Zártkörűen Működő Részvénytársaság (Private company limited by shares)
Situated in Central Europe, Hungary offers strategic advantages for businesses seeking access to the wider European market. As a full member of the European Union, Hungary connects investors to a consumer base exceeding 500 million people. Within a radius of 1,000 kilometers, roughly 250 million individuals reside, creating a dense economic catchment area ideal for trade, logistics, and industrial activity. The country’s infrastructure—comprising modern highways, railway networks, and international airports—facilitates smooth cross-border movement of goods and services.
Hungary’s fiscal environment is also a defining factor in its appeal to investors. The country maintains the lowest corporate income tax rate in the EU at 9%. This flat rate applies to all taxable entities, regardless of ownership structure or origin of capital. Complementary to this, Hungary’s tax code includes various additional levies and incentives, tailored by sector and locality, contributing to a relatively flexible and predictable tax system.
Foreign direct investment (FDI) in Hungary has remained consistently strong, particularly in high-value sectors such as automotive manufacturing, pharmaceuticals, biotechnology, medical equipment, information technology, and logistics services. The government has supported this trend through sector-specific development programs, and many multinational corporations have opted to establish regional hubs or production sites within Hungary to capitalize on its location and workforce.
The Hungarian labour market offers a competitive mix of affordability and specialization. Wages are notably lower than the EU average, yet the workforce is known for its strong educational background, particularly in engineering, healthcare, and economics. This makes Hungary especially attractive for industries requiring technical knowledge and efficiency.
While the Kft (limited liability company) is the most commonly chosen corporate vehicle in Hungary, larger enterprises or those seeking more formal capital structuring may prefer to incorporate as a Zártkörűen Működő Részvénytársaság (Zrt), a private company limited by shares. The Zrt structure offers enhanced credibility and is often used for more complex ownership arrangements or long-term investment planning. It is governed by more stringent corporate rules, aligning it closely with the corporate governance practices of larger EU economies.
A Zrt requires a minimum share capital of HUF 5 million (approximately €13,000), which may be contributed in cash or in kind. The company is structured around shares, which may be issued in registered form but are not publicly traded. The shares may carry different classes of rights, allowing flexibility in voting power, dividend preferences, or transferability. Shareholders’ liability is limited to their contribution to the share capital, similar to other limited liability structures.
Management of a Zrt is typically carried out by a board of directors, although a single executive officer model is also permissible. A supervisory board is mandatory if certain thresholds are met (e.g., workforce size or public interest), or if required by the articles of association. Zrts must also appoint an auditor unless exempted by size thresholds. These governance requirements make the Zrt suitable for more structured business operations and investor arrangements, particularly where transparency and oversight are important.
From a tax perspective, a Zrt is subject to the standard 9% corporate income tax. There is also a minimum tax base for companies that do not report sufficient taxable income—calculated as 2% of total revenues (applicable from the second tax year). In addition, a local business tax is levied by municipalities. In Budapest, for example, this tax is set at 2% of adjusted net sales revenue. Allowable deductions include material costs, subcontracted services, and R&D expenses, which can reduce the effective burden.
Zrts engaged in retail activity are subject to Hungary’s retail tax regime, which is tiered according to revenue levels. The standard rate ranges from 0.1% to 2.5%, and a temporary surtax of 80% is currently in effect (as of 2024), increasing the effective rate for larger retailers. These taxes are levied on gross income, irrespective of whether a company posts taxable profits. Importantly, the scope of these taxes includes e-commerce and digital sales, reflecting recent trends in consumer behavior.
Dividends paid by a Zrt to private individuals are generally subject to a 15% withholding tax. This applies to both domestic and foreign shareholders. However, if the recipient is a corporate entity—either based in Hungary or abroad—dividend distributions are typically exempt from withholding tax, subject to applicable treaties and substance requirements. Hungary’s network of double tax treaties also helps mitigate the risk of double taxation on cross-border income streams.
Hungary’s corporate legal framework is rooted in civil law and harmonized with EU regulations. The Zrt form provides a robust legal basis for structured investment, enhanced governance, and shareholder protection. For businesses that anticipate capital-raising, international joint ventures, or long-term operations in the region, the Zrt offers a higher level of formalization than the Kft, while still maintaining limited liability and operational flexibility.
Legal
Country code – HU
Legal Basis – Civil law
Legal framework – Act V of 2013 on the New Civil Code of Hungary
Company form – Private company limited by shares (Zártkörűen Működő Részvénytársaság, ZRT)
Liability - The liability of the shareholders for the company is limited to the amount of their respective shareholdings.
Share capital – Minimum share capital must be at least HUF 5,000,000. The initial contribution for a private company in Hungary can be made in cash or kind.
The amount of cash contributions at the time of foundation may not be less than 30% of the share capital.
Asset contributions have been made available to the company, with the exception if the value of such asset contributions is less than 25% of the share capital. Shareholders shall pay up the nominal value or accounting par value of the shares to the limited company in full within one year from the date when the Zrt. is registered and shall place asset contributions at the Zrt.’s disposal in whole within three years from the date of registration.
Shares may be issued as ordinary shares, preference shares, employee shares, interest-bearing shares, redeemable shares.
Shareholders – Private limited companies may be incorporated by one or more shareholders, who can be either natural or legal persons, residents or non-residents, without restrictions. The shareholders of a company limited by shares under 50% are not shown in the company register.
Directors – The Zrt. has to appoint one director or board of directors consisting of at least 3 persons to handle the administrative duties of the company. Corporate directors are not allowed. Directors’ details are available to the public.
Secretary – The company's board of directors may appoint one or more company secretaries from among the employees of the company. There are no restrictions on nationality.
Registered Address – A ZRT is required to have its registered office in Hungary. The registered office is the location where the company’s statutory records are maintained, available for inspection, and is the address where documents can be served, if necessary.
General Meeting – Annual general meetings must be held annually. AGM can be held by conferencing; in that case, the articles of association, or a general meeting resolution adopted by authorization of the articles of association, has to define the procedure for checking the identification of shareholders participating through a telecommunications connection, along with the voting procedure and the authentic conclusion of the results, furthermore, define the procedure for the election of general meeting officers, and the requirements for shareholders to make their opinions known and to make proposals.
Electronic Signature – Permitted.
Re-domiciliation – Inward and outward re-domiciliation is allowed.
Compliance – Companies are obliged to keep the report for the fiscal year, as well as the supporting inventory, assessment, ledger extract, journal ledger or other records in legible form for at least 8 years.
The statement of accounts that supports the accounts, directly and indirectly, must be kept for at least 8 years. Accounting records must be stored securely at the company’s headquarters/premises, or at another place reported to the tax authority.
Companies must publish their annual reports, and file an annual return and tax return to the relevant authorities.
Appointment of an auditor is compulsory for all companies whose annual net sales exceed HUF 100 million according to the average of the two business years preceding the business year and whose average number of employees in a given year is more than 50.
- Shareholders not disclosed
- Directors not disclosed
- Corporate shareholders permitted
- Corporate directors permitted
- Local director required
- Secretary required
- Local secretary required
- Annual general meetings required
- Redomiciliation permitted
- Electronic signature
- Annual return
- Audited accounts
- Audited accounts exemption
- Exchange controls
- Civil law (Roman) Legal basis
- 1 Minimum shareholders
- 1 Minimum directors
- HUF 5,000,000 Minimum issued capital
- HUF 5,000,000 Minimum paid up capital
- HUF Capital currency
- Local Location of annual general meeting
- 2017 AEOI
Taxes
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 - 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).
Local business tax is payable on net revenue, that is, gross revenue minus COGS. To that amount few deductions are allowed such as those explained above. Local business tax is payable in addition to corporate tax. Small businesses (HUF 25 million, or HUF 120 million for a retailer) can opt for a flat HUF 50,000 local business tax.
There is also a retail tax that also applies to electronic sales. The retail tax is from 0% (tax base of less than HUF 500 million), 0.1% (tax base between HUF 500 million and HUF 30 million), 0.4% (between HUF 30 billion and HUF 100 billion) and 2.5% on the rest. There is a retail surtax of 80%. (i.e. retail tax x 0.80 added to tax base) which can lead for largest companies to a total retail tax of around 5%.
Local business taxes, retail taxes are levied according to net revenue, regardless of whether the company generates a taxable profit for corporate tax purposes. Further note that there is a minimum corporate tax base calculated as 2% of the total revenues. The same typically applies in the second tax period of the company (first tax period exempt).
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.