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The Ultimate Guide To
Employment in Hungary

Employing in Hungary: What You Need to Know

Key Factors to Consider When Employing in Hungary

There are several key areas to be aware of within Hungary's employment framework, especially for companies that plan to initiate a full local office and human resources department. These challenges can be mitigated by use of a locally sourced payroll provider who is familiar with all of the local laws and rules for both local employees as well as foreign nationals.

Employee Entitlements

Information Explanation
Working on Sundays ?

If Sunday work is carried out during regular working hours the employee must receive 150% of their regular daily salary and be granted another day off.

Disclosure and Confidentiality of Personal Information ?

Employers shall inform their employees with regard to processing personal information. Employers are permitted by law to disclose personal information of their employees in cases specified by law.

Employee Protection and Anti-discrimination Rights ?

Personal rights of employees falling within the labour code shall be respected. Employees are protected for minimum wages, labour conditions, young workers, personal data,  and protection of personal rights etc.

Time Off Work ?

Annual leave is 20 days. Additional holidays may be granted on special circumstances.

  • Employees younger than 18 years of age – 5 days
  • Parents with children – upto 7 days depending on the number of children

Maternity leave is provided upto 24 weeks.

Medical Leave ?

If the employment has been for more than 2 years the rate of sick pay is 60% and if it has been less than 2 years the sick pay is 50%. The employer is required to pay 70% of wages for a maximum of 15 work days in the event of illness.  However, the maximum amount of sick pay cannot exceed two times the minimum wage.

Employment Termination in Hungary

Information Explanation
Resignation / End of Service Payment ?

Employees can terminate their employment contract by giving written notice.

Severance / Redundancy Pay ?

Severance pay shall be the sum of the absentee pay due for;

  • one month, for up to three years;
  • two months, for up to five years;
  • three months, for up to ten years;
  • d) four months, for up to fifteen years;
  • e) five months, for up to twenty years;
  • f) six months, for up to twenty-five years of employment
Termination of Employment ?

Employees can terminate their employment contract by giving written notice.

Labor code prohibits employers from terminating the employment relationship by ordinary notice if

  • Employee is unable to work due to illness, and during a maximum of 1 year period following the expiration of the sick leave period
  • Unable to work due to an accident or an occupational disease
  • On sick leave to take care of a sick child
  • On leave of absence to take care of a close relative
  • Pregnant or on maternity leave for a period of 3 months after giving birth
  • On unpaid leave to take care of children until the child reaches 3 years of age
  • Absent due to regular or reserve army service
  • Absent due to disability with reception of rehabilitation benefits

Employers cannot terminate workers during these leave periods plus 15 days thereafter for periods exceeding 15 days. If this period exceeds 30 days, no termination may occur during the 30 day period.

Under the Labor code, a minimum of 30 day notice period maybe extended depending on the duration of employment

Using Shield GEO EOR Services: How We Can Help You

Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Hungary. For companies which intend to employ their staff directly through their incorporated Hungarian entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Hungary.

As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Hungary.

The Shield GEO solution is an attractive alternative where

– the company is looking to employ staff quickly

– the company doesn’t have an appropriately incorporated entity in Hungary

– the company wants to work within a defined budget

– the company wants to limit its initial commitment in Hungary

– the company needs help with tax, employment, immigration and payroll compliance in Hungary

 

A GEO EOR Solution vs DIY Employment in Hungary

Companies entering Hungary must make a decision whether to use their own resources for a Do-It-Yourself (DIY) approach, or to use a Global Employment Organization to handle payroll and employment responsibilities.  A GEO or Hungarian Employer of Record solution makes it faster, easier and cheaper to deploy staff if they don’t have a Hungarian entity established that can run payroll.

A DIY approach will typically be delayed until there is a properly incorporated company ready to run payroll and may be a costly option.  Shield GEO can deploy foreign staff in 4-6 weeks and local staff in 48 hours. Additionally Shield GEO is responsible for all compliance issues related to the employment.

Using Shield GEO Employer of Record Services in Hungary

Payroll

Payroll Hungary
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Currency ?

Hungarian Forint (HUF)

Tax Amount
Grossed income Tax Rate (%)
All levels of income 16%
Tax Returns Supplied

Yes

Corporate Tax Requirements

Employers must file monthly tax returns for tax computed and remitted.

Employers Social Security and statutory contributions

Foreign nationals are subject to Hungarian social security contributions only if:

  • They are employed locally by a Hungarian employer
  • They work in Hungary as employees of a non-Hungarian employer and are nationals of an EU member state

Employer must contribute 27% of gross monthly payroll in the form of social contribution tax. As of 1st of January 2014, Employers of non Hungarian citizens are exempt from paying social security contributions for such employees. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

Minimum monthly wage is used to calculate social security contributions and also cover work injury benefits, sickness and maternity benefits and unemployment benefits.

Employees Social Security and statutory contributions

Employee contributions are 8.5% of covered monthly earnings. Since January 1 2014 resident non-citizens are exempt from paying contributions for up to 2 years. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

Payroll and Tax in Hungary

There are specific rules in Hungary depending on whether your company employs residents or non-residents. The key concerns for a company that needs to comply with tax laws in Hungary are net taxable income, social security contribution, value added tax (VAT), corporate income tax, specific business tax (SBT), value added tax (VAT), and property tax. Moreover, international treaties to avoid double taxation, international social security agreements, free trade agreements and special tax regimes for specific industries or sectors can make an indirect impact on a company’s tax environment.

Your Payroll Options in Hungary

Information Explanation
Remote payroll ?

A remote payroll in Hungary is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Hungary.

Thus a non-resident company is permitted to process payroll for Hungary residents who are on its payroll. Another option for a non-resident company to payroll its employees in Hungary would be to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration ?

In some cases, a company will register their business in Hungary under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll ?

Larger companies with a commitment to Hungary may wish to run their own local payroll for all employees, foreign and local.  In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a Thai payroll, and can fulfil all tax, withholding, and payroll requirements.

This approach carries significant cost and requires some knowledge of local employment and payroll regulations.  The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Thai employment laws.

Fully Outsourced Payroll & Employment ?

Companies can outsource the employment and payroll of their staff in Hungary to a GEO, like Shield GEO. This is possible for both foreign workers and Hungary nationals. This is the easiest, fastest and safest way to payroll staff in Hungary.

Shield GEO manages all aspects of payroll for workers in Hungary, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Hungary

Information Explanation
National Currency ?

Hungarian Forint (HUF)

Employee Information Required ?
  • Personal information (name, date of birth, postal address, place of relevant details)
  • Passport
  • Bank statements proving sufficient funds are available for the stay
  • Proof of health insurance coverage
  • Statement of permission to stay in your residential property, from the land owner. A signed tenancy agreement is acceptable
Tax Registration Requirements ?

A foreign national working in Hungary is liable to pay personal income tax. For personal income tax purposes the following individuals are considered as tax residents.

  • A Hungarian resident
  • A European Economic Area resident whose stay in Hungary exceeds 183 days
  • Third country citizen who has permanent residence status

Tax residents will be taxed on their worldwide income while non tax residents will be taxed on the domestic source of income or income as per the double tax treaty.

Foreign nationals and Hungarians working in Hungary must register with the competent tax authority and obtain a personal tax identification number to pay taxes and file a tax return (tax card number).

The tax forms can be obtained through the National tax and customs administration in Hungary

Social Security Registration ?

Foreign nationals are subject to Hungarian social security contributions only if:

  • They are employed locally by a Hungarian employer
  • They work in Hungary as employees of a non-Hungarian employer and are nationals of an EU member state

Employer must contribute 27% of gross monthly payroll in the form of social contribution tax. As of 1st of January 2014, Employers of non Hungarian citizens are exempt from paying social security contributions for such employees. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

Minimum monthly wage is used to calculate social security contributions and also cover work injury benefits, sickness and maternity benefits and unemployment benefits.

Employee contributions are 8.5% of covered monthly earnings. Since January 1, 2014 resident non-citizens are exempt from paying contributions for upto 2 years. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.

Documentation Required for New Employees ?

Employment contract

Tax card number

Address card registration

Social security registration

Tax Figures

Information Explanation
Corporate Income Tax ?

Corporate income tax rate is 19%. But a rate of 10% is applicable to the part of the tax base which does not exceed HUF 500 million.

Income Tax Rate ?
Grossed income Tax Rate (%)
All levels of income 16%
Sales Tax ?

A foreign taxable person is eligible to recover Hungarian input VAT if the following conditions are met.

  • The business does not have Hungarian residency
  • The business does not have any taxable supplies in Hungary
  • Tax exempt cross border transportation from/to third countries
  • Tax exempt cross border passenger transportation
  • Supplies for which the reverse charge mechanism applies
  • Electronically provided supplies where the foreign taxable person opted for application of the special regime for non-established taxable persons supplying electronic services to non-taxable persons

The standard VAT rate is 27%. While the reduced VAT rates are 18% and 5%. It’s not necessary to appoint a Hungarian fiscal representative to claim a VAT refund based on Directive 2008/09/EC or the 13th Directive.

Withholding Tax ?

There is no withholding tax levied on dividends paid to foreign companies. However, dividends paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.

Hungary does not levy withholding tax on interest paid to foreign companies. However, interest paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.

There is no withholding tax levied on royalties paid to foreign companies. However, dividends paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.

Hungary does not levy tax on branch profits.

Income Tax (Personal Allowance) ?

A personal income tax allowance is granted through a family allowance ( (Családi Adókedvezmény). The total allowance is equal to the individual allowance multiplied by the number of beneficiary dependent children. For the first and second child an allowance of HUF62,500 is granted while an allowance of HUF206,250 is granted in the case of 3 or more children.

 

Payments

Information Explanation
Payment Mode ?

Wages should be paid in cash or by way of transfer to the employee’s bank account.

Wages may not be paid in the form of vouchers or any other means of substitute payment instruments.

 

Frequency of Salary Payment ?

In the absence of an agreement, wages should be paid retrospectively accounted for atleast once a month. Wages should be paid by the tenth of the month following the month to which it pertains.

 

Invoice / Payslips required ?

A salary slip is required. A payroll statement of wages paid shall be made available in writing by the tenth day of the following month.

Minimum Wage ?

HUF 105,000 as of 1st January 2015

Hungary Immigration and Work Permits

Since Hungary is a member of the European Union (EU) as well as a party to the Schengen Treaty, differing rules and conditions apply to EU/EEA nationals compared to non-EU/EEA nationals. Foreign nationals from non-EU/EEA member countries need to apply for a valid work permit and/or visa to work in Hungary. Minister of National Economy publishes on an annual basis the number of work permits that can be issued to foreign nationals which is published in the Official Hungarian Gazzette (Magyar Közlöny).

Your Options

Use your own company?

All foreign nationals who intend to work in Hungary must obtain a work permit.

Types of work permits:

  • Individual work permit
  • Joint work permit
  • Residence permit

Individual work permits are issued if a foreign national wishes to work in Hungary for a period not exceeding 90 days during a 180 day period. A Joint permit is required if a foreign national intends to work in Hungary for a period exceeding 90 days within a 180 day period.

Process to obtain a work permit:

Step 1: Advertise the job in the Hungarian Labour Office (Munkaügyi Központ) for a fixed period of 15 days to allow sufficient time for unemployed Hungarian national to compete for the job vacancy.

Step 2: Initiate a manpower procedure by submitting a valid manpower request to the regional branch of the labour centre

Number of work permits issued for foreign employees cannot exceed the average number of workers requested by employers (monthly basis) as reported during the previous year. Such data are made available on an annual basis in the Official Hungarian Gazzette (Magyar Közlöny) published by the Minister for National Economy.

An employer must satisfy the following conditions to be granted work permits:

  • A valid workforce requirement for the foreign national prior to applying for a work permit
  • Absence of Hungarian nationals to fill the workforce requirement
  • Foreign national satisfies the employment conditions

Step 3: There are two procedures applicable.

  • General procedure
  • Simplified procedure

Requests for a work permit must be made within 60 days from making a labour demand request. Some of the key documents required include:

  • Certificate of vocational qualification required to perform the job activities
  • Employment conditions certificate
  • Document certifying employer’s title of operation
  • Medical certificate

General procedure:

Submit a work permit application to the Labour Centre if the foreign national intends to work for a period less than 90 days with a 180 day period

If the foreign national intends to work for a period exceeding 90 days within an 180 day period, the joint permit should be submitted to the Immigration Bureau. It takes up to 90 days to obtain approval for a joint work permit and is valid for a 2 year period. Such work permits can be extended for an additional 2 year period.

Simplified procedure:

A simplified procedure does not require the employer to submit a manpower request when submitting the application for an individual work permit to the Labour Centre or when submitting the application for a joint permit to the Immigration Bureau.

Circumstances under which a simplified procedure may be approved:

  • If one or more of the foreign firms/persons possess majority ownership interest in the company applying for the work permit. However, the number of foreign nationals to be employed cannot exceed 5% of the total work force of the company as of 31st of December in the immediate preceding year.
  • If the employer intends to employ a foreign national for installation work, or provide guarantee, maintenance, or warranty related activities for more than 15 consecutive working days
  • If the foreign employee is exempt from work permit requirements a residency permit must be applied for

Step 4: Labour centre will make the final decision within 10 – 30 days from submitting the work permit. Once the work permit is approved a resolution will be issued by the Labour Centre specifying:

  • Employer who is authorized to employ the foreign national
  • Workplace details
  • Job description and associated activities
  • Employment tenure

Step 5: Apply for a residence permit (Tartózkodási engedély) permiting residency for a period exceeding 90 days.

Foreigners need to have a work permit to work in Hungary.

Single permit: A residence permit which authorizes a third country national to establish an employment relationship with a Hungarian employer.

Single application procedure: Authorizes the third country national to stay in Hungary for more than 90 days and less than 180 days based on employment relationship with a Hungarian employer on the basis of an application submitted by a third country national.

Documents required:

  • Photo and fingerprints (biometric information)

Documents supporting legal employment:

  • Temporary work booklet
  • Business plan for business activity
  • Individual business card/registration number
  • Agriculture permit (for primary producers)
  • Agency/business/user contract signed by a private individual
  • A deed for a business association, co-operative, or any other legal person created for the purpose of making profits has legally employed at least 3 Hungarian citizens or persons having rights for free movement and residence for atleast 6 months on a continuous basis
  • Foreign applicant’s stay in Hungary is indispensable for the business association and it’s based on the attached business plan

Documents supporting the financial conditions necessary to live in Hungary:

  • A bank certificate issued by a Hungarian or foreign bank
  • A certificate of income issued by the employer
  • A certificate issued by the employer and/or the tax authority with respect to regular income from abroad

Documents supporting the existence of Hungarian accommodation:

  • A rental agreement
  • A document approving the use of the flat by courtesy
  • A document evidencing the availability of a reserved and paid place of accommodation
  • Certificate proving the place in a dormitory
  • A document evidencing the ownership of a flat
  • A contract of sale and purchase of a real estate and state approval for acquiring the real estate

Documents supporting the existence of an all inclusive health insurance:

  • Must provide evidence of full health coverage

Documents supporting the existence of provisions to leave the country:

  • A return air ticket
  • A valid passport or necessary permit allowing the third country national to return to his/her country of origin

Visa extension:

Visa extension is allowed provided that at least 30 days prior to the expiration of the visa the applicant submits the required documentation to the respective regional directorate of the Office of Immigration and Nationality. Moreover, the passport must be valid for at least 3 months at the time of visa extension.

*Please check Single application procedure for the respective process to apply for the visa.

Validity: A residence permit for employment is issued for a 3 year period and can be extended up to 3 years occasionally. In case if the permit is issued for a maximum of 2 years, then it can be extended for a maximum of 2 years occasionally.

Visa fee: EUR 60

Time taken to process the visa: 21 days

Step 6: Foreign nationals working in Hungary should obtain:

  • A Social Insurance Identification Number (TAJ-szám) from the National Health Insurance Fund Administration
  • A tax identification number from the tax authority

Rules for European Area Citizens (EEA):

Permission is not required for EEA citizens to enter into an employment arrangement in Hungary. However, a notification is required.

Employer is obligated to inform the Labour Centre about the employment of an EEA national. The notification must contain the following information:

  • Number of people employed
  • Their age
  • Citizenship
  • Qualifications
  • HSCO number of the position
  • Form of the employment relationship
  • For relative status, statistical core number of the employer and information pertaining whether the employment relation just started or ceased

Next, the notification is verified by the Hungarian Employment Centre.

Employers should retain the verification of the employment start and end date post 3 years from termination of employment.

Use the Shield Geo Solution?

Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. Contact us to know more.

Types of visas in Hungary

Category Description of Visa
Residence permit for paid activity

Documents required:

1. A work permit
2. An employment contract
3. A document certifying occupancy in Hungary
4. A certificate indicating how the applicant will make a living until he or she receives the work permit (bank account statement, employer’s certificate etc.)

Or

5. Articles of Association
6. Resolution on the court registration of the enterprise
7. A document certifying the occupancy in Hungary
8. A certificate on the acquisition of the qualifications necessary to fill the vacancy
9. Declaration of expected yearly income (certificate)
10. A certificate of the amount of money at the person’s disposal in Hungary
11. Simplified balance sheet of the prior year
12. A certificate declaring that the firm does not have public debt
13. If the firm has Hungarian employees: their employment contract
14. In case of a new enterprise: a brief business plan

Fee for residence permit: EUR 60

Time taken to process the application: 30 days

Seasonal employment visa

Seasonal work can be undertaken for agriculture, horticulture, animal husbandry, and fishing in possession of a work permit and a seasonal work visa. This visa entitles the holder to a single or multiple entry. It facilitates the applicant to be employed for longer than 3 months and less than 6 months. The validity of the visa is limited to 1 year. The permit has to define the exact time and work place. In case of multiple employments, the seasonal employment permit must define the detailed information of every employment.

A seasonal work visa maybe issued to a third country citizen who:

• Has a valid travel document
• Has a permit enabling return or outward travel
• Certifies the purpose of entry and stay
• Has financial means to cover the cost of the stay
• Has health insurance for the period of stay

Documents required:

*Documents evidencing the purpose of stay
• Work permit
• Temporary employment booklet
• A document certifying a legal relationship for employment

*Documents supporting the financial conditions necessary for living in Hungary

• A bank certificate guaranteeing financial means
• Income tax certificate issued by the tax authority with respect to the previous year
• A certificate of income issued by the employer
• A certificate issued by the employer and/or tax authority with respect to regular income from abroad
• A declaration made before a notary public by a family member having a residence permit, a permanent residence card or the legal status of an immigrant or settled person giving assurance to maintain and support the applicant

*Documents evidencing the existence of Hungarian accommodation

• A rental agreement certifying a rental relationship
• A document on the use of the flat by courtesy
• A document evidencing the availability of a reserved and paid accommodation
• A valid letter of invitation supplied with the authority’s consent
• A contract of sale and purchase of real estate and a copy of the decision of the competent county government office granting permission for the acquisition of the real estate.

*Documents supporting an all-inclusive health insurance

*Documents evidencing the conditions of exit

• A valid passport and/or the permits required for entry into the country indicated
• A valid return air ticket

Visa fee: EUR 40
Time taken to process the application: 15 days

Residence permit for the purpose of employment or other gainful activities

Entitled persons:

• Perform work for a compensation based on a legally defined employment relationship
• Perform work individually for a compensation
• Perform business activities as the owner, leading office holder or member of a managing, representative or supervisory body of a business association, co-operative created for the profit purposes

Foreigners need to have a work permit to work in Hungary.

Single permit: A residence permit which authorizes a third country national to establish an employment relationship with a Hungarian employer.
Single application procedure: Authorizes the third country national to stay in Hungary for more than 90 days and less than 180 days based on employment relationship with a Hungarian employer on the basis of an application submitted by a third country national.

Documents required:
• Photo and fingerprints (biometric information)

Documents supporting legal employment:
• Temporary work booklet
• Business plan for business activity
• Individual business card/registration number
• Agriculture permit (for primary producers)
• Agency/business/user contract signed by a private individual
• A deed for a business association, co-operative, or any other legal person created for the purpose of making profits has legally employed atleast 3 Hungarian citizens or persons having rights for free movement and residence for atleast 6 months on a continuous basis
• Foreign applicant’s stay in Hungary is indispensable for the business association and it’s based on the attached business plan

Documents supporting the financial conditions necessary to live in Hungary:
• A bank certificate issued by a Hungarian or foreign bank
• A certificate of income issued by the employer
• A certificate issued by the employer and/or the tax authority with respect to regular income from abroad
Documents supporting the existence of Hungarian accommodation:

• A rental agreement
• A document approving the use of the flat by courtesy
• A document evidencing the availability of a reserved and paid place of accommodation
• Certificate proving the place in a dormitory
• A document evidencing the ownership of a flat
• A contract of sale and purchase of a real estate and state approval for acquiring the real estate

Documents supporting the existence of an all inclusive health insurance:
• Must provide evidence of full health coverage
Documents supporting the existence of provisions to leave the country:
• A return air ticket
• A valid passport or necessary permit allowing the third country national to return to his/her country of origin

Visa extension:

Visa extension is allowed provided that at least 30 days prior to the expiration of the visa the applicant submits the required documentation to the respective regional directorate of the Office of Immigration and Nationality. Moreover, the passport must be valid for at least 3 months at the time of visa extension.
*Please check Single application procedure for the respective process to apply for the visa.
Validity: A residence permit for employment is issued for a 3 year period and can be extended up to 3 years occasionally. In case if the permit is issued for a maximum of 2 years, then it can be extended for a maximum of 2 years occasionally.

Visa fee: EUR 60
Time taken to process the visa: 21 days

Single application procedure

Enables a third country national to stay in Hungary for a period exceeding 90 days and enables the applicant to establish a legal employment relationship with a specific employer.

Eligibility for single application procedure:
• Third country nationals submitting an application for residence permit for gainful activities with the aim of a legal employment relationship
• Third country nationals who intend to establish a legal employment relationship and submits a residence permit application for family reunification or submits an application for EU Blue card
• Third country nationals who intend to establish a legal employment relationship and possesses a residence permit application for family reunification or posseses an application for EU Blue card
• Special cases
From an employment/business perspective, the single application procedure is NOT applicable to the following personnel.
• Those who stay in Hungary with a seasonal work visa
• Third country nationals who are transferred as intra-corporate employees and who already stay or intend to stay in the territory of Hungary
• Personnel whose purpose of residency is to perform independent gainful activities (private entrepreneurs, small scale agriculture producers etc.)
• Third country nationals who are eligible to carry out gainful activities during their stay in a period between 90 days and 180 days.

*Applicant is required to submit the application in person. Moreover, a valid travel document/passport along with the submission of biometric information such as fingerprints and a photo is required.

Documents verifying the establishment of an employment relationship:
• Valid employment contract
• Certified copies of educational qualifications
• In the case of EU Blue card, certified copies of the proof of higher professional qualification

Employment agreement should include:
• Scope of duties
• Specification of professional qualifications required to perform duties
• Amount of remuneration payable to third country nationals
• Determination of the employment relationship
• Expected duration of the employment relationship

*If the residence permit is issued as a single permit such permits are valid upto two years and can be extended for a maximum of two years, occasionally.

EU Blue card

EU Blue card is issued to a third country national who has been issued a residence permit for work that requires advanced skills (high skilled workers) by an European Union (EU) member country. The applicant must be able to prove at least 18 months of lawful stay in an EU member state and meets the following conditions.

• Possess a valid travel document
• Certify the purpose of entry/exit
• Meet legal employment conditions
• Possess a full coverage on health insurance
• Report a valid address for the Hungarian accommodation

A third country national is not a Hungarian citizen nor stateless persons except for persons with the right for free movement and residence (EEA nationals and accompanying family members of EEA citizens and Hungarian citizens).

Application procedure:
• Submit a valid passport
• Submit biometric data (fingerprints, photograph)
• The application for the EU Blue card must be submitted to the Consular Officer or at other authorized locations
• A statement certifying that the applicant will leave the EU territory voluntarily if the application is rejected
• Follow the single application procedure to obtain the EU Blue card
• Once the EU Blue card has been approved, the regional Directorate grants permission to issue the residence permit visa at the consular representation of Hungary and notifies the Consular Officers.
Extension of EU Blue card: Application for an extension can be submitted 30 days in advance to the expiration of the right of residence. At the submission the applicant must have a valid passport with atleast 3 months of validity.

Documents required:

Documents certifying the purpose of residence:
• A valid employment contract requiring a higher education qualification between the third country national and the employee upto a 4 year tenure
• Documents providing proof of the higher education qualification

Documents supporting the financial conditions necessary to live in Hungary:
• Preliminary agreement for employment requiring advanced skills or,
• A valid employment contract

Documents supporting the existence of an all exclusive health insurance
• A full health coverage insurance

Term: EU Blue card is usually issued for a 1 year period. However, if the employment tenure is for less than 1 year, the EU Blue card will be issued for a period up to 3 months post the expiration of the employment contract. The maximum tenure for an EU Blue card is 4 years and can be extended for another 4 year period.

Visa fee: EUR 60
Time taken to process the visa: 90 days

Schengen Business visa

This visa is issued to non-European citizens who wish to travel to a Schengen area on a short term basis for a business specification purpose on a single or multiple entry. Schengen Business visa holders can stay in a Schengen country for a 90 day period during a period of 6 months.

Documents required:
• Passport sized photo (less than 6 months old, 35 X 40 mm, taken in a light clear background)
• Return air ticket
• Travel medical insurance policy
• Passport valid for atleast 3 months from the date of departure
• Cover letter explaining the purpose of visit
• Profile of the applicant’s company/organization
• Memorandum and Article of Association in original certified copy (registered with joint stock companies)/ Trade License (first issued and present renewal)/ Proprietorship/Partnership documents
• Current bank statements
• Employer letter specifying the purpose of the business travel and the business itinery
• invitation letter from the partner company in the Schengen zone, faxed also to the corresponding consulate
• Coverage of applicant’s expenses during the stay
• Hotel reservation document
• Proof of prior trade relations between the two companies (if relevant)
Applicant needs to attend the Schengen visa interview in person.

Visa fee: EUR 60
Time taken to process the visa: Atleast 15 days

Working (Employment) Schengen visa

Non-European citizens who intend to travel to a Schengen area for a short term for an employment specification should obtain an Employment Schengen visa.

Documents required:
• Passport sized photograph (less than 6 months old, 35 X 40 mm, taken in a light clear background)
• A passport valid for atleast 3 months after the departure date along with all the copies of your previous visas
• Return air ticket
• Travel medical insurance policy
• Two application forms should be filled
• Employment contract between the applicant and the potential employer in the Schengen area
Applicant needs to attend the Schengen visa interview in person.

Term of the visa: Schengen Employment visas are issued for a long term based on the term of employment

Visa fee: Long stay visa (more than 90 days) EUR 99, short term stay visa (less than 90 days) EUR 60
Time taken to process the visa: 3 months

Setting up a company in Hungary

When setting up a company you may want to consider these factors:

  1. Business factors

    Hungarian law allows Hungarians and foreign natural persons as well as Hungarian and foreign legal entities without a legal personality to establish a business organization under the Hungarian law. The state may participate in a business organization without any restrictions.

    You may also want to consider the following when making your decision:

    • The industry and the nature of business that will be established
    • Nationality of the headquarters/Management and employees
    • Minimum capital and conditions
  2. Regulatory framework

    There are numerous rules and regulations that govern Hungarian business organizations.

    • Act XLV of 2004 on European Company Limited by Shares
    • Act XLIX of 2003 on European Economic Interest Grouping
    • Act X of 2006 on Cooperatives
    • Act LXIX of 2006 on European Cooperative Societies
    • Act CXXXII of 1997 on Hungarian Branch Offices and Commercial Representative Offices of Foreign Registered Companies
    • Act V of 2013 (Civilian Code)
    • Act XLIX of 1991 on Bankruptcy Proceedings and Liquidation Proceedings

     

Your Options

There are seven types of business forms available for foreign companies in Hungary. Each of these business forms has unique advantages and disadvantages, as well as differing scope of approved business activities, registration requirements and minimum capital requirements. Both foreigners as well as Hungarian nationals can establish a business in Hungary. Moreover, there are no restrictions on a business organization registered in Hungary to be exclusively owned by foreign nationals. The only restriction that applies to foreign business owners is that if they do not have a residence in Hungary, an agent of service for process must be appointed in the due process.

When setting up a company in Hungary you have the following options.

  • General (unlimited) Partnership (Kkt)
  • Limited Partnership (Bt)
  • Limited Company (Kft)
  • Private Company limited by shares (Zrt)
  • Public Company limited by shares (Nyrt)
  • Branch Office
  • Commercial representative office

This article provides a general guideline for foreign businesses that seek to enter Hungary for business purposes. In particular, it looks at common pathways to establish a business presence in Hungary, generally through a Partnership, Limited Company, Commercial, or Representative Office. In addition, various economic, tax, and regulatory factors are provided throughout as a source of useful information to assist those who seek to establish a business presence in Hungary. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

 

Limited Liability Company (Kft)

LLCs can be established with only one member and have pre-determined initial capital.

Members are not liable for the company’s liabilities. Members of a LLC cannot be recruited through public offerings. The members’ rights to the company’s assets are represented via quotas in the company.

All companies must have a supervisory board if

  • If the law requests so
  • If the annual average number of full time employees exceeds 200

Investment capital requirements: HUF 500,000. Capital can be contributed in cash or in kind.

Management: Is managed by one or more Managing Directors

Registration fee: HUF 100, 000

Company Limited by shares (Rt)

There are two forms for CLS.

  • Private Limited Company
  • Public Limited Company

A Company Limited by shares can be established as a sole member entity or as a large entity with several investors.

Private Company Limited by shares (Zrt)

A Company Limited by Shares (CLS) can be established via a private offering whereby the shares will be offered only to its founders.  A private CLS can issue printed share certificates. Such shares can take the form of ordinary shares, employee shares, interest-bearing shares, redeemable shares, and preference shares which have the following sub categories.

  • Dividend preference shares
  • Preference with regards to liquidation ratio
  • Preference with regards to voting rights
  • Preference with regards to the appointment of executive officers or members of the supervisory board
  • Shares providing pre emption rights

A supervisory board is required only if shareholders representing atleast 5% of the voting rights request for an advisory board or if the following mandatory cases persist.

All companies must have a supervisory board if

  • If the law requests so
  • If the annual average number of full time employees exceeds 200

Public Limited Company (Nyrt)

A public CLS maybe established via a public offering where shares are offered to the public. Public CLS’ have dematerialized shares which are registered in the shareholders security account maintained in a financial institution. Such shares can take the form of ordinary shares, employee shares, interest-bearing shares, redeemable shares, and preference shares which have the following sub categories.

  • Dividend preference shares
  • Preference with regards to liquidation ratio
  • Preference with regards to voting rights

Nyrt must have a supervisory board except in the case of a unified company management system. Shares of a Public Limited Company can be traded in the stock exchange.

Common attributes of Rts:

Auditor: Not required other than in the following cases.

  • Accounting Act requires so
  • Articles of Association prescribes the need for an auditor
  • Required by the law

 Investment capital requirements:

Private: HUF 5 million. Capital can be contributed in cash or in kind.

Public: HUF 20 million. The company cannot be established without capital contributions.

Management: Board of Directors (3 to 11 personnel) or a CEO. If the constitutive documents prescribe, the general director can manage the company.

Registration fee:

Private: HUF 100, 000

Public: HUF 600, 000

Unlimited Partnership (Kkt)

The liabilities of the members are joint and unlimited for the obligations of the Partnership.

Partners are not required to personally take part in the business activities of the Partnership. Every member is entitled to represent the Partnership unless the Articles of Association specifies otherwise. Partnership is required to have at least 2 members.

Investment capital requirements: No minimum capital required

Management: Partners

Registration fee: HUF 50,000

Limited Partnership (Bt)

A Limited Partnership must have atleast one general partner and atleast one general partner.

The general partner has unlimited liability (multiple general partners are jointly and severally liable). The Limited Partner has limited liability based on the capital contribution. Only the general partner is authorized to represent the Limited Partnership unless if the articles association specifies otherwise.

Investment capital requirements: No minimum capital required

Management: General partner

Registration fee: HUF 50,000

Commercial Representative office

Foreign investors can perform business functions such as contract negotiation, advertising and exhibiting products and other forms marketing on behalf of the parent company

However, the representative office is prohibited to pursue core business activities.  A representative office does not have a legal personality. A commercial representative office is an unincorporated organizational unit of a foreign company established upon its entry into the Company Register. Representative offices are obliged to keep their monetary assets in a bank account.

Investment capital requirements: Not applicable

Management: Not applicable

Registration fee: HUF 50,000

Branch Office

A branch office is an organizational unit of a foreign company which is authorized to carry out independently business activities. However, it does not have a legal personality.

A branch office may carry out business activities, acquire property, exercise certain rights and assume liabilities in its own name. A branch office may not act as a representative or agent of a foreign company or a branch of a foreign company. The only exception is a branch set up by a foreign company in any EEA member state. Branch offices must be registered by the Court Registry and are obliged to keep their monetary assets in a bank account.

Investment capital requirements: Not applicable

Management: Not applicable

Registration fee: HUF 50,000

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Cambodia, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Hungary they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Hungary
  • the company needs help with tax, employment, immigration and payroll compliance in Hungary

The complexity of employment regulations in Hungary makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Hungary allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Hungary.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Hungary. Read more about outsourced employment through Shield GEO.

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