A Step-by-Step Guide to Establishing a Hungarian Kft and Its Strategic Advantages for International Entrepreneurs

In today’s global economy, businesses are constantly seeking locations that combine cost efficiency, access to major markets, and a favorable regulatory framework. For many entrepreneurs and investors, establishing a Hungarian Kft (Korlátolt Felelősségű Társaság), the Hungarian equivalent of a limited liability company, is an increasingly attractive choice. With a business-friendly climate, central EU location, and competitive tax rates, Hungary stands out as a prime destination for international expansion.

Whether you’re a startup seeking your first European base or a mature company looking to enter new markets, this guide explores everything you need to know about Hungary company formation, focusing on the establishment of a Hungarian Kft.

Why Choose Hungary for Business?

Hungary offers a unique mix of advantages for international entrepreneurs:

1. Strategic Location: At the heart of Central Europe, Hungary connects Western and Eastern markets. Budapest is a key logistics hub close to Vienna, Prague, and Belgrade.

2. EU and Schengen Membership: Full EU membership ensures access to the single market and harmonized EU regulations.

3. Low Corporate Tax: At 9%, Hungary has the lowest corporate income tax in the EU, complemented by a municipal business tax of up to 2% depending on location (NAV – Corporate Tax).

4. Skilled Workforce: Highly educated, multilingual professionals in IT, engineering, finance, and legal sectors.

5. Competitive Setup Costs: Incorporation and operational costs are lower compared to Western Europe, making Hungary appealing for SMEs and startups.

What is a Hungarian Kft?

A Kft (Korlátolt Felelősségű Társaság) is the most common Hungarian business entity, similar to an LLC. It is a separate legal entity and offers limited liability to its shareholders. A Kft can be fully foreign-owned.

Key Features of a Hungarian Kft:

• Minimum Share Capital: HUF 3 million (approx. €7,900), contributed in cash or in kind.

• Liability: Limited to the capital contribution.

• Management: Managed by one or more directors; shareholders can be individuals or legal entities.

• Taxation: Subject to 9% corporate income tax plus local business tax (0–2%).

• VAT Number: Issued automatically together with the company’s tax number by the Hungarian Tax Authority (NAV) (NAV – VAT).

Step-by-Step Guide to Establishing a Hungarian Kft

1. Choose a Unique Company Name: The name must be unique and comply with Hungarian naming rules. Availability is checked at the Company Court of Registration.

2. Prepare Incorporation Documents: Documents include the Articles of Association, registered office declaration, proof of capital contribution, specimen signatures of directors, and ID of shareholders/directors. Documents are prepared in Hungarian; translations and notarization may be required.

3. Submit to the Court of Registration: Incorporation is filed electronically with the Company Court. Approval is usually granted within 1–3 business days once documents are complete, though practical timelines can extend to 5–10 business days due to translations and bank requirements (Hungarian Courts – Company Court).

4. Open a Bank Account: While capital must be committed at incorporation, the actual deposit into a Hungarian bank account can be deferred. However, companies must open a Hungarian HUF corporate account promptly (commonly within 8–15 days) for tax and payroll compliance.

5. Obtain Tax and VAT Number: The company receives its tax number and VAT number automatically upon registration by NAV. Separate application is only needed for certain EU cross-border activities.

6. Register for Social Security and Local Taxes: Companies employing staff must register with the Social Security system and the relevant municipality for local business tax.

Compliance and Maintenance Requirements

• Annual Financial Statements: Must be filed electronically with the Company Court and reported to NAV.

• Registered Office: Every Kft must maintain a registered office in Hungary.

• Local Representative: If all directors reside outside the EU/EEA, a local delivery agent must be appointed for service of process.

• Accounting: Double-entry bookkeeping is mandatory; most businesses engage a local accountant.

Advantages of Establishing a Hungarian Corporation

• Cost Efficiency: Office rental, salaries, and operations cost significantly less than in Western Europe.

• Fast Incorporation: Electronic filing and streamlined procedures make Hungary one of the fastest EU jurisdictions for setup.

• Attractive Holding Regime: Hungary does not levy withholding tax on dividends paid to foreign corporate shareholders and grants participation exemption on qualifying capital gains (OECD Hungary Tax Profile).

• Growing Startup Ecosystem: Budapest has a vibrant tech and startup scene with access to coworking spaces, accelerators, and venture funding.

Challenges and Considerations

• Hungarian Language: Most legal documentation must be in Hungarian.

• Local Business Tax Variations: Rates differ across municipalities.

• Complex Tax & Labor Rules: While incorporation is straightforward, compliance can be complex without expert guidance.

How Mirr Asia Can Help

Navigating Hungarian company formation requires local expertise. At Mirr Asia, we help foreign entrepreneurs establish and grow businesses in Central and Eastern Europe.

Our services include:

• Company formation and legal documentation

• Registered office services

• Bank account assistance

• VAT registration and compliance

• Accounting and tax support

• Ongoing business advisory

With our local knowledge and international perspective, Mirr Asia ensures a smooth, compliant, and efficient Hungary company formation — whether you’re starting fresh or expanding your global presence.