Practical guide for Ukrainian businesses entering the Hungarian market

Incentive plans for Ukrainian businesses in Hungary

At the moment there are no specific rules for companies relocating from Ukraine. The general incentives in Hungary are responding to the dynamics of the economy.

Cash grants (tenders and VIP Cash Subsidies) and notable tax benefits are available in relation with trainings, R&D&I projects and development investments.

There are special economic zones and projects that are given priority for national economy consideration (due to strategic importance), however these are available in case of significant investments.

HIPA (Hungarian Investment Promotion Agency) is the governmental body directed by Ministry of Foreign Affairs and Trade responsible for investments.

Relocating a business from Ukraine to Hungary

There are no legal provisions directly addressing the transfer of a company from Ukraine to Hungary, however, the company registration process in Hungary is relatively quick. We can support you in the incorporation process.

Company formation in Hungary

Freedom of business activity

In Hungary, there is a general rule of freedom of business activity, which means that in most cases you can set up a company and run it in the form you choose.

Some activities require registration in a specific legal form or reserve the form to persons with specific competencies.

Forms of conducting business activity

• Sole proprietorship
• Partnerships (general and limited)
• Single-member limited liability company
• Private limited liability company
• Limited company (private or public)

Entrepreneurs most often decide to run business in the form of a private limited liability company. We can provide full-range support to Ukrainian companies planning to enter the Hungarian market and help with navigating the country-specific statutory requirements.

Minimum capital and minimum financial contributions

• Sole proprietorship – there are no requirements on amount of capital, however it can only be established by a private entrepreneur
• Partnerships (general and limited) – there are no requirements on amount of capital
• Single-member limited liability company – the minimum amount of capital is HUF 3,000,000
• Private limited liability company – the minimum amount of capital is HUF 3,000,000
• Private limited company – the minimum amount of capital is HUF 5,000,000
• Public limited company – the minimum amount of capital is HUF 20,000,000

The incorporation time in the case of companies is fast. The business operations can be started upon signing the instrument of constitution. After submitting the documents the Court usually registers the company within 1 day and the Tax Authority issues the tax number in 1 day after registration – if there is no legal obstacle of registration or becoming a taxable person.

Registrations required to run a business in Hungary

The entrepreneur is obliged to register:

• in the Court
• for taxation purposes with an acquisition of a tax ID number and a statistical number
• to the Hungarian Chamber of Commerce and Industry and other chambers if required

The entrepreneurs shall also have a Hungarian bank account.

Requirements on foreign investors in Hungary

Citizens of the countries outside the European Union and the European Economic Area, like Ukraine, may start and conduct a business activity under the same principles as Hungarian citizens – if they have a permanent residence permit, an EU long-term residence permit or a temporary residence permit, issued for a specific purpose, for instance, in relation to university studies or researches.

Foreigners, who are not citizens of the above-mentioned countries or who do not have a residence permit enabling them to set up a business on the same terms as Hungarian citizens, may operate in the form of a company, join or acquire shares or stocks in such companies without any restriction. Also they may set up a branch of a foreign entrepreneur in Hungary.

The non-Hungarian investors have to have a person or an entity who is responsible for acquiring and forwarding the official letters sent to the foreign member.

In case of Ukrainian investors, no visa is required when entering Hungary for a shorter period of time when travelling for business purposes. Otherwise, the same applies for Ukrainians as for other investors. Also, Ukrainian citizens are eligible for a residence permit in Hungary as a refugee, therefore, they are eligible to start not only companies, but become private entrepreneurs as well.

Sanctions

The act of running a business illegally is subject to fines by the authorities. These illegal activities can cause prohibition of later activities and also, if any financial crime was committed (e.g. budgetary fraud), then restriction of liberty can be posed as a sanction.

Key taxes for businesses in Hungary

Corporate income tax

• CIT: 9%

Value-added tax

• Standard VAT: 27%
• Reduced VAT:
  • 5% – reduced VAT rate for selected types of goods and services: some type of milk, poultry meat, fish fillets and other fish meat, fresh eggs, medicine, books, magazines, specific large live animals, district heating services, instrumental live music performed by artists at private events, new residential properties, restaurants and internet
  • 18% – for selected types of goods and services: dairy products, products made from milk, corn, starch, commercial accommodation services and open-air events’ service providers

Personal taxation of employees relocated from Ukraine to Hungary

Contributions paid by the employer

The rate of social security contribution is 13% as of 1 January 2022.

Contributions paid by the employee

The contribution paid by the employee for social security and health insurance is 18.5% of the gross salary.

Hungarian legislative measures in relation to Ukraine

The Government continuously updates relevant legislative documents in order to decrease the administrative burden for Ukrainian refugees and to assist the entities and organizations who are helping those in need.

Ukrainian citizens are to acquire the status of refugee when entering Hungary from their home as a consequence of the war. The government made several simplifying provisions related to their employment (e.g. grants for employers who employ Ukrainians), status, health care, residency etc.

Need help with entering the Hungarian market? Book us for a free consultancy!

We have years of experience in supporting businesses to grow in Hungary. Benefit from our free 1-hour long market entry consultancy that includes:

• Brief analysis of your needs based on the information provided
• Country-specific aspects that may be important to your investment
• Basics of local tax, accounting and legal rules in Hungary