Located in the center of Europe, the Hungarian nation has been slowly recovering its imperial glory, but unlike in the past, this time it is not through conflicts and conquests, but through a business climate that attracts businessmen and entrepreneurs from all corners of the world to visit this magnificent country.
Ordinary people know Hungary from history books and its tourist charms. But this country is much more than its beautiful architecture, its goulash dishes and its beautiful songs by Béla Bartók. Hungary today ranks as one of the best places in all of Europe to do business and to reside for investors and wealthy individuals.
Hungary, because of its position, has always been the gateway connecting Western and Eastern European cultures. This role as a bridge between cultures has deeply marked the more than one thousand years of history of this country that has fought against any number of empires to make its own voice prevail.
Hungary is one of the most beautiful countries in Central Europe that also offers excellent business opportunities. Its popularity among the international business sector is growing in such a way that it´s becoming the preferred European destination for business even before Cyprus. Moreover, with the Cypriot CBI program suspended, many international investors are starting to consider other options in Europe.
Hungary has been a member of the EU since 2004 and is part of the Schengen area, thus opening the doors to the European market. It also serves as a gateway to Europe from the Asian market as many Chinese products enter the old continent through Hungary.
With the lowest corporate tax rate in the EU, a legal system that enforces foreign rulings subject to bilateral treaties, of which there are only a few, and excellent asset protection structures such as the trust, the foundation and the AMF (asset management foundation), Hungary offers unique business advantages for businesspeople not only from Europe but from the whole world. Mundo has chosen Hungary for its business environment, its protective legislation, its rich culture, and its picturesque cities.
Mundo´s country rating is essentially a freedom index whereby our team of specialists rate a combination of freedoms which include freedom from violence and personal attacks, financial freedom from high taxes, business freedom from government interference and especially from socialism and communism.
Political stability - 6
Although Hungary has been part of the Eastern Block controlled by the Soviet Union until 1989, it was the most westernized country. Thanks to this, the economy did not suffer much during the perestroika process, with a mild transaction to a liberalized economy. This tendency kept growing even after the perestroika with government policies which favored business and that kept boosting the country into the western economic model. These efforts resulted in Hungary finally joining the European Union in 2004.
Hungary is generally a stable country, but it has been facing political issues during the past few years. The current Prime Minister, who has been the head of state since 2010, is highly criticized for its authoritarian regimes and conservative views.
Being one of the most important financial centers in the region, Hungar´s government provides different incentives for businesses established in the country. This tendency finds its origins back in the 70s, where the head of state implemented business friendly policies moderated according to communist requirements.
Even during its communist times, Hungary was able to plant a seed that would grow into a business-friendly environment and a free market policy. In this section we will discuss some of the incentives that are available in this country and that will help your business to thrive. We will also discuss important aspects that every entrepreneur should consider, especially when operating abroad.
These aspects include labor law, licensing, restrictions, trade and import policies and others. This jurisdiction can offer excellent business advantages in an OECD compliant environment, which will make it easier to prove the source of income when expanding your business into new horizons.
Hungary offers us a solid background where to establish our businesses. We are talking about a jurisdiction that provides substance in full compliance with the EU auditing requirements, but with a low corporate tax.
In this country it is possible to set up different structures such as limited liability company, limited partnership, or general partnership. Being one of the most important business centers of the region, Hungary offers unique corporate advantages such as easy incorporation and straightforward processes. Many of the auditing processes can be conducted through online platforms, reducing bureaucracy to the minimum.
Mundo´s experts recommend Hungary as the place in Europe where to establish your operating company, because, like all Central and Eastern Europe, this country presents a high-skilled labor force with low wages. Moreover, the corporate tax here is the lowest in the EU with only 9% a year and, if you transfer your dividends from an operating company to another one of your companies abroad, then you won´t have to pay withholding tax.
One of the strongest features of Hungary and one of the best opportunities for international investors is the creation of a Hungarian trust.
This country offers us a great asset protection tool with excellent options for tax optimization such as:
- A secure legal environment (foreign rulings are subject to a few bilateral treaties).
- Low tax on the assets
- Reputable jurisdiction
- Option to establish other asset protection structures.
Hungary enforces foreign rulings subject to bilateral treaties of which there are only a few, which means that, if you are a US citizen, for example, and your trust is set up in
Hungary, creditors or ex-spouses will have a very hard time reaching your assets . If they are brave enough to go after your property, then they will have to do it through the Hungarian legal system and wish them good luck, because local law is extremely protective of trusts. It is difficult, even in Hungary, to set a trust apart.
With increasing demand from foreign and domestic corporate clients for simple and rapid services, more financial institutions are providing universal banking, which ranges from straightforward lending to investment banking and securities trading. Most foreign firms tend to access local credit and capital markets through home-country financial institutions that have opened branches in Hungary. The services industry is concentrated in Budapest with large SSCs from many international important banks.
Under the EU's "single passport" principle, a financial services provider authorized in one EU member state is free to provide that service anywhere else in the EU. EU-based financial institutions are not required to establish a local subsidiary or branch; they are only required to register with the Hungarian Financial Supervisory Authority.
Hungary used to have an RBI program a few years back, but this is not available anymore. Although there is no official scheme for acquiring citizenship by investment, it can be acquired but at remarkably high costs. Moreover, this is not a country that is generally open for immigration and, although not the highest in Europe, personal taxes are slightly high in our opinion, especially if you add them to the corporate tax.
Considering the high expenses for citizenship, the country´s tendency towards immigration and the personal tax rates, Mundo does not particularly recommend Hungary as a place where to get official residency. If you would like to conduct business here, we recommend acquiring another European or Schengen passport and establishing your operating company in Hungary.
Undoubtedly, one of the most interesting aspects of the Hungarian business environment is taxation. In Mundo´s view, Hungary is one of the best places to establish a company because, like we have stated in other sections of this page, the corporate tax is only a flat 9% annual rate. This makes Hungary the EU country with the lowest corporate tax.
If you have a company that is officially resident of Hungary, then you will be subject to worldwide income tax, but still can benefit from some interesting incentives such as double taxation treaties. This country has double taxation agreements in place with more than 40 jurisdictions, and does not impose withholding tax on dividends, interest or royalties paid to companies in those countries.
If you are looking for a jurisdiction that provides substance, then Hungary is a great option as it is in full compliance with EU accounting and reporting standards.
In this section we will discuss the life of an expat living in Budapest based on a real experience. My friend Monica, whose name I obviously changed for confidentiality purposes, is from the UK and has worked as an English teacher in different parts of the world including South Korea and India. Now she lives in Budapest and agreed to tell me all about her experience as an expat in one of the most exciting cities in Europe.
Monica is incredibly happy in Budapest because the city is particularly beautiful, with the Danube River crossing it by, its stunning architecture and unforgettable views.
Monica teaches English language in a private school in Budapest and her husband has his own business. They have lived in different countries, but they have lived in Hungary the longest (8 years) which I think is testimony of how good their life is here. Monica and her husband live a great life with amazing and affordable cultural offers and great social circles, they earn more money and spend less, they save a lot in taxes and have spare time for their hobbies.
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