Before you set up your Hungarian company, stop and consider who will work for it. If you are planning to move employees of another company of yours to Hungary, it might be better to set up a subsidiary instead of a standalone company, and take advantage of the preferential work permit procedure available to affiliates: intra-corporate transfer.
This article will cover the following topics:
Employing foreign nationals in Hungary
Depending on your planned operation, you might want to work either with locals or with trusted employees who have already proven themselves working for your foreign business. In case you want to bring foreign nationals to work in Hungary, they will need proper documentation.
- EU and EEA nationals: they only need an EU registration card. Applying for this takes just a few days, and they are good to go.
- Non-EEA nationals (“third-country nationals”): they need a work permit, which requires complex paperwork and at least a few months of waiting time.
There are several types of work permits currently available in Hungary depending on the position, required qualification, nationality, and even marital status. However, if your Hungarian company will be a subsidiary, you will be able to take advantage of intra-corporate transfer: a work permit created specifically to allow the movement of talent between affiliates of the same business.
Intra-corporate transfer
The most important difference between intra-corporate transfer and other work permits is that with intra-corporate transfer, the employee stays on payroll with the sending company. As a result, you should consult a tax advisor before choosing this permit to see how and where your employee will need to pay taxes. Of course, we will be happy to help with this too.
Intra-corporate transfer is available under the following conditions:
- Your Hungarian company and the foreign company where your employee is on payroll “belong to the same group of companies” (which in this case means that the Hungarian company must be the subsidiary of the sending company).
- The employee has been working at the sending company for at least 3 months by the time they submit the work permit application.
- The employee needs to be qualified for the position they want to fill in Hungary.
- The salary of the employee must align with Hungarian market salaries for the same position.
Since intra-corporate transfer is supposed to cover temporary postings, the permit will be valid for up to 3 years, and it cannot be extended.
Option for permanent residency
ICT permit holders are not excluded from permanent residency, but there is a catch. Permanent residency in Hungary becomes available after at least 3 years spent in Hungary, and the applicant needs to have a valid residence permit throughout the application process. However, that is not possible simply with an ICT permit that is valid for up to 3 years.
For their permanent residency application, the employee would need to switch to another work permit that allows permanent residency (either a Hungarian Card or an EU Blue Card), which would also mean being moved to the payroll of the Hungarian company.
Setting up a subsidiary in Hungary
A subsidiary is a company which is controlled by another company. In this sense, control means that at least one of the following statements is true:
- The parent company has a majority vote (more than 50%) in the shareholders’ assembly based on the shares it owns.
- The parent company has a majority vote (more than 50%) in the shareholders’ assembly based on agreements with the other shareholders.
- As the owner, the parent company has the right to appoint or remove most of the executives or the members of the supervisory board.
- Regardless of its share in the company, the parent company can control the company based on either the articles of association or agreements with the shareholders.
Setting up an LLC as a subsidiary requires additional paperwork compared to setting up a standalone company. It also requires more thorough planning regarding operation, costs and taxes. The limited liability company will be liable for damages only up to their share capital just like a standalone company, which can be a benefit to foreign parent companies. At the same time, dividends are paid to the foreign company, and international taxation must be considered.
Get expert assistance from Helpers
Helpers has more than 20 years of experience providing assistance to international clients starting a business in Hungary. We can help you with the entire scope of the project, from company registration through daily operation, including not only accountancy and mail forwarding, but also residency applications for any foreign nationals you want to work at your Hungarian company.
Tell us about your plans, and we will help you make them reality.
Frequently Asked Questions
That will depend on your plans and goals in Hungary. A standalone company is certainly quicker to set up. If you want to take advantage of the intra-corporate transfer, that is one solid argument for setting up a subsidiary.
- A subsidiary can shield the parent company against legal or financial liabilities.
- Depending on where the seat of the parent company is, operating a subsidiary can mean significant tax savings.
- A subsidiary can be an excellent testing ground of structural innovation compared to the global processes of the parent company.
- Creating a subsidiary can increase business diversity and introduce advantages created by synergies.
There are several types of work permits available in Hungary, so yes, you can probably bring employees working for your existing foreign companies to Hungary even if your Hungarian company will not be a subsidiary of that company. However, that way you cannot take advantage of the preferential treatment offered by the ICT permit. Talk to one of our experts to see what would work best for you.