A Hungarian holding company is usually formed as a corporate entity with limited liability. Hungarian law provides for two distinct types of corporate vehicles with limited liability: the limited liability company (in Hungarian: “korlátolt felelősségű társaság”, shortly: “kft”) and the company limited by shares (in Hungarian: “részvénytársaság”, shortly: “rt.”), of which there are two variations on the basis whether the shares of the company are listed on the stock exchange. For holding company purposes, only the privately held rt. is suitable (abbreviated as “zrt”).
The formation of any Hungarian corporate entity requires the approval of the formation documents (articles of association), the appointment of at least one director and the payment of the initial capital. (The initial capital of the company must be fully paid within one year after its formation.) The statutory minimum capital of a kft is HUF 3 million, while of a zrt is HUF 5 million.
Any person, whether natural or legal, domestic or foreign, may form, and hold an equity interest in a Hungarian company. The director of a Hungarian company must be a natural person, who may be domestic or foreign national and resident. Foreign members and directors of a Hungarian company must appoint a Hungarian resident delivery agent to receive official correspondence on their behalf.
A Hungarian company may choose its accounting currency. Accounts must be kept in accordance with Hungarian accounting standards, however, IFRS accounting is also available. The annual financial report must be approved and published by 31 May of the following year.
In Hungary, there is no foreign exchange control, dividends and liquidation and sale proceeds may be freely transferred abroad and there is no withholding tax on dividends, regardless whether it is paid to a non-treaty country. In the event an equity participation is reported to the tax authority, there is no capital gains tax on the sales proceeds if the equity participation is held for at least one year thereafter (participation exemption).