Branches - Hungary

Updated 12/2010

Legal requirements

Hungarian branch offices and commercial representations of foreign-registered companies are regulated by the Act on Hungarian Branch Offices and Commercial Representations of Foreign-Registered Companies.

Act on Hungarian Branch Offices and Commercial Representations of Foreign-Registered Companies

Special rules apply to branch offices set up in the financial sector. These offices are mainly covered by the Act on Investment Enterprises and Commodity Brokers, and on Rules for the Activities Pursued by them, and the Act on Credit Institutions and Financial Enterprises.

Act on Investment Enterprises and Commodity Brokers
Act on Credit Institutions and Financial Enterprises

Types of secondary establishment

Any company that is legally established in the territory of the European Union may open secondary premises, i.e. a commercial representation, branch office or subsidiary, in another Member State of the European Union. The chief rule is that the aforementioned foreign businesses are treated in the same way as domestic businesses as regards setting up and running a branch office.

Investment in Hungary

Secondary premises with no legal personality

A branch office is an organisational unit of the foreign company that pursues its activities independently but does not have legal personality and may not pursue representative activities on behalf of the foreign enterprise. An exception to this is financial branch offices (e.g. Hungarian branch offices of foreign-registered credit institutions and insurers), which may pursue representative activities on behalf of the foreign enterprise.

A branch office may have an operating site (premises) in more than one place. An enterprise may acquire property, with the exception of agricultural land, without a licence, if the registered office of the parent company of the branch office and commercial representation is registered in a Member State of the EEA or in a state featuring in the notice of publication of the list of countries under international agreements and the existence of reciprocal practices referred to in certain provisions of the Act on Hungarian Branch Offices and Commercial Representations of Foreign-Registered Companies.

Another condition in the latter case is that the property be necessary in order for the branch office and commercial representation to pursue the company’s activities.

If the acquisition of property is conditional upon a permit, permission for the acquisition of the property needs to be obtained from the director of the county (or Budapest municipal) administration department. The liability of the foreign-registered company and the branch office for any debts arising from the activities of the branch office is collective and unlimited.

Notice of publication of the list of countries under international agreements and the existence of reciprocal practices referred to in certain provisions of the Act on Hungarian Branch Offices and Commercial Representations of Foreign-Registered Companies

A commercial representation is an organisational unit of the foreign company without legal personality, and it mediates, prepares and concludes contracts, provides information and maintains business contacts on behalf of and for the benefit of the foreign company. Commercial representations cannot provide legal consultancy services or conduct business activities. Branch offices and commercial representations may not acquire shares in companies that are registered in Hungary (e.g. limited liability companies, private joint stock companies, and limited partnerships).

Legally independent entities

A subsidiary or mutual subsidiary is an independent company with legal personality created by the foreign company in the host country in accordance with the company types found there.

If the number of members of a subsidiary operating as a limited liability company falls below 1, it will continue to operate as a one-man business. If the company does not report any new members within a year, the previous articles of association must be amended to become an instrument of incorporation.

Companies Act

Many of the requirements and procedures for opening a secondary establishment are the same as for starting up a business.

Start-ups — Hungary

Administrative procedures

The Hungarian branch offices, commercial representations and subsidiaries of foreign companies must be recorded in the companies register maintained by the competent court of registration for the company's registered office. Applications for registering or amending details must be submitted electronically by the company's legal representative.

Company Information and Electronic Company Registration Service

Preliminary procedures

Branch offices and commercial representations must be recorded in the companies register. The obligations of branch offices and commercial representations towards the tax authorities are identical to those of Hungarian companies.

A branch office or commercial representation of a foreign-registered company established in a country that is not a Member State of the EEA may be represented - including the companies register - by Hungarian residents who are employed in an employment relationship at the branch office/commercial representation, have been seconded there or who are in a long-term commission relationship.

A branch office or commercial representation of a foreign-registered company established in an EEA Member State is not subject to the above condition, but in this case it is also necessary to enter at least one representative person in the companies register.

Employees at the branch office and commercial representation are in a legal relationship with the foreign company, which exercises employer's rights via the branch office. The legal jurisdiction selected by the parties shall prevail over individual contracts of employment, but if the place of regular employment is in Hungary this may not lead to the employee being deprived of the protection enshrined in the Hungarian Labour Code, and no agreements may be used to derogate from this. If no legal jurisdiction is selected, the law of the place of regular employment shall apply.

Labour Code
EC Regulation on selection of jurisdiction [63 KB]

Branch offices and commercial sub-offices may only pursue activities that are conditional upon a licence (e.g. operating licence, premises licence or activity licence) after the necessary licences have been obtained. It may, however, be provided for in law that a company established in any Member State of the EEA may also, through its Hungarian branch office, carry out activities that are conditional upon an operating or activity licence if it is in possession of a licence from the supervisory authority for the place of its registered office, or if the foreign company itself meets the legal requirements.

Regulation of the performance of commercial activities
Business operating licence
Regulation of the issuing of premises licences
Premises licence
Application for a premises licence
Application for an operating licence
Specialist companies
Procedures to be followed for the commencement and continuation of service activities

Registration

Branch offices and commercial representations must be registered as separate companies in accordance with the rules on the register of companies. Branch offices and commercial representations come into being when they are recorded in the companies register, but those who are authorised to register the company may act on behalf of and for the benefit of the branch office once the company registration application has been submitted. In such cases, the extension “in process of registration” must be included in the documents and added to the name during the legal transactions entered into (preliminary branch office). A financial branch office of a foreign company registered in any Member State of the EEA comes into being upon foundation, and it may commence operations in Hungary in accordance with separate legislation, if it submits its company registration application at the same time. A commercial representation may commence operations once it has been registered.

Act on the Companies Register, Public Company Information and Court Registration Proceedings

Many of the requirements and procedures for opening a secondary establishment are the same as for starting up a business.

Electronic company procedures
Information on electronic company procedures
Electronic payment of stamp duties and costs for company procedures
Decree on the Electronic Payment of Stamp Duties and Publication Costs
Downloadable company registration documents and programs
Company Information and Electronic Company Registration Service
Online company information service

The Services Directive: Points of single contact

The Services Directive is a European law that aims to make life easier for businesses that wish to provide services in the European Union – in their home country or abroad. The Directive defines the rules that apply to entrepreneurs wishing to establish a business or perform temporary services in the EU/EEA area (the 27 EU member states, plus Iceland, Liechtenstein and Norway). It obliges member states to eliminate unnecessary bureaucracy, simplify formalities for businesses and make public administrations more efficient.

For the implementation of the Directive, each member state had to set up ‘Points of Single Contact (PSC)’ , e-government portals which help businesses complete their administrative procedures on-line. The PSCs provide comprehensive information on all administrative matters related to setting up or expanding a services business in a given country. This includes for example:

- Which licences, notifications or permits do I need to obtain to start a business (at home or abroad)?
- What do I need to do when I want to offer my services abroad on a temporary basis?
- What do I need to do to apply for a licence? Which authority is responsible?
- Are the licences subject to a fee? What kinds of deadlines apply?
- Which acts and decrees apply in my sector?
- What do I need to do to establish, for instance, a restaurant or a shop? Or to work as a tour operator in another country without actually setting up a company?
- Where can I turn for personalised advice and further information?

With the PSCs, you no longer need to approach various authorities one by one!! The PSC allows you to find all relevant information and to send in your online applications to the responsible authority through one single contact point, the PSC. You can complete your administrative formalities electronically through the PSC. Just contact the PSC of the country that you want to do business in.

All PSCs are part of the European EUGO network ; through a central website you can easily access all PSCs in Europe. Of course, the services of the PSCs are optional. You may always address yourself directly to the relevant authorities, too.

EUGO network
Points of single contact in Hungary

Regular obligations

The Accounting Act contains provisions relating to bookkeeping, preparation of annual reports, publication and dissemination by the branch office. A certified copy of the foreign company's annual report and its Hungarian translation must be sent electronically by the branch office to the company information service no later than 30 September of the following year.

Branch offices of foreign companies having their registered office in the European Union are not required to publish their own reports according to the Hungarian rules. There are different rules that apply to financial branch offices.

Accounting Act
Company Information and Electronic Company Registration Service
E-reporting
General form-filling program (ÁNYK)
Client Gateway

Branch offices are generally classed as foreign nationals. On this basis, external trade agreements must be concluded in accordance with the regulations for Hungarian companies or, in the case of trade that requires a licence, the licences must be obtained unless otherwise provided for by law.

Resources

You can request information on branch offices and commercial representations in electronic format on the website of the Ministry of Public Administration and Justice via the company information service.

Company information and electronic company procedures
Online company information service

The Hungarian Investment and Trade Development Agency (ITD Hungary Zrt.) was set up to promote investments by foreigners. It provides information on Hungarian investment law, taxation and financial conditions.

ITD Hungary

Check also the legislation on this topic in:

Branches - Hungary