Start-ups - Hungary
Act IV of 2006 regulates the formation of companies, whilst Act V of 2006 on publicly available company information, company court procedures and solvent liquidation, governs the steps involved in founding companies.
Legal forms for businesses
In Hungary there are companies without legal personality, as well as companies with legal personality. Companies may also operate in not-for-profit form. Companies may be set up by foreign and domestic natural and legal persons, and by companies without legal personality. To establish a company, with the exception of limited liability companies and joint stock companies, at least two members are required.
Companies without legal personality:
- General partnership (kkt.) - When they sign the articles of association, the members of a partnership (kkt.) undertake the obligation to pursue joint business activities with unlimited, joint liability.
- Limited partnership (bt.) - In the case of a limited partnership (bt.), not every member has to assume unlimited liability, but there does need to be at least one such member (full partner) and at least one other member (associate member), who is only obliged to provide the material deposit undertaken in the articles of association.
Companies with legal personality:
- Limited liability company (kft.) - A limited liability company (kft.) is a company that is made up of share capital comprising primary stakes of a pre-defined amount, and for which a member's liability extends to providing his primary stake and any other material contributions defined in the articles of association. A limited liability company may be set up with capital of at least five hundred thousand forints.
- Joint stock company (rt.) - A joint stock company (rt.) is a capital investment company, and may be private (zrt.) or public (nyrt.) in form. A joint stock company (rt.) is public if all or part of its shares are traded publicly, and it is private if its shares are not traded publicly. A private joint stock company may be set up with capital of at least five million forints, while a public joint stock company may be set up with capital of at least twenty million forints.
Business activities and related rules
It may be a legal requirement for setting up a company to have a permit from the authorities. If there is a legal requirement to have a permit from the authorities in order to pursue a business activity (with the exception of local government decrees), such activity may only start once the permit has been obtained. The chief rule is that a company may only pursue activities linked to qualifications if at least one of the members, employees, or those performing activities for the company under a long-term civil-law contract concluded with the company, and collaborating personally on such an activity, meets the qualification requirements defined in law.
In addition to Hungarian citizens and nationals of EEA Member States, foreigners with a residence permit can also conduct business as a sole trader following registration of the business activity. Registration must be done electronically via the Client Gateway, but the arrangements for this may be initiated in person at a notary’s office. The Central Office for Administrative and Electronic Public Services keeps records of sole traders on the basis of the registration. A sole trader who registers sole-trading activities is entitled, but not obliged, to a replacement sole trader’s licence.
A sole trader may set up a sole trader business, which is a taxpayer without legal personality and which is created upon registration in the companies register in accordance with the company registration rules. Sole trader companies have legal capacity, and may acquire rights and undertake obligations, and may in particular acquire property, conclude agreements, instigate court proceedings and be sued. A sole trader company may only have one member, and a natural person may only be a member of one sole trader company.
Business plans and evaluation
Small and medium-sized enterprises can ask chambers of commerce, and business development and innovation centres for advice with regard to drawing up their business plans.
To succeed, a new business needs a sound commercial strategy and secure financing.
Some standard requirements to be completed when setting up a business are the same as when opening a branch.
In Hungary, applications for the registration of a company must be submitted electronically by the company's legal representative. The "one-stop shop" during company registration means that the Court of Registration obtains the company's tax number and statistical code using the electronic system created for this purpose.
The "one-stop shop" in the process of registering sole trader activities means that the competent authority obtains the tax number and statistical code directly, instead of the applicant, so the applicant does not need to deal in person with the competent State tax authority or the Central Statistical Office before registration (for post-hoc registration see the section entitled “Tax registration” below).
All companies and sole trader businesses must register at the competent court of registration for the company’s registered office. Applications for registering or amending details must be submitted electronically via a legal representative. The court of registration electronically records documents relating to the company and provides an electronic certificate of registration as well as confirmation of any changes made.
Social security registration
Once they have registered at the Client Gateway, employers are obliged to submit electronically on the Government Portal the data stipulated by law relating to their employees, on the form drawn up for this purpose, for the competent State tax authority of first instance, by no later than the first day of the legal insurance relationship prior to commencement of employment.
Pursuant to the Decree Implementing the Act on Social Security Pension Provision, the obligation to provide information relating to the NYENYI (Individual Pension Insurance Record) form may also be fulfilled through electronic administration. The obligation to provide information relating to the Individual Pension Insurance Record Form may be fulfilled using the e-NYENYI service of the Central Administration of National Pension Insurance.
Only taxpayers who have a tax number may pursue taxable activities. Thanks to the “one-stop shop”, they receive the tax number immediately when they submit the company registration application or register sole trader business activities. Taxpayers who are required to register their company are also required at the same time to report to the state tax authority within 15 days of the submission of the company registration application with regard to information that does not appear in the application for company registration. Similarly, all taxpayers have an obligation to report to the local tax authorities, within 15 days of the commencement of activities there by the taxpayer (e.g. with regard to local business taxes).
The fact that a company is registered in the companies register, or that an entrepreneur completes the registration required, or receives its operating licence, does not necessarily mean that it may pursue unrestricted business activities. It is a basic condition for legal operation that a company obtain the different licences necessary for its activities.
Many manufacturing and service activities may be pursued on the basis of a simple report, while numerous activities require a premises licence.
Some commercial activities may be pursued on the basis of an operating licence.
A number of activities require an activity licence prescribed by sector legislation.
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.
The following websites provide useful information on starting up companies:
With regard to the important role played by small and medium-sized Hungarian enterprises in the economy, a government strategy on the development of small and medium-sized enterprises has been adopted.
The "In Tune with Business" programme aims to reduce the burden on companies and improve their operating conditions. It also focuses on simplifying company and tax administration, increasing the legal security of companies, improving financial conditions and enhancing fair trade and transparency.
The New Hungary Micro-Loan programme aims to improve the opportunities for micro-companies registered in Hungary and which cannot be financed, or not to the desired extent, by means of commercial banking methods, to obtain credit.
One of the main purposes of the Hungarian Development Bank's (MFB) various loan and bank guarantee programmes is to encourage private businesses and company start-ups.
Check also the legislation on this topic in: