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Zártkörűen Működő Részvénytársaság (Private company limited by shares)

Hungary is one of the most developed economies in Central Europe. As a member of the European Union, it is a gateway to a market of more than 500 million people – 250 million in a radius of 1,000 km. Its strategic location makes it an investment destination and ideal logistics point, due to its quality infrastructures, industrial and scientific parks.

Furthermore, Hungary stands out for levying the lowest corporate income tax across the EU, a low 9% tax rate.

This is why the foreign direct investment stock in Hungary is one of the highest in the region.

The Hungarian workforce is cost-effective and highly qualified, especially in engineering, medicine, and economics, with a 60% lower cost than the European average.

Another aspect that makes Hungary a very attractive region for investment is its financial stability. Its financial system is one of the most developed in the area. Together with its government legislation, favorable investment policies and tax incentives aimed at improving competitiveness, that we will discuss it later in more detail.

Hungary has several fast-growing sectors such as automotive, services, biological sciences, pharmaceuticals, and medical technology, electronics, information technology, R&D, renewable energy, supply chain management, and distribution logistics sectors.

As weak points, Hungary is heavily dependent on the economic situation of its main European trading partners, due to the importance of its foreign sector, its low level of foreign exchange reserve and the risk of loss of value of its currency.

Zártkörűen Működő Részvénytársaság (Zrt) is a private company limited by shares, which are not publicly listed and traded.

The minimum share capital is HUF 5,000,0000 (≈€16,000), which may be in cash or in-kind contributions.

The management of the company is carried out by a board of directors of three to eleven members, or in the case that the constitutive document establishes it, the general manager manages the company.

Shareholders representing at least 5% of the voting rights may request a supervisory board, which must have between 3 and 15 members.

Hungarian companies benefit from the lowest corporate tax burden in the EU. Currently, the corporate income tax rate is 9%, dividends received may be tax-exempt, and there are no withholding taxes on payments to non-resident companies.


Tax residency – A company is resident in Hungary if it is incorporated in Hungary or its place of effective management is in Hungary.

Basis – Hungarian companies are taxed on their worldwide income.

Corporate income tax rate – Corporate income tax rate is 9%.

Municipal tax rate - A local business tax is applied to the net revenue of a company. The local business tax rate varies depending on the municipality - the local business tax in Budapest is 2%. The local business tax is levied on net sales revenue (as opposed to profits) (with deductions available for COGS, subcontractors’ work, material costs, mediated services, and research and development (R&D) costs). If the company has presence in various locations in Hungary, then revenue would need to be attributed to each municipality according to the level of activities in such municipality (considering various variables, such as permanent establishment definition, tangible asset value and payroll costs in each municipality, when applicable).

Capital gains – Capital gains are taxed as ordinary income.

An exemption may apply for those gains from the sale of shares of a subsidiary, provided that shareholder owns at least 10% of shares for at least 1 year, and subsidiary is not considered a controlled foreign company (CFC).

Dividends – Dividends received by a resident entity, whether from a local or foreign source are usually tax-exempt unless foreign-source dividends are derived from a CFC and are paid out of profits that are subject to a tax lower than 9%.

Interests - Interest income is subject to tax at the standard rate.

Royalties – 50% of royalty income may be exempt from taxation, subject to certain requirements.

Foreign-source income – Foreign-source income is taxable according to tax treaties provisions. If no tax treaty is available, a tax credit for foreign tax paid may be available.

Withholding taxes – Dividends, interests, and royalties paid to a non-resident company are exempt from withholding tax. A 15% withholding tax may apply for dividends, interests, and royalties paid to non-resident individuals.

Losses – Losses arising from taxable income may be carried forward for 5 years and may be offset against up to 50% of the profit before tax. Carryback of losses is not allowed.

Inventory - Inventory valuations are generally stated at the historical cost or their fair market value, whichever is lower. First in first out method (FIFO) or average values may be used for book and tax purposes. Last in first out (LIFO) is not allowed for tax purposes.

Anti-avoidance rules – Transfer pricing rules require related-party transactions to be done at arm’s length. Transactions may be required to be documented and advance pricing agreements are available.

Thin capitalization rules apply, interest on non-bank debt exceeding three times the taxpayer’s equity is not deductible for tax purposes.

Hungary has controlled foreign company regulations, CFC is a foreign company in which a resident holds a participation exceeding 50% (direct or indirect) and a foreign P.E., if the tax paid is less than the tax payable in Hungary, and 50% or more of its revenue is passive income. Certain profits derived from passive income from a CFC may be taxable in Hungary, although foreign tax paid on these profits may be creditable.

Labor taxes – Employers and employees are required to make contributions to social security fund at 22% and 18.5% on employees’ monthly wage, respectively. Employers also have to pay a vocational training contribution of 1.5% on employee gross salary.

Tax credits and incentives – A tax credit for foreign tax paid is usually available up to the Hungarian tax payable on the creditable income and up to 90% of the tax paid abroad.

Tax credits are available, under the development tax incentive, for certain investments, depending on the amount, the industry and the region where the investment is carried out. There are also

Tax deferrals for growing companies are also available.

Projects aimed at improving energy efficiency may benefit from tax credits up to 30% of eligible costs.

Film and theatre subsidies, developments, business startups and small and medium-sized entities may apply for tax incentives.

Compliance – On average, a company in Hungary may require 11 payments and 277 hours per year to prepare, file and pay corporate income tax, value added tax, and labor taxes, including payroll taxes and social contributions.

Personal income tax – Tax residents in Hungary are Hungarian nationals, EEA nationals with a registration card issued in Hungary and spending at least 183 days per year in the country, foreigner permanently settled in Hungary, or not permanently settled but his or her centre of vital interests in the country or spends at least 183 days per year in the country.

Tax residents are subject to income tax on their worldwide income, while non-residents are only taxed on their income arising from Hungarian sources.

Income tax rate is currently 15%. Capital gains, dividends, interests and rental income are generally taxed at standard rate.

Other taxes – There is a local business tax whose rate varies depending on the municipality - the local business tax in Budapest is 2%. The local business tax is levied on net sales revenue (as opposed to profits) (with deductions available for COGS, subcontractors’ work, material costs, mediated services, and research and development (R&D) costs).Municipalities levy property tax on buildings and plots. There is an inheritance tax of 18%, but inheritances to direct descendants and spouse are fully-exempted. Certain transactions involving the sale of immovable and movable properties are subject to transfer tax. There is no wealth tax.

V.A.T. standard rate is 27%, with reduced rates of 18% and 7%.

  • Offshore Income Tax Exemption
  • Offshore capital gains tax exemption
  • Offshore dividends tax exemption
  • CFC Rules
  • Thin Capitalisation Rules
  • Patent Box
  • Tax Incentives & Credits
  • Property Tax
  • Wealth tax
  • Estate inheritance tax
  • Transfer tax
  • Capital duties
  • 9% Offshore Income Tax Rate
  • 9% Corporate Tax Rate
  • 9% Capital Gains Tax Rate
  • 0% Dividends Received
  • 0% Dividends Withholding Tax Rate
  • 0% Interests Withholding Tax Rate
  • 0% Royalties Withholding Tax Rate
  • 0 Losses carryback (years)
  • 5 Losses carryforward (years)
  • FIFO Inventory methods permitted
  • 277 Tax time (hours)
  • 11 Tax payments per year
  • 18.50% Social Security Employee
  • 22.00% Social Security Employer
  • 15% Personal Income Tax Rate
  • 27% VAT Rate
  • 79 Tax Treaties

Country details


Hungary is a landlocked Central European country, member of the European Union. It is located on the Pannonian plain and has borders with Slovakia to the north, with Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest and Austria to the west. Its over 93,028 sq. m. is inhabited by almost 10 million people.

Its capital and the most populated city is Budapest, as well as its main industrial, trade and transport center. Considered to be one of the most beautiful cities in Europe, Budapest has several World Heritage Sites, including, on the banks of the Danube, the Buda Castle district, Andrássy Avenue, the Heroes’ Square, and its Metro, the second oldest in the world.

Its official language is the Hungarian and its legal tender currency is the Hungarian Florint (HUF), and for now, there is no deadline for the euro adoption.

Hungary is defined as a parliamentary liberal democracy, in which authority resides in the people and the practice of government is carried out within the framework of a rule of law.

The supreme organ of power is the parliament, or in Hungarian Országgyűlés. According to the constitution, elections to parliament are held every four years to elect the 386 deputies according to a mixed system; 176 seats are elected in individual constituencies and 210 are voted on by lists drawn up by the parties.

The President of the Republic is elected every five years by the parliament. Its role is rather representative.

Hungary has an export-oriented economy. Its main exports are electrical machinery and equipment, vehicles, pharmaceuticals, plastics, medical apparatus, and rubber articles.

The country also has other important industries such as automotive, building materials, metallurgy and food, and beverages processing.

Regarding the primary sector, the country has very favorable agro-climatic conditions, 63% of its total area is arable, where its most important crops are wheat, corn, sunflower, potato, sugar beet, canola and a wide variety of fruits.

Tax treaties

Country Type Date Signed
Qatar DTC  2012-01-18
Austria DTC  1975-02-20
Japan DTC  1980-02-13
Netherlands DTC  1986-06-05
Malta DTC  1991-08-06
Georgia DTC  2012-02-16
Kazakhstan DTC  1994-12-07
Azerbaijan DTC  2008-02-18
Uruguay DTC  1988-10-25
South Africa DTC  1994-03-01
Bulgaria DTC  1994-06-08
Germany DTC  2011-02-28
Singapore DTC  1997-04-17
Former Yugoslav Republic of Macedonia DTC  2001-04-13
Israel DTC  1991-05-14
Viet nam DTC  1994-08-26
Malaysia DTC  1989-05-22
Slovenia DTC  2004-08-26
Korea, Republic of DTC  1989-03-29
United Kingdom DTC  2011-09-07
Belgium DTC  1982-07-19
Finland DTC  1978-10-25
Armenia DTC  2009-11-09
Ukraine DTC  1995-05-19
Russian Federation DTC  1994-04-01
San Marino DTC  2009-09-15
Denmark DTC  2011-04-27
Croatia DTC  1996-08-30
Turkey DTC  1993-03-10
Latvia DTC  2004-05-14
Brazil DTC  1986-06-20
Lithuania DTC  2004-05-12
Switzerland DTC  2013-09-12
Jersey TIEA 2014-01-28
Spain DTC  1984-07-09
Cyprus DTC  1981-12-01
Saudi Arabia DTC  2014-03-23
Chinese Taipei DTC  2010-05-19
Canada DTC  1992-04-15
Guernsey TIEA 2013-09-11
Poland DTC  1992-09-23
Mexico DTC  2011-07-24
Pakistan DTC  1992-02-24
Philippines DTC  1997-06-13
Albania DTC  1992-11-14
Bahrain DTC  2014-02-24
Iceland DTC  2005-11-23
United Arab Emirates DTC  2013-04-30
United States DTC  1979-02-12
Hong Kong, China DTC  2010-05-12
Belarus DTC  2002-02-19
Italy DTC  1977-05-15
India DTC  2003-11-03
Bosnia and Herzegovina DTC  1985-10-17
Serbia DTC  2001-06-26
France DTC  1980-04-28
China DTC  1992-06-17
Montenegro DTC  2001-06-20
Moldova, Republic of DTC  1995-04-19
Sweden DTC  1981-10-12
Thailand DTC  1989-05-18
Egypt DTC  1991-11-05
Australia DTC  1990-11-20
Slovakia DTC  1994-08-05
Morocco DTC  1991-12-12
Greece DTC  1983-05-25
Kosovo DTC  2013-10-03
Ireland DTC  1995-04-25
Portugal DTC  1995-05-16
Uzbekistan DTC  2008-04-17
Luxembourg DTC  1990-01-15
Romania DTC  1993-09-16
Kuwait DTC  1994-01-17
Czech Republic DTC  1993-01-14
Indonesia DTC  1989-10-19
Mongolia DTC  1994-09-13
Norway DTC  1980-10-21
Tunisia DTC  1992-10-22
Estonia DTC  2002-09-11

Tax treaties Map



We can help you incorporate a Zártkörűen Működő Részvénytársaság (Private company limited by shares) in Hungary for $3,400.

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