An off-shore company may be a limited liability company or a company limited by shares that is registered in Hungary, has a domestic registered place of business, is entirely (100%) owned by foreign owners, and in each given tax year simultaneously and continuously complies with the following conditions:
- The company has a certification of registration at the Tax Authority.
- The company performs its commercial activity exclusively abroad and/or provides services to a foreign legal or private person of which the place of delivery -according to the rules of the Act on Value Addad Tax- is abroad (except any kind of financial activity which cannot be practised by an off-shore company).
- In state administrational and court proceedings the company may employ domestic attorneys exclusively. The majority of the leading officials, the members of the supervisory board and the employers may only be domestic private persons. Furthermore the company has to meet the requirements of auditing by an auditor registered in Hungary.
- The company has to keep its bank account necessary for its operation at a domestic banking institution.
- Neither the company nor its owners has interest in a domestic economic organization or co-operative, as well it has no domestic representation. Furthermore there are no domestic persons who either directly or indirectly own the Company.
The minimum capital of an off-shore company established in the form of a limited liability company is 1.000.000.- HUF (that is about 6.000.- USD) of which at least 50% must be provided at the time of establishment and the remaining 50% must be paid within one year from the registration of the company. In case of a company limited by shares the minimum capital is 10.000.000.- HUF (that is about 60.000.-USD) of which at least 30% has to be provided at the time of establishment, and the remaining 70% must be paid within one year from the registration of the company. Considering the fact that the owner of an off-shore company may exclusively be a foreign person, the capital must be provided in a foreign currency.
In case the owner of the off-shore company is a foreign company, the foreign company is to enclose to the registration application its foreign registration document or an equivalent other document certifying the registration. The documents has to be enclosed in an authorised Hungarian translation. The company must enclose the attestation of the person who is entitled to sign on behalf of the foreign company. If the founder of the company is a foreign natural person, s/he must have a valid foreign passport.
The off-shore company pays 3% corporate tax for its positive tax base. Besides this the company is not allowed to utilise any other kind of tax allowance. As a general rule the foreign members of the company are to pay 20% tax on dividend from the dividend actually received from the company's profit. In case there is an international treaty on avoiding double taxation existing between the countries and it states lower tax on dividend to the foreign member, the off-shore company may reclaim the difference from the domestic Tax Authority. Beyond the aforesaid the company is to pay local taxes, that is about 3-4%.
The off-shore companies have to submit tax return of all their taxes, which work is generally done by the auditors of the companies. There is an important difference according to which the off-shore companies do not have to pay tax advance during the year. The book-keeping of the off-shore companies have to be done in Hungarian language, but they have to keep their books in currency. According to the Hungarian laws an offshore company is qualified as a foreign subject, therefore it may keep its financial means in currency. The company must pay to domestic persons who participate in the operation of the company in Hungarian forints by exchanging the currency from its bank account.
The yearly cost of running of an off-shore company may vary depending on the demands. The average yearly running cost of an off-shore company having a manager is about two thousand dollars per year.
The information in this newsletter is correct to the best of our knowledge and belief at the time of going to public. It contains only basic information and specific advice should be sought, however, before investment and other decisions are made.