A sole trader may set up a sole trader business, which is a taxpayer without legal personality and which is created upon registration in the companies register in accordance with the company registration rules. Sole trader companies have legal capacity, and may acquire rights and undertake obligations, and may in particular acquire property, conclude agreements, instigate court proceedings and be sued. A sole trader company may only have one member, and a natural person may only be a member of one sole trader company
The primary act of law in Hungarian company law is Act 4 of 2006 on Business Associations (Companies Act). The main types of business associations under the Companies Act are identical to those regulated in EU countries. The procedures on founding, implementing changes in data and winding up of Hungarian associations are primarily governed by Act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings (Company Procedures Act).
Under the Companies Act, business associations may be founded by non-resident and resident natural persons, legal persons and business associations without legal personality. Hungarian laws do not provide an exhaustive list of legal persons but, on the basis of the Civil Code, state, municipal, business, social and other organisations may have legal personalities. International treaties may contain regulations in derogation from these provisions in respect of the participation of non-residents in Hungarian business associations.
The law may require a special permit from the authority for the foundation of a business association (foundation permit), such as, for instance, companies with an interest in financing, insurance or capital market activities, which may only be founded with approval from the Hungarian Financial Supervisory Authority (PSZÁF). Where authorisation by the authority is prescribed as mandatory by law to engage in a certain economic activity, the business association can be founded and registered but it may only begin and pursue the activity in question when in possession of such authorisation. Activities subject to qualification may only be pursued by business associations if there is at least one person among its participating members, employees, or persons working for the benefit of the company under a permanent civil law contract concluded with the business association who satisfies the qualification requirements set out in the legal regulations.
General partnerships, limited partnerships, limited liability companies, single member companies or private limited companies may be founded in a simplified procedure by enclosing with the application for the registration of the company the deed of foundation drawn up on the basis of a template in the annex of the Company Procedures Act.
Preparation of corporate documents by a Hungarian attorney-at-law.
Founders of the company must sign the company's constitutive document, which, together with some other documents must be countersigned by a Hungarian attorney).
Time to complete: minimum one day.
Costs: Attorney fees range widely.
Opening of a bank account
Time to complete: one day.
Costs: depending on the bank.
Registering the company at the Hungarian Court of Registry and obtaining a tax identification number.
The company is established by the act of the court of registration. All companies and sole trader businesses must register at the competent court of registration for the company’s registered office. Applications for registering or amending details must be submitted electronically via a legal representative. The court of registration electronically records documents relating to the company and provides an electronic certificate of registration as well as confirmation of any changes made.
The "one-stop shop" during company registration means that the Court of Registration obtains the company's tax number and statistical code using the electronic system created for this purpose. The "one-stop shop" in the process of registering sole trader activities means that the competent authority obtains the tax number and statistical code directly, instead of the applicant, so the applicant does not need to deal in person with the competent State tax authority or the Central Statistical Office before registration (for post-hoc registration see the section entitled “Tax registration” below).
Time to complete: in the case of companies established using template constituting documents – one working hour from the issue of the company’s tax identification number (NB: this simplified registration procedure is not available for public companies limited by shares), otherwise the registration procedure takes 15 working days. It should be noted that the process could be more time-consuming if the procedure is suspended because the tax authority needs more than one day to provide the court with the tax identification number.
Costs, registration fees:
Simplified registration procedure:
In the procedure of company registration legal representation is obligatory.
Applications used in company registration shall be submitted by the legal representative via the Governmental Portal (magyarorszag.hu), using a general form fill-out framework program (ÁNYK) which handles the different forms for the process. In the electronic procedure of company registration it is necessary for the counsel to use electronic signature and time stamp.
Registration (and any other process which requires authorization) by electric means also requires Client Gateway (Ügyfélkapu) registration by the legal representative. The Client Gateway is the electronic identification and customer entry system of Hungarian governance. After single-sign-on and authentication of identity, the Client Gate allows users to connect with public bodies, which provide e-government services and administration. The legal representatives (counsel) have to convert all records not prepared by themselves (such as copy of property deed, authorisation, certification by payment service institutions of deposit, etc.) into electronic record. Those electronic documents assigned with qualified electronic signatures (QES) can be attached to the application directly.
Registration with the Hungarian tax authority, municipality, chamber of commerce, the Central Administration of National Pension Insurance
A representative of the company or an authorized tax expert can perform the administration required for the registration.
Time to complete: one day.
Costs: free of charge.
Taxpayers who are required to register their company are also required at the same time to report to the state tax authority within 15 days of the submission of the company registration application with regard to information that does not appear in the application for company registration. Similarly, all taxpayers have an obligation to report to the local tax authorities, within 15 days of the commencement of activities there by the taxpayer (e.g. with regard to local business taxes).
Pursuant to the Decree Implementing the Act on Social Security Pension Provision, the obligation to provide information relating to the NYENYI (Individual Pension Insurance Record) form may also be fulfilled through electronic administration. The obligation to provide information relating to the Individual Pension Insurance Record Form may be fulfilled using the e-NYENYI service of the Central Administration of National Pension Insurance.
Data provision on employees to the tax authority
Once they have registered at the Client Gateway, employers are obliged to submit electronically on the Government Portal the data stipulated by law relating to their employees, on the form drawn up for this purpose, for the competent State tax authority of first instance, by no later than the first day of the legal insurance relationship prior to commencement of employment.
The fact that a company is registered in the companies register, or that an entrepreneur completes the registration required, or receives its operating licence, does not necessarily mean that it may pursue unrestricted business activities. It is a basic condition for legal operation that a company obtain the different licences necessary for its activities.
Many manufacturing and service activities may be pursued on the basis of a simple report, while numerous activities require a premises licence. Some commercial activities may be pursued on the basis of an operating licence. A number of activities require an activity licence prescribed by sector specific legislation.
(Please note that the forms are currently available in Hungarian only)
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