Doing Business in Hungary
Do you want to expand your business into Hungary, or hire employees there? Find out the key things you need to know about Hungary expansion below.
Hungary Economy Overview
Currency
Hungarian forints/HUF
Working hours
40-48 hours/week
Public/bank holidays
11 public holidays
Capital
Budapest
Languages
Hungarian
Population
9.7 million
Minimum hourly salary
1,200 HUF-1,560 HUF
Tax year
1st Jan – 31st Dec
Date format
YYYY/MM/DD
Misclassification penalties
Penalties for misclassification range between HUF 300,000 and HUF 10,000,000
Fun fact
It is considered rude to clink your beer glasses
Overview of Hungary’s Economy
Hungary’s economy experienced a slight downturn in 2023 when energy prices increased, and the international demand for exports slowed down. However, in the first quarter of 2024, the financial outlook is positive, with GDP expected to rise by 2.4% in 2024. The country has improved in the agricultural sector, with a growth of 0.4%, contributing to its economic stability.
| Economic Indicator | 2023 | 2024 (Forecast) |
|---|---|---|
| HICP Inflation | 17% | 4% |
| Budget Deficit | – | 5.4% of GDP |
Inflation is set to decline, with HICP inflation set to decrease to 4% in 2024 from 17% in the previous year. Hungary’s economy is forecast to recover in the next year, with its budget deficit predicted to decrease by around 5.4% of its GDP. The country has lowered its corporate tax from 19% to around 9%, which is the lowest rate across Europe. Hungary is ranked as one of Europe’s top electronics manufacturers, contributing to its overall fiscal growth.
Taxes
Employer tax: 13%
Social Security
13%
Employee tax: 33.5%
Social Security
18.5%
Income tax
Personal income is taxed at a flat rate of 15 percent. (not applicable to employees under 25)
Business Regulation in Hungary
Hungary is governed by the Labor Code of 1992, which oversees employment terms and conditions such as wages, working hours, overtime, and holidays. The Constitution of Hungary governs the rights of employees and employers. The business regulation in Hungary is similar to European labor law; however, there are unique conditions that employers must satisfy concerning employment contracts. All employment contracts, whether modified or terminated, must be prepared in writing. According to the Labor Code, new employees are entitled to a 3-month probationary period, and all employee benefits,wages, and rights must be stipulated in the contract.
When an employment contract is terminated, both parties must agree, or written notice must be issued to the other party. In Hungary, the employer must issue a rational reason for the termination of the contract, but employees do not have to provide an explanation to end their contract. If an immediate termination is requested, both parties must provide a valid reason. Hungary does offer part-time employment and options to work from home, but there are no formal regulations to govern these practices. Businesses must carefully manage these circumstances to avoid contravening employee rights. The standard work week is 40 hours, and employees are entitled to 20 days of annual leave. All non-EU citizens must have a permit to work in Hungary that is valid for 2 years.
Benefits of Doing Business in Hungary
Hungary’s economy is on the road to recovery, with growth in its GDP for the first quarter of 2024 already contributing toward financial stability. In addition to improvements in its economic climate, Hungary provides businesses with competitive taxation. Businesses can benefit from a skilled workforce with English as a predominant language.
The country has a large number of students who have a tertiary education and specialized skills in technology, mathematics, and science who can contribute to modern businesses, including research and development sectors. The most attractive incentive for companies in Hungary is the lower tax rates. To promote investment, Hungary offers tax allowances and tax credits for companies in the research and development sector. For small to medium businesses, lower tax rates reduce the financial burden, allowing for growth and expansion.
Business Expansion Options in Hungary
Hungary’s low taxes and growing economy provide businesses with options from opening a branch to various subsidiaries. The following business options are available for international expansion into Hungary:
Hungary Employer of Record (EOR)
The Hungary EOR becomes the official legal employer of your Hungary team. This method is fast and efficient, making it perfect for companies that need to quickly deploy staff on the ground.
An EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to focus on their core activities. They may also provide additional services, such as Hungary talent acquisition and visa support.
Recruitment Agencies
Recruitment agencies in Hungary help businesses expand by connecting them with skilled local talent across various industries.
Remote People provides recruitment solutions that simplify hiring and ensure compliance with Hungarian labor laws.
For businesses looking to grow in Hungary, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.
Hungary Professional Employer Organization (PEO)
A PEO is a Professional Employer Organization, and an EOR is an Employer of Record. Both entities assist foreign businesses with HR administration, paying employee benefits, and keeping companies compliant. A PEO in Hungary can only act as a co-employer on behalf of a client company by recruiting employees in Hungary and advising on certain aspects of contracts and professional processes.
A Hungarian EOR can manage far more responsibilities than a PEO because they have a legal entity in the country and can act as the sole employer of the client company. A Hungarian EOR will connect businesses to talent pools, onboard employees, and ensure the conditions in the employment contract adhere to local business laws.
Subsidiary Incorporation
In Hungary, the regulations governing subsidiary incorporation depend on the type of entity of the parent company. Depending on the company structure, different laws must be followed to register and establish a legal entity in the country. Businesses in Hungary have the option of opening an LLC, a private joint stock company, or a partnership.
To incorporate a subsidiary, foreign businesses must have a Hungarian legal representative to establish a workforce. Documentation to set up the subsidiary must be submitted to the Company Registry and companies must register for tax. A business must approach the Court of Registration to register with the local municipality and submit a local business address to the Chamber of Commerce and Industry in Hungary.
Branch Registration
To register a branch in Hungary, the company must follow the same process as registering a subsidiary, which includes applying to the Hungarian Registry Court. The company will register for tax and receive a VAT identification number from the National Tax and Customs Administration. The names of the directors, the branch address, and the names of the local representatives for the business must be provided. Articles of Association and a registration certificate of the parent company must be submitted to the registry.
The parent company of the branch office will be held liable for all legal requirements as the branch in Hungary is not separate from the parent company. As Hungary is a member of the EU, it follows EU regulations, which businesses operating in the country must consider.
Exploring Opportunities in Hungary
Hungary is recovering from the recession experienced during the pandemic in 2020, but with government initiatives, investment opportunities, and incentives for foreign businesses, the country is slowly gaining traction. Hungary is a member of the EU and, therefore, follows European labor laws.
| Sector | Opportunities | Advantages |
|---|---|---|
| Automotive | Vehicle components, electric & autonomous vehicles | Strong manufacturing base, skilled workforce, proximity to European markets |
| Electronics | High-value-added products | Well-established industry, competitive labor costs, favorable tax environment |
| ICT | Software development, cybersecurity, digital services | Highly skilled IT professionals, growing startup ecosystem, government support |
| Renewable Energy | Solar and wind power | Government commitment, attractive feed-in tariffs, untapped potential |
| Shared Services & BPO | Regional centers for global companies | Multilingual workforce, competitive labor costs, favorable business environment |
Hungary’s stable political and economic environment, access to EU markets, and efforts to improve ease of doing business make it an attractive destination for investors looking to tap into the potential of the Central and Eastern European region.
Our Solutions
- EOR from $199
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- Global Payroll
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- Contractor Management
- Company Incorporation
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