HUNGARY

The Republic of Hungary is a Central European country with the territory of 93,000 square km.

The population is nearly 10 million people.

The official language is Hungarian.

The national currency of Hungary is Hungarian Forint (Ft). The exchange rate with regard to principal currencies is subject to fluctuations, in November 1999 it has been 240 Ft/USD.

Advantages:

A low taxation of off-shore companies 3% of net profit.

Hungary has no reputation of an “off-shore” zone.

The lack of currency regulation.

Disadvantages:

The need to have accounting, submit the annual report.

The lack of confidentiality of the information on participants and directors of the Company.

The need to visit Hungary to register the Company.

1	Advantages	A low taxation of off-shore companies – 3% of net profit. Hungary has no reputation of an “off-shore” zone. The lack of currency regulation. The availability of double taxation avoidance treaties with over 45 countries
2	Disadvantages	The need to have accounting, submit the annual report The lack of confidentiality of the information on participants and directors of the Company The need to visit Hungary to register the Company
3	Corporate Law	The Law 1996/LXXXI on corporate tax and withholding tax
4	The form of a tax-free company	An off-shore company, hereinafter referred to as the “Company”, is registered as a limited liability company (kft) or a joint stock company (rt), but has special tax benefits. This material discussed the issues of the registration and taxation of kft only
5	Permitted activities	Any activity not prohibited by the law. A special license for banking, insurance, reinsurance and financial services is required.
6	Prohibited activities	Conduct business in the territory of Hungary and earn income from Hungarian residents. Take part in the capital of Hungarian companies
7	Taxation	Off-shore companies are levied 3% net profit tax. Also please see Hungarian withholding tax table.
8	Additional capital export tax	The dividends distributed by the Company are subject to the additional 20% tax. The tax may be reduced to 5-10% in case double taxation avoidance treaties are applied
9	The period of registration	The decision on the Company’s registration is issued within 2 months. However, the registration number is obtained at once when the documents are submitted, and the Company may start its business under condition that the name of the Company should include the expression “under registration”.
10	The possibility to buy a shelf company	None
11	The name of the Company	Should not be identical or similar to any registered one. The name should reflect the character of the business and the form of the entrepreneurial activity.
12	Who signs the incorporation documents?	The incorporation documents (the incorporation agreement or memorandum) are signed by the founders in Hungary and certified by the attorney-at-law. The signatures of directors are notarised.
13	The share capital of the Company	The minimum announced share capital (kft) is Ft 3,000,000. The total amount of cash deposits may not be less than 30% of the registered capital, or Ft 1,000,000. On registration every participant should pay a half of its cash deposit and install non-cash deposits in full. Unpaid cash deposits should be paid within a year after the registration of the company. In case of a sole founder, 100% of the registered capital should be obligatory paid in by the registration of the company.
14	The recommended share capital	Ft 3,000,000
15	Shares	Not issued. The incorporation agreement/memorandum records the share of every participant.
16	Founders/participants: - minimum number - citizenship - additional requirements	a single private individual or corporate entity Hungarian non-residents A foreign entity may be a participant to only one Hungarian off-shore company
17	Banking accounts of the Company	The Company should have an account only in Hungarian banks. The confidentiality of the information on banking transactions of the company is provided.
18	Directors: - minimum number - ethnic origin and nationality - status	a single private individual X+1 Hungarian directors are required with X foreign directors All rights except those within the exclusive competence of the shareholders (determined by the Articles of Association)
19	Power of attorney	Possible, but the authorised person should be the company’s employee
20	The existence in the territory of Hungary of: - legal address - authorised agent	Obligatory Obligatory
21	Meetings of: - participants - directors	Annual meetings are obligatory, no requirement as to the place Annual meetings, no requirements as to the place
22	The requirement of: - the accounting - preparing the annual report - submission of the auditors’ opinion	Yes Yes Yes if the Company is registered by a single promoter
23	The information available upon request of any third parties	Names and addresses of directors and participants, registered address, Articles of Association or memorandum
24	Double taxation avoidance treaties	Over 45 treaties, including Austria, Canada, Cyprus, China, Germany, Denmark, France, Japan, the Netherlands, Romania, Bulgaria, Ireland, Czech Republic, Italy, Sweden, Great Britain, the USA, Poland, Yugoslavia, Malta, Kazakhstan, Ukraine, Moldova
25	Currency control	Not applied to off-shore companies