parent company; requires extra paperwork to link entities.
• Joint-Stock Company (Rt.): Higher capital and stricter governance make it less common for small businesses.
• Partnership or Sole Proprietorship: Less attractive to foreign owners due to no limited liability and less favorable taxes. Sole proprietors pay 15% personal income tax on profits.

For the purposes of this guide, we will focus on the Kft. (Limited Liability Company) as it’s the go-to structure for foreign-owned businesses in Hungary.

In fact, any foreign individual or entity can be the owner of a Hungarian company, and you can appoint yourself (or another foreigner) as the managing director.⁴

The law does require that every company have a local registered office address in Hungary and maintain proper bookkeeping.⁵ That said, there’s no requirement for the owners or managers to be residents. Many international entrepreneurs use professional service providers for a virtual office address and hire a local accountant.

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Company Registration in Hungary: Steps and Requirements

Setting up a company in Hungary is a relatively simple procedure, especially if you engage a local lawyer or formation service to handle the paperwork.

Here’s a step-by-step overview of how company registration works:

1. Choose Company Name and Scope: Select a unique name with the letters of the Hungarian alphabet and define main activities.⁶ Some activities require special licenses.
2. Draft Founding Documents: Prepare the Articles of Association (or Deed of Foundation for a Kft.) with details on founders, address, activities, capital and management. Must be countersigned by a lawyer; bilingual versions are common.
3. Provide Identification and Address: Submit passports, proof of address and secure a Hungarian-registered office. A tax ID is issued for foreign owners or directors.
4. Sign and Submit: Sign documents in person or via Power of Attorney. Lawyer files with the Company Registry; registration usually takes one to three business days.
5. Receive Registration and VAT Numbers: Once approved, receive company registration, tax and EU VAT numbers.
6. Open Bank Account: The managing director must visit Hungary to open a business account. Deposit share capital for use in operations.
7. Register for Additional Taxes/Licenses: Corporate tax and VAT registration are automatic.⁷ Additional payroll or industry-specific licenses may be required.
8. Accounting and Compliance: Maintain books, file annual financials and tax returns, and submit VAT reports. A local accountant is mandatory.

How Long Does It Take To Register A Company In Hungary?

Overall, from start to finish, you can expect a straightforward company formation in a matter of days once your documents are ready. In some cases, it might take up to a week if there are any queries or if you submit by mail.

Allow a bit of extra time for gathering and notarizing any documents from the U.S., and for scheduling your bank visit.

What Are The Costs Of Forming A Hungarian Company?

For a Kft., registration costs about €150, with higher fees for public companies (Nyrt.). Legal and notary fees range from €500 to €2,000, depending on complexity. Full formation packages typically run €1,800 to €2,500 and cover setup, legal work, address service and tax number registration.

Annual compliance starts around €300, while monthly accounting fees vary based on activity and payroll needs.⁸

Taxation in Hungary: Corporate, Local, and Personal Taxes

As touched on above, one of the key reasons businesses flock to Hungary is its favorable tax regime.

Your Hungarian company will be subject to 9% corporate income tax on its profits, plus up to 2% local business tax on its gross revenue (exact rate depends on the city).⁹

If your company is active, it will also deal with 27% VAT, though the net VAT cost depends on your business (you charge customers VAT and reclaim VAT on expenses). If you pay yourself a salary or hire employees, there’s a flat 15% personal income tax on wages and associated social contributions.

Residency in Hungary Through Company Formation

One unique advantage of starting a business in Hungary is that it can serve as a stepping stone to European residency.

If you are a non-EU citizen (for example, a U.S. citizen) and you open a company in Hungary, you become eligible to apply for a business residence permit.

Company owners or directors can apply for residency based on running a Hungarian business. Doing so requires a business plan and proof of activity or strong prospects.

There is no set minimum investment, but applicants must show adequate funds and a viable plan. Permits are usually granted for one year, then renewable for two-year periods up to three years before possible transition to another status.

Does Business Residency Lead to Permanent Residency or Citizenship?

Unlike “golden visa” programs, simply owning a company does not grant citizenship. It can, however, put you on track if you live in Hungary.

After five years of continuous residence, you may qualify for permanent residency, provided you’ve lived there most of that time, kept your business active, and complied with the law. After eight years, you could apply for citizenship.¹⁰

These outcomes aren’t guaranteed, as each application is reviewed individually. For American entrepreneurs, the ability to secure residency in Hungary through company formation is a valuable benefit.

It allows you to contribute to the local economy while gaining the right to live in a centrally located EU country. Many U.S. expats use this path to base themselves in Europe for travel and business expansion.

With straightforward incorporation, competitive taxes and the possibility of EU residency, Hungary gives U.S. entrepreneurs the tools to grow internationally while maintaining a strong connection to a robust European business hub.