Today, Hungary is known for its most friendly terms for company incorporation, doing business and taxation of activities among all countries located in continental Europe. We recommend that you read this article before you register your company in Hungary.
As of 2017, the lowest income tax rate is reported in Hungary which is only 9%. At the same time, excellent conditions are livingly formed within the country to create holdings and to make transactions with intellectual property, so-called royalties. All this, including the controlled assignment of VAT number, which is very important for doing business within the EU, makes Hungary as one of those countries where business can be the most profitable.
Hungarian companies and their application
As of today, income taxes within Hungary are for those companies with the profit size that does not exceed 1.8 mln Euro, which is equivalent to 500 mln HUF, and make only 10% of them. This rate is one of the lowest across the EU. It should also be noted that in this country, the VAT number is given to companies in the course of incorporation to avoid the need in additional costs for it to obtain. This helps doing commercial business all over the EU at the rate of VAT 0%.
For Hungary, among other things, it is one of the most advantageous and attractive holding regimes. Dividends received from companies that are registered within the EU are not taxable on their profits. Among other things, the dividend component is subject to tax exemption irrespective of the company, but only where such conditions are followed:
- The company owns 30% of shares and more;
- The duration of ownership of these shares exceeds 12 months;
- Shares are declared to tax authorities within 2 months since the date of purchase;
- Subsidiaries are not under the control of foreign corporations; that means that at least 10% of them are owned by Hungarian residents.
Among other things, Hungary is also distinguished for rather interesting and loyal regime regarding royalty, the benefit of which is one of the largest in the EU. Thus, only half of the profits received under royalties are subject to corporate tax. This includes patent payments, use of know-how, potential trademarks, commercial secrets, various software, databases, video and audio, all those works that are protected by the copyright law.
In addition, taxes do not fall on capital gains resulting from the sale of intellectual property, but only when a range of requirements are met.
0% royalties paid even for foreign legal or offshore companies further enhances Hungary’s attractiveness and profitability in terms of sublicense.
If you are concerned in more detailed information about the company incorporation in Hungary, please feel free to contact our specialists.
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