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Korlátolt Felelősségű Társaság (Limited Liability Company)

Hungary is one of the most developed economies in Central Europe. As a member of the European Union, it is a gateway to a market of more than 500 million people – 250 million in a radius of 1,000 km. Its strategic location makes it an investment destination and ideal logistics point, due to its quality infrastructures, industrial and scientific parks.

Furthermore, Hungary stands out for levying the lowest corporate income tax across the EU, a low 9% tax rate.

This is why the foreign direct investment stock in Hungary is one of the highest in the region.

The Hungarian workforce is cost-effective and highly qualified, especially in engineering, medicine, and economics, with a 60% lower cost than the European average.

Another aspect that makes Hungary a very attractive region for investment is its financial stability. Its financial system is one of the most developed in the area. Together with its government legislation, favorable investment policies and tax incentives aimed at improving competitiveness, that we will discuss it later in more detail.

Hungary has several fast-growing sectors such as automotive, services, biological sciences, pharmaceuticals, and medical technology, electronics, information technology, R&D, renewable energy, supply chain management, and distribution logistics sectors.

As weak points, Hungary is heavily dependent on the economic situation of its main European trading partners, due to the importance of its foreign sector, its low level of foreign exchange reserve and the risk of loss of value of its currency.

The Korlátolt Felelősségű Társaság (Limited Liability Company) is the most common company form to incorporate in Hungary.

It may have 1 or more members and the liability of each of them is limited to their capital contribution.

Its members cannot be recruited through public offers and the rights of the partners and ownership is represented by quotas, which may be ordinary (identical rights) or preferential (e.g. preference of dividends or voting rights). A Kft is not allowed issuance of securities in respect of such quotas.

The minimum subscribed capital is HUF 3,000,0000 (≈€10,000), which may be in cash or species. One or more administrators manage the company and a supervisory board is not required if the number of employees is less than 200.

Hungarian companies benefit from the lowest corporate tax burden in the EU. Currently, the corporate income tax rate is 9%, dividends received may be tax-exempt, and there are no withholding taxes on payments to non-resident companies.

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