Are you planning to do business in Hungary? You have several options – you just need an idea for your operation, and find the business form that suits it best. Company formation or self-employment? VAT or no VAT? Which tax regime? Let’s give you a crash course.
Consider what you want to do and how you want to do that. The first big decision is whether you want to set up a company or start freelancing in Hungary. In either case, make sure to see our checklist here for other aspects to consider (even though it was written with self-employment in mind).
Read an explanation below the summary table.
| Company (LTD) | Freelancing | |
| Setup time | 4-5 business days | 1 day |
| Registration | Need a lawyer | Possible on your own |
| Products | Goods or products | Goods or products |
| Employees | Allowed | Allowed |
| EU VAT number | Available immediately | Available immediately |
| Chamber of Commerce registration | Required | Required |
| Registered seat | Required | Required |
| Separate business bank account | Required | Optional if VAT exempt, otherwise required |
| Starting capital | At least HUF 3 million | Not required |
| Accountant | Required above HUF 10 million revenue / year and for the yearly balance sheet; otherwise strongly recommended | Not required but strongly recommended |
| Liability | Limited | Full |
| Residency | Not required (but available based on operation) | Required |
| Main tax regimes | TAO, KIVA | Regular, KATA, Flat-rate |
| Revenue limit | On KIVA | On KATA and Flat-rate taxation |
| VAT exemption | Available below HUF 12 million / year in revenues | Available below HUF 12 million / year in revenues |
Setting up a company or a freelancer business in Hungary both take a relatively short time. You can get an EU VAT number immediately, without any extra requirements or costs. You can use your business to sell either products or goods, and you can have employees to help your work.
The most important difference is liability.
If you are not a Hungarian national, the next important question is residency. Since freelancers are liable for damages in full, only people who are actually available locally can start freelancing in Hungary. This means citizens of Hungary or the EEA, or at least residents of Hungary. If you are none of these, you can only start a business in Hungary by setting up a company. (Once your company is running, however, you can apply for Hungarian residency, which you can use to access the entire Schengen zone without a visa.)
Other than these, operation is pretty similar. You will need to register with the Chamber of Commerce, have a seat where you can always be contacted, and have a bank account from where you can pay taxes. You will most probably need an accountant too; you are not officially required to have one until a certain revenue, but the yearly balance sheet of an LTD can only be prepared by a chartered accountant. Compliance with tax regulations is taken very seriously in Hungary, and a precise, competent accountant can be a true ally for that. Our colleagues at Helpers Finance have special expertise in working with foreign business owners, so feel free to reach out to us if you need assistance.
Even taxation is similar for freelancers and company owners, at least in the regular case. Normally, under the standard, “TAO” taxation rules, your business pays 9% corporate tax, while you as the owner pay a 15% dividend tax and a 13% social contribution tax after your dividends (as well as a 18.5% social security tax if you are a resident of Hungary). Under the standard tax regime for freelancers, you pay a 9% freelancer tax on your profits, then a 15% personal income tax, a 13% social contribution tax, and an 18.5% social security tax.
At the same time, based on the size and other particulars of your operation, you can choose other, more favorable tax regimes.
If your yearly revenue is below HUF 12 million, you may also choose to be exempt from VAT. Whether this makes sense for your business depends on which form of business and which tax regime you chose, and who your customers are: you will be able to offer your services for a lower price, but you will not be able to deduct VAT after the purchases you make for your business.
Our team at Helpers Hungary has been providing administrative assistance to expats living, working, and doing business in Hungary for almost 20 years. Whatever your plans are, you can safely rely on our expertise to show you the way and support your new life in Hungary.
Do you need help with company setup, accounting, or residency application? We are here to help.
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