How to open a company and obtain a residence permit in Hungary

9 benefits of Hungary residence permit for guest self-employment

1. Moving to Hungary. After opening a company and obtaining a residence permit for guest self-employment, foreigners can move to Hungary and live there continuously for a year. They are eligible to extend their stay for a further two years if they remain in Hungary for at least 90 days every six months.

Investors who wish to live in Hungary for more than three years or plan to obtain permanent residency or citizenship may instead apply for the Hungary Golden Visa.

2. Schengen Area travel. Hungarian residents can travel to other Schengen states without a visa and stay there for 90 days within a six-month period.

How to get Hungary Golden Visa

3. Favourable tax regime. Companies in Hungary pay a 9% corporate tax, the lowest in the EU. The personal income tax is a flat rate of 15%, which is also low compared to other EU states.

The VAT rate is 27%, but some products are taxed at a reduced rate of 18% or even 5%. 

4. Strong economy. Hungary is one of the fastest-growing economies in the European Union, with its GDP having doubled in the 10 years since 2014. As a result, starting a company in Hungary offers investors significant potential for high rewards.

5. Cost of living. By European standards, the cost of living in Hungary remains relatively low. On average, a family of four would spend approximately €2,200 per month in the country. For comparison, this is 52% lower than in Germany and 14% lower than in Spain.

6. State support. Small and medium-sized businesses in Hungary benefit from simplified taxation and accounting reporting systems. They can also receive loans at beneficial rates of up to 2.6%.

7. Family reunification after a year. If the entrepreneur meets the conditions to extend their residence permit for two more years, they are allowed to include close family members in their application. 

8. European healthcare. Hungarian residents can obtain a European Health Insurance Card, which allows them to access medical treatment in Hungary and other EU states either free or at a reduced cost.

9. Access to quality education. Residents’ children can attend schools and universities in Hungary. Five of the country’s higher education institutions are among the top 1,000 in the world, according to the QS Top University ranking.

What is the difference between a business residence permit and a business visa?

Business visa. Investors wishing to visit Hungary for a short term normally get a Schengen visa. Depending on the purpose of travel, it is referred to as a tourist or business visa. A Schengen visa allows an individual to stay in the country for 90 days within a 180-day period.

Business residence permit. Entrepreneurs need a residence permit to stay in the country for more than 90 days. To obtain it, they must first receive a national D visa for private business. 

Documents for the type D visa are submitted to a local consulate or embassy of Hungary. It is normally issued within 6 weeks and valid for 3 months.

Once investors get a D visa, they travel to Hungary, apply, and receive a so-called business residence permit. It is officially named a residence permit for guest self-employment.

Who can obtain a Hungarian business residence?

To qualify for a residence permit by guest self-employment, the applicant must meet the following requirements:

• be over 18 of age;
• have no criminal record, no residence permit refusals, or deportations from Hungary;
• have a legal business income and savings of at least €10,000;
• have an address in Hungary;
• have health insurance.

The spouse can be included in the application by being registered as a co-founder of the company. Dependent children can only join the applicant during the residence permit extension process a year later.

Company types foreigners can open in Hungary

Foreigners do not need to travel to Hungary to open a company. Instead, they can be represented by an authorised local attorney. In this case, the company founders sign the registration application in the lawyer’s presence via a video link and send the documents by post.

The Kft., or limited liability company (LLC), is the most popular type of company in Hungary and is ideal for small to medium-sized businesses. It can be formed by a single participant.

The minimum capital required for a Kft. is HUF 3 million, or around €7,700. Founders must contribute at least half of this amount upon registration, with the remainder due within a year.

The registration fee for a Kft. is HUF 100,000, or approximately €260, though this may vary with exchange rate fluctuation.

The Rt., or joint stock company (JSC), is typically chosen for large companies and can be either private or prepared for stock exchange listing. It requires multiple founders to establish.

The minimum authorised capital for an Rt. is HUF 20 million, roughly €50,000. This capital is divided into shares according to each shareholder’s contribution. The registration fee for an Rt. is HUF 600,000, or about €1,550.

The Kkt., or unlimited liability partnership, must have at least two participants, each with equal legal liability. Share transfers to other parties require unanimous approval from all partners.

There is no minimum capital requirement for a Kkt. The registration fee is HUF 50,000, or approximately €130.

The Bt., a limited liability partnership, differs from the Kkt. by having a general partner with unlimited liability and a limited partner with reduced liability.

The same conditions apply to opening a Bt. as with a Kkt.: no minimum capital requirement and a registration fee of around HUF 50,000.

Documents required to register a company and get business residence in Hungary

To register a company in Hungary, the following documents must be submitted to the Hungarian Chamber of Commerce:

• an application form;
• a company charter;
• sample signatures of the founders;
• a power of attorney;
• an application from the company’s director for the gratuitous contribution of the authorised capital;
• a receipt of payment of state duty to the Chamber of Commerce.

Before travelling to Hungary to obtain a residence permit, an entrepreneur must first apply for a national D visa to enter the country. The following documents must be submitted:

• passport;
• application form;
• two 3.5 × 4.5 cm colour photos;
• certificate of no criminal record;
• health insurance;
• proof of accommodation in Hungary;
• bank statement;
• company registration certificate.

Taxes in Hungary for foreign entrepreneurs

Main taxes. In Hungary, businesses must pay three main types of taxes, regardless of their activity:

• corporate tax — 9%.
• VAT — 27%, 18%, or 5%, depending on the product category. During the first year of operation, all companies pay VAT quarterly;
• local business tax — 1 or 2% deducted from the company’s gross profit, depending on the municipality.

Additionally, companies employing people pay social security contributions, which are 13% of the gross income paid to the employees.

Businesses must also pay capital gains tax on profits from selling assets like securities, real estate, and precious metals. The rate for legal entities is 9%.

Tax incentives. Enterprises with annual revenue under HUF 18 million (about €46,000) and exclusively private clients are eligible for reduced taxes. The incentive is called the KATA tax scheme. Instead of regular corporate tax, a business pays a monthly flat tax of HUF 50,000 (approximately €128).

Double tax avoidance. Hungary has double tax treaties with over 80 countries, including the UK, UAE, Turkey, and most EU nations. Residents of these countries with Hungarian residency are exempt from paying tax on income earned there.

Most popular business areas for investors in Hungary

Automotive industry. This sector generates 21% of the country’s GDP, employing more than 115,000 workers in 712 companies. It is also the fastest-growing industry in Hungary, benefitting from the country’s central European location.

Information technology. This industry includes telecommunications, IT services, outsourcing, and software and hardware products. It is one of the largest sectors in Hungary, accounting for 10% of the GDP. Thanks to government funding, opportunities are emerging in areas such as cybersecurity, cloud computing, and digital transformation projects.

Pharmaceutical industry. This sector has shown continued growth over the past decade, with an average annual growth rate of 3.3%. It is regarded as a priority industry by the Hungarian government, employing nearly 32,000 people.

Renewable energy. Hungarian authorities are committed to making energy cleaner, aiming to have 29% of energy consumption come from renewable sources by 2030. The outlook is especially positive for solar energy: between 2018 and 2024, Hungary’s total installed solar capacity increased by over 240%.

Best places to do business in Hungary

Budapest is the capital of Hungary and its most international city. It is also the most important financial hub, home to many businesses, including small startups and offices of large multinational corporations.

Debrecen is the second-largest city and a growing industrial and tech centre. It is particularly strong in the IT and automotive sectors, with the local government actively encouraging foreign investment. 

Szeged is a university town and research hub, making it an excellent place for biotechnology, pharmaceuticals, and education companies.

Györ has a skilled labour force and is known as an industrial powerhouse, particularly in the automotive industry. The city hosts Audi’s large manufacturing plant.

Pécs is known for its culture, education, and healthcare industries. It is also becoming increasingly recognised for tourism, making it an attractive option for businesses in this sector. 

Key points about Hungary residence permit for guest self-employment

1. Entrepreneurs can obtain a Hungary residence permit for guest self-employment by starting a business in the country. 
2. Foreigners are not required to travel to Hungary to open a business. They can be represented in the country by a local attorney and send the founding documents by post.
3. The residence permit is issued for an initial period of one year, with the option to extend it for two more years, provided the applicant spends 90 out of 180 days in the country during the first year.
4. To obtain permanent residency in the country, investors may consider the Hungary Golden Visa.
5. Hungary offers one of the lowest corporate tax rates in the EU at 9%, alongside a flat 15% personal income tax.