Hungary has earned a reputation as a competitive and business-friendly jurisdiction in the EU — especially thanks to its 9% corporate tax rate, remote-friendly incorporation rules, and R&D incentives. But what does the process look like for small foreign-owned companies or startups aiming to operate in Hungary?
Below, we break down the key aspects of minimum capital, tax rules, admin requirements, and practical realities — helping you decide if Hungary is a good fit for your business in 2025 and beyond.
1. Minimum Capital & Company Formation Requirements
The most common legal structure for foreign-owned businesses in Hungary is the Kft. (Limited Liability Company).
Key Facts:
- Minimum Share Capital: HUF 3 million (≈ €8,500)
- Use of Capital: The capital does not need to remain locked — it can be used for operational expenses as soon as registration is complete.
- Ownership: 100% foreign ownership is fully permitted
- Incorporation Time: Company formation usually takes 1–2 business days after document submission
- Remote Setup: Registration can be completed remotely via Power of Attorney
Director & Address Requirements:
- No Hungarian or EU resident director is required.
- If the director is not an EU resident, a local tax representative must be appointed.
- A local registered office is mandatory for all companies.
Great for founders outside the EU looking for quick, location-flexible incorporation.
2. Tax Rules for Small and Low-Profit Companies in Hungary
Hungary’s 9% Corporate Income Tax (CIT) rate applies to all companies, but the minimum tax base rule affects startup-stage firms.
Minimum Tax Base: 2% of Revenue
- If your declared profit is low or negative, your company is still expected to pay tax on at least 2% of total annual revenue.
- However, exemption is possible for early-stage or low-profit startups — if you can justify the situation (e.g., high development costs).
Small Business Tax (KIVA) – 10%
- Hungary offers a 10% tax regime (KIVA) for qualifying small businesses (up to HUF 3 billion revenue and payroll <50 employees).
- Not all foreign-owned businesses qualify — eligibility depends on turnover, payroll, and shareholding rules.
Local Business Tax (HIPA)
- Local municipalities may charge up to 2% in business tax, though exemptions exist for micro-entities in certain regions.
- In Budapest, this 2% applies unless revenue is below HUF 1.5 million.
Combined, these mechanisms offer flexibility but require planning to avoid unintended tax exposure during low-revenue years.
3. Admin, Accounting & Reporting Requirements
Despite business-friendly policies, compliance in Hungary is detailed — especially during your first two years in operation.
Accounting & Reporting:
- All companies must maintain Hungarian GAAP-based accounting in Hungarian.
- Annual financial statements are due within 5 months of the financial year-end, and must be filed electronically.
- Monthly VAT returns are required during the first two years (even with low or no revenue).
- Real-time invoice reporting (RTIR) requires companies to use Hungary-compliant invoicing systems.
Common Startup Operating Costs:
| Requirement | Typical Cost / Burden |
|---|---|
| Accountant (monthly) | €120–€250 |
| Tax filings (CIT/VAT/payroll) | Included in accountant fees |
| Payroll setup | Required (even for 1 employee) |
| Bank account setup | Can take 2+ weeks for non-EU |
It’s common for foreign-owned startups to outsource both accounting and tax compliance from day one.
4. Practical Experience Insights
Many non-resident founders choose Hungary not just for the tax rate but for tech-friendly advantages such as:
- 150%+ R&D super deductions (2022–2027)
- 50–100% patent box exemptions
- Strong government focus on innovation and EU funding access
That said, early-stage companies often face:
- Delays opening local bank accounts (especially for non-EU founders)
- Challenges due to Hungarian language-only filings
- Admin burden from mandatory VAT, payroll, and real-time reporting
Despite these challenges, Hungary remains a top choice for founders in SaaS, R&D, IP holding, and digital services — especially when compliance is outsourced.
Is Hungary Right for Your Startup?
You should strongly consider Hungary if you value:
- EU presence with competitive tax strategies
- Remote incorporation and 100% foreign ownership
- Incentives for tech, IP, or R&D-heavy models
- Low flat CIT rate + innovation incentives
You might want to think twice if:
- You’re not prepared for local accounting and compliance costs
- You expect to operate with zero revenue for several years and can’t justify exemption from minimum tax base rules
- Real-time invoicing or Hungarian-language documentation is a dealbreaker
Final Takeaway
Hungary offers one of the most cost-efficient and streamlined business environments in the EU, especially for foreign-owned tech and innovation-led companies. But like any tax-efficient jurisdiction, the details matter — and startups should understand the practical realities around minimum capital, compliance, and tax eligibility before jumping in.
