If you cannot decide which Hungarian legal form to choose for your business and are weighing up a Kft (the equivalent of an s.r.o.) against a joint-stock company:

Tax advisers will clearly recommend a Kft, since setting up a Kft in Hungary and running it is considerably less bureaucratic, which is also reflected in lower running costs compared with a joint-stock company.

When setting up a Hungarian joint-stock company, you need a much higher minimum share capital, you must issue shares and you must appoint and maintain a board of directors and a supervisory board. With the Hungarian form of limited company (Kft), you are spared these issues. The operation and legal form of a Hungarian Kft are very similar to those of a Slovak s.r.o.

Liability in a Hungarian company is likewise limited to the amount of capital contributed.

The main difference lies in the rules on issuing tax documents. Invoicing in Hungary is subject to much stricter rules: you may use only prescribed forms or software meeting the criteria of the Hungarian Ministry of Finance. As Hungarian accountants, we can confirm that financial discipline is much stricter than in Slovakia. (receipts, cash handling, invoicing, cash payments).

Tax advantages in Hungary

In recent years the tax system has changed very favourably for small and medium-sized enterprises.

  • Hungarian corporate income tax has been set by law at 9%.
  • In addition to corporate income tax, a 2% local business tax is payable to the local authority (its base being turnover less the cost of goods sold and intermediated services).
  • If the Hungarian company’s profit is paid out as dividends, a 15% dividend tax is payable where the owner is a natural person; where the owner is a legal entity, no dividend tax is due.

There are also several simplified forms of taxation for Hungarian small and medium-sized enterprises.

A further advantage is the stability of the legislation: according to government representatives, the overhaul of the Hungarian tax system has been completed and no further significant changes are planned for the coming period.

The business environment in Hungary

Business life in Hungary is similar to that in Slovakia: similar contracts are used, the business culture is the same as in Slovakia, and business etiquette and negotiating customs are likewise similar. English and German are also increasingly used. Several features of the Hungarian business environment stand out.:

  • Access to EU subsidies is much more widespread for Hungarian businesses.
  • a sufficiently qualified workforce is available at a reasonable cost, and employment is supported by the state with substantial relief in many cases (people without vocational training, women returning from maternity leave, graduates, and employees under 25 and over 55)
  • banking services, however, cost more than in Slovakia, although the level of service is higher (a domestic bank transfer in Hungary is completed within 4 hours)
  • dealing with the authorities electronically is far more widespread

Last but not least, a new country represents an expansion of the potential market for your products and services.