Residence permit of Hungary through business

Residence permit of Hungary through company registration

Business immigration to Hungary may be the best solution for your subsequent naturalization in the European Union. It should be noted right away that this option can be recommended only to experienced businessmen who have been working in their field for a long time and are aware of the nuances and basic foundations of any entrepreneurial activity.

You will have to work in the Hungarian business sector, paying salaries to your employees, paying the rent for premises without forgetting the timely payment of taxes to the budget. If your goal is business immigration, Hungary can be a good option, but you will need professional help from specialists who are familiar with local laws and the specifics of conducting any kind of work activity.

Benefits and advantages of the Hungarian economy

Why do many entrepreneurs choose Hungary as a promising option for their overseas business? The Hungarian economy is quite stable, increasing its momentum every year. Every year, the gross domestic product grows by about 5-6%, which is a good sign of development in the right direction.

The country is interested in specialists and foreign investments in its economy. This was the reason for the introduction of loyal legislation, a transparent taxation system with a minimum tax rate, effective market reforms in various areas and industries.

It is beneficial for foreign business to work in the Hungarian economic “climate” due to the presence of a legislative framework on the absence of double taxation with more than sixty countries, among which there are many countries of the former USSR.

Business immigration to Hungary is relevant for many areas and segments of the local economy, among which the following are the most popular among foreign investors:

• Engineering industry;

• Agricultural sector;

• Electronics;

• Motor-vehicle industry;

• Tourism and hotel business.

Hungary takes one of the leading places in Europe in terms of the number of transport companies in which foreign investors also invest. Transportation throughout Europe is a promising business direction, which is accessible and understandable in its structure to many domestic businessmen.

Advantages of doing business in Hungary

What are the main benefits of buying and registering your own company and business in Hungary? First of all, you will receive the main bonus in the form of a legal transfer of your financial savings to the best financial institutions in Europe with a guarantee of their safety. In addition, you will work in a promising European market with transparent and adequate taxation.

We immediately draw your attention to the main aspect: it is quite difficult to obtain a residence permit of Hungary through business (acquisition and ownership of a local company). This is just one of the potential opportunities for obtaining temporary resident status in the country, however, it is not a complete 100% guarantee of obtaining permanent residence and subsequent citizenship in the country.

However, many foreign investors and businessmen receive a residence permit without any problems, becoming residents of the European Union. The advantages of this status have long been known. They are:

1. Possibility to travel without visas to any country of the Schengen area;
2. Legal transfer of business financial flows to Europe;
3. The possibility of obtaining loans on preferential terms at a minimum percentage;
4. Developed infrastructure offering a high standard of living for each family member;
5. High-quality medical services;
6. The opportunity to study and obtain higher education in the best European universities.

Just start your business in Hungary and a residence permit and a permanent residence status, quite possibly, will become a reality not only for you, but also for each member of your family.

Forms of ownership of companies in Hungary

In accordance with the Hungarian law, foreign investors are provided with such forms of ownership as:

• Closed Limited Liability Company or KFT;

• Open Limited Liability Company composed of shareholders or ZRT;

• Unlimited Liability Partnership or KKT;

• Limited Liability Partnership or BT;

As a rule, businessmen who open a company in the Hungarian economic territory prefer the first type of companies. In terms of its parameters and internal arrangement, KFT is very similar to domestic LLCs.

Among the features of this form of ownership, experts distinguish:

• Simplicity of company management without special requirements for compliance with strict regulations;

• A minimum authorized capital of only €2,000 is sufficient for registration;

• There are no restrictions regarding the type and number of founders;

• A foreign investor may be the sole owner of such company.

Stages of registration a company in Hungary

How is your business registered? The main feature and aspect is the mandatory participation in the registration process of local notaries and lawyers. If you establish a company and register a legal entity, while not being a resident of the country, you need to enlist the support of Hungarian notaries.

All activities of preparing the necessary documentation, certifying documents, and submitting them to the relevant registration authorities are entrusted to a Hungarian lawyer. This specialist is responsible both for the correctness of the documents and for the accuracy of the information indicated in them.

What does your Hungarian lawyer need to know? First of all, it is the basic data, which includes:

1. The name of the newly established company;
2. The scope of its future activities;
3. Information about foreign founders (passport data, etc.);
4. Place of permanent residence of the founders of the company.

In the case when there are several founders, it is necessary to provide information on the amount of contribution of each of them to the authorized capital of the newly established enterprise. It is also necessary to provide data on the real legal address of your new Hungarian business. At the same time, this address should be “not on paper”, but be a very real office where employees work.

During the initial registration of a business, situations when the actual address is not the legal one are quite possible. The specialists of our company are always ready to meet your needs by providing the service of selecting such an address in accordance with the Hungarian law.
Documents for immigration to Hungary through registration of the company are prepared by a Hungarian notary. He must verify the reality and reliability of the information provided to him by the applicant, after which he prepares a certain package of documents, including:

1. Articles of organization of the future company or enterprise;
2. Samples of official signatures of the founders;
3. Legal powers of attorney;
4. Documents to the registration authority;
5. Copies of passports and so on.

In some situations, when registering a business, a guarantee from a Hungarian resident is required. In addition, the founder is obliged to pay a certain amount of state duty, as well as an administrative fee at the registration chamber.

Next, you have to open a bank account of the company in one of the financial institutions of the country. To do this, you will need to collect all the founders who have the authority to sign. If there is only one founder, who is also the director of the company, the task shall be greatly simplified.

The main requirement for a bank account is that it must contain an amount not less than the minimum amount of the company’s authorized capital. For a KFT company, which is one of the most popular forms of ownership, the amount on the bank account must be €2,000 and more.

In accordance with the documentation collected by the notary, the Hungarian regulatory authorities must issue a permit for the right to engage in business in the country, as well as for the registration of a new company.

With such permit in hand, you can actually start your own Hungarian business. You will also need a final decision from the registration authorities, but you can get it later.

The main features of registering the most popular form of business activity (KFT) in the country include:

1. With several founders, it is necessary to have only half of the maximum authorized capital of the company to register a business. It is enough to open an account for only €1,000 and put the rest on it at least 12 months after;
2. With one founder, the full amount of the authorized capital in the amount of €2,000 shall be deposited into the bank account;
3. To open an account and sign the necessary banking documents, you will need to personally visit the country;
4. The director of the newly established company may be a citizen of any country;
5. The registration numbers of the company, tax and VAT payer do not differ from each other and are the same in Hungary.

Hungarian tax system

Requirements for business immigration to Hungary are quite adequate, and their non-compliance can lead to very unpleasant consequences. One of the aspects is the timely payment of taxes to the Hungarian budget.

It should be understood that the evasion of taxes or late payment of tax liabilities is a serious violation of local legislation. This will especially affect you if your goal in Hungary is obtaining a residence permit through business immigration.

It will be practically impossible to obtain the status of a permanent resident if there are any claims and questions from the tax authorities against you and your company. What are the main types of taxes that companies should pay to the budget?

There are only three of them, and they do not depend on the scope of your business:

• AFA or value added tax

Depending on the situation, the Hungarian VAT can be 0.12 or 27 percent. 27% tax is paid by companies offering certain services and goods. 12% tax is paid by businesses in the field of food, medical goods, tourism, transport and hotel business. The zero rate is applicable for a business that works for export.

VAT in Hungary can be paid monthly, quarterly or annually, it all depends on the annual profitability of your business. During the first 12 months of activity, any company pays VAT once a quarter.

• HelyiIparuzesiAdo (HIA – “local industrial tax”)

The local industrial tax constitutes only two percent, and many local authorities can reduce the base rate to one and a half or even one percent. In other words, the amount of “local tax” depends on the area in which you will conduct your business.

• Income tax 

The current income tax rate in Hungary is 18 percent. All forms of business and companies that are registered and operate within the country have to pay the income tax. If your company has paid less than HUF 5 million of income tax in 12 months, the next accounting period for it will be with a prepayment of tax every quarter.

Considered tax payments may be revised based on the results of your company’s activities for the accounting period. Supervisory authorities have the right to review tax rates in terms of their reduction or increase. In addition, there are incentives for companies in the form of tax relief.

Accounting in Hungary

Registration of business in the country has its own characteristics, one of which is a rather complicated and confusing accounting. Please note that it is very difficult to find an experienced accountant who speaks Russian in Hungary, and if you are lucky to find one, his or her services will be quite expensive.

Naturally, in this situation there are certain bonuses: for example, you can learn business Hungarian faster thanks to constant communication with local specialists both in the field of accounting and in other areas of business.

If you do not want to waste your time and nerves searching for qualified specialists on the spot, our company is ready to provide you with access to our own database of experts. If necessary, we will help you with Hungarian notaries, translators, accounting specialists and other professionals who will be required for the registration and operation of your business.

Residence permit through company registration. Nuances.

All applicants for a permanent residence status with the possibility of obtaining a Hungarian passport in the future, who choose the option of starting a business in the country, should understand a few points. Your future company must really work in the Hungarian economic territory, and not exist solely on paper.

The business must be profitable so that you could pay salaries to employees, pay taxes and maintain premises. The fictitiousness of the company is easily and quickly checked by the relevant authorities, so attempts to “cheat” the legislation do not work here.

As soon as facts of fraud or tax evasion are discovered, you will be in serious trouble, ranging from deportation to a real prison sentence. It goes without saying that you could forget about obtaining the status of an EU resident.

Entrepreneurs who open a business in Hungary must apply for a standard form of a temporary residence permit. The law provides the obtaining visas for entry of type “C” or “D” for this procedure. The applicant will be required to submit certain documents, including:

1. Copies of pages of a valid international passport;
2. Fresh photos in the amount of 2 pieces of the established size;
3. Copies of the pages of a valid internal passport of your country;
4. Certificate of no criminal record.

In addition, you will need health insurance that will cover the entire expected period of your stay in countries of the Schengen area. The insurance must have a maximum payout of at least €30,000.

Visas of type C and D of Hungary

The documents you have collected must be submitted to the consulate or embassy, ​​depending on your location. As a result, you have the opportunity to obtain one of two visa options:

• Type “C”

Visa of type C is appropriate for visiting the country for the purpose of conducting business, education or tourism. It is valid for 3 months and does not provide the possibility of official employment in Hungary. With this type of visa you shall submit an application to the immigration authorities for a temporary residence permit.

• Type “D”

Visa of type D is issued for a long period of time. You do not have to contact the immigration committees as soon as possible to apply for a temporary residence permit, as this type of document allows you to enter and leave Hungary for unlimited number of times.

Obtaining a residence permit upon arrival to Hungary

After you have crossed the Hungarian border on one of the types of visa (C or D), you must contact a special body – the immigration committee. The applicant shall  submit a package of documents, which includes:

1. Issued decision on business registration;
2. Originals and copies of statutory documents;
3. Originals and copies of documents on the lease of premises for the company;
4. Documents confirming the tax registration of your company;
5. Documents confirming your Hungarian legal address;
6. Copies of pages of international passport with photos of the established sample;
7. Application form of the applicant, which shall be preliminarily filled in;
8. Documents on the ownership or lease of housing space in the country (it is required to have at least 18 square meters per applicant);
9. Bank certificate on the status of an open account. The funds on it should be sufficient for living in Hungary for 12 months. The amount is calculated annually, taking into account the Hungarian Statutory Minimum Wage Index.

Time for obtaining a residence permit and permanent residence in Hungary

A temporary residence permit in the country is issued for a period of 12 months, after which this status shall be mandatory extended if you plan to obtain permanent residence and citizenship in the future. An application for an extension of a temporary permit must be submitted at least 2 weeks until the end of the previous period.

A temporary residence permit is renewed twice (at the end of the first and second years of your stay in the country), after which the applicant has the right to apply for a permanent resident status. You can get a Hungarian passport no earlier than eight years after entry subject to the basic requirements (number of days of residence, reliability of data provided, etc.).

An important point that you should pay attention to is that the business immigration program in which you participate is not a guarantee of obtaining the status of a permanent resident and citizen of Hungary. This is one of the real opportunities to obtain citizenship, nothing more.

Relevant authorities and services closely monitor all the aspects of business immigration, rarely issuing a temporary residence permit to applicants. Most often, they are limited to issuing a regular business visa, with which you can carry out business activities in Hungary, but you will not be able to become its citizen or, at the worst, obtain a permanent residence status.

Guarantees and opportunities for obtaining a residence permit of Hungary through the purchase of business

Of course, it is possible to obtain a residence permit through business immigration, but it takes a long time and the necessary result is not always guaranteed. If you have sufficient funds, investment immigration to Hungary can be a very promising alternative.

Investing in the Hungarian economy through the purchase of government bonds will allow you to obtain a temporary residence permit in just 2-3 weeks, and the status of a permanent resident can be issued in six months.

The main benefits of participation in the investment program of the Hungarian government are:

• You need to invest €300,000 in bonds plus €60,000 in administration fees. Funds spent on bonds will be returned in full in five years;

• In fact, €60,000 is the real payment for obtaining resident status not only by the applicant, but also by each member of his family from among close relatives;

• There is no need to live in the country for at least six months per year, which is required from participants of other naturalization programs;

• The opportunity to visit any country of the Schengen area without visas, as well as to live and work anywhere in Europe.

Permanent resident status is timeless, meaning you get it once for the rest of your life.

If you are interested in the conditions of the investment program, if you want to know what documents are required for immigration to Hungary with children, what time period for obtaining the status is necessary and what final financial expenses are due, the specialists of our company are always ready to help and advise on any issues.