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Hungary

Branches

Updated 07/2012

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.

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.

Types of secondary premises

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.

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 must be necessary for the branch office, and the commercial representation must be necessary for pursuing 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 county (or Budapest municipal) government office.

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.

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. Subsidiary is an enterprise the operation of which is controlled by another enterprise.

Foreign and Hungarian natural and legal entities are allowed to found economic organisations in Hungary. The major partnership forms are as those regulated in the EU member states. The Companies Act contains major rules relating to the foundation of Hungarian companies. Among others, it is provided that if the number of the members of the subsidiary operating as a limited liability company reduce to 1 then it will become a one-man company. 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.

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

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.

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 with 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 and the commercial representation. 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 ensured under 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.

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 disposes over a licence from the supervisory authority for the place of its registered office, or if the foreign company itself meets the legal requirements.

Recording

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 an EEA Member State is created upon foundation, and it may commence operations in Hungary in accordance with a separate legislation, if it submits its company registration application at the same time. A commercial representation may commence operations once it has been registered.

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

Service guideline: Points of Single Contacts

The service guideline is a European regulation intended to offer a help to enterprises planning to provide services in the European Union either in their own countries or abroad. The guideline specifies rules for enterprises wishing to create businesses, or to provide temporary services on the area of the EU/EEA (in 27 EU member states, as well as in Iceland, Liechtenstein and Norway). The guidelines obliges the member states to eliminate any unnecessary bureaucracy, to simplify the formalities required for enterprises, and to make public administration more efficient.

As part of the execution of the guideline, each member state had to create "point(s) of single contact", i.e. government portal(s) which help(s) the enterprises in the online management of the relevant administration procedures. The contact points offer general information on the administrative duties to be performed in connection with the foundation and expansion of an enterprise in a specific country. The points of single contact offer help, among others, in answering the following questions:

  • Which permits and certifications are required for the foundation of my company (in my country or abroad)?
  • What should do if I want to provide my services temporarily also abroad?
  • What are necessary for me to acquire the permit? Which authority should I contact?
  • Should I pay a fee for the permit? What deadlines should I meet?
  • Which laws and regulations apply to my sector?
  • What should I do to open a restaurant or a shop, or to work as a travel organiser in another country without founding an enterprise there?
  • Whom should I contact if I need personal advices and additional information?

Due to the points of single contact, it is not necessary to personally contact various authorities in the future. You can find all essential information, and submit your online requests to the relevant authorities via a single joint point of contact. The electronically available official procedures become available via the points of single contact. The enterprises must use only the single point of contact of the target country.

The individual national single points of contact are available via a central website as part of the EUGO network. Using the services of the single points of contact is not compusory, and the enterprise may directly contact the competent authorities if he wants.

Regular obligations

The Accounting Act contains provisions relating to bookkeeping, preparation of annual reports, publication and dissemination by the branch office. The Hungarian branch of an enterprise seated abroad must submit its annual report and the relating independent auditor's report, as well as the decision on the use of the result after taxation by 31 May of the subject year in an electronic way to the company information service.

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.

The branch offices are generally classified 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.

The Hungarian Investment and Trade Agency (HITA) has been established to promote foreign investors. It provides information on Hungarian investment law, taxation and financial conditions.

Help & advice

Help & advice

The Joint Venture Association is an association of foreign and domestic investors. It mainly represents the interests of foreign-owned companies, commercial representations of foreign companies and branches of foreign companies.

SOLVIT helps businesses deal with problems that arise when national authorities wrongly apply EU market rules.

If you wish to establish a business or perform temporary cross-border services in the EU/EEA area (the 27 EU member states, plus Iceland, Liechtenstein and Norway), turn to the ‘Points of Single Contact (PSC)’ - Members of the EUGO network - that will help you to complete all necessary administrative procedures on-line! Get the information you need and submit your applications to the responsible authorities online. You no longer have to worry about contacting several different authorities one by one - the PSC will do it for you!

E-mail a business organisation near you

The EU runs a network (Enterprise Europe Network) of local business organisations in most European countries that may be able to help you.

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