anyone here with experience running a company in Hungary?

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thedirtyteller

New member
Why can't I find more threads about Hungary when they have the lowest corporate tax in Europe at nine percent? Are there any catches involved? If I relocate to Hungary to start a company, will I only be paying the nine percent whenever I pay out dividends or are there any hidden fees involved?

Hungary blocks EU deal on 15% minimum corporate tax They do the right thing in that country compared to Romania that will start cracking down on their micro company scheme. Romania’s ruling coalition agrees on several changes to the tax code, including hiked taxes for gambling gains
 

Sols

Staff member
Mentor Group Gold
There are a few low-tax EU member states that look good on paper (Hungary, Bulgaria, Romania, Latvia, Lithuania). But once you get down to it, you'll wish you had gone with Malta, Ireland, or Cyprus instead. There are many factors that end up making them unattractive. It comes down to bureaucracy, language barrier, and things just not being set up for non-resident foreigners.

However, if you relocate there, it will become easier to run the business. The reason more people don't do that is because they don't want to live in Hungary. You will still need a local accountant or lawyer to help you out, though, because bureaucracy is still terrible.

I could be wrong but I believe that in addition to 9% corporate income tax, you pay 15% tax personally regardless of whether you pay yourself dividends or salary. Plus 18.5% social security contribution (plus 13% or so by the company). Don't take my word for it, but as I recall, the personal taxation aspect of Hungary isn't quite as attractive.
 

thedirtyteller

New member
There are a few low-tax EU member states that look good on paper (Hungary, Bulgaria, Romania, Latvia, Lithuania). But once you get down to it, you'll wish you had gone with Malta, Ireland, or Cyprus instead. There are many factors that end up making them unattractive. It comes down to bureaucracy, language barrier, and things just not being set up for non-resident foreigners.

However, if you relocate there, it will become easier to run the business. The reason more people don't do that is because they don't want to live in Hungary. You will still need a local accountant or lawyer to help you out, though, because bureaucracy is still terrible.

I could be wrong but I believe that in addition to 9% corporate income tax, you pay 15% tax personally regardless of whether you pay yourself dividends or salary. Plus 18.5% social security contribution (plus 13% or so by the company). Don't take my word for it, but as I recall, the personal taxation aspect of Hungary isn't quite as attractive.
What will be the benefits of going with Malta, Cyprus or Ireland? I don't want to live on an island, but rather somewhere in eastern Europe where it is relatively safe compared to the west. My head is about to explode from all these options. It doesn't have to be done remotely. I don't mind going there.
 

Sols

Staff member
Mentor Group Gold
What will be the benefits of going with Malta, Cyprus or Ireland?
Low tax, English speaking, and things are set up to be a business friendly environment with relatively decent bureaucracy and with a wide range of service providers competing for your business.

Hungary only provides low corporate income tax. Nothing else is about it is attractive for running a business. Low costs of labor if you need low/medium skilled workers.

People often get hung up on what percentage of corporate tax they pay. While not unimportant, there is so much else to consider.
 

thedirtyteller

New member
Low tax, English speaking, and things are set up to be a business friendly environment with relatively decent bureaucracy and with a wide range of service providers competing for your business.

Hungary only provides low corporate income tax. Nothing else is about it is attractive for running a business. Low costs of labor if you need low/medium skilled workers.

People often get hung up on what percentage of corporate tax they pay. While not unimportant, there is so much else to consider.
So if I set up a business in one of those countries you mentioned, which country in the EU will be the best to relocate to while paying the least amount of taxes? I have a lot in savings, so I'm not dependent on a monthly income but dividends every three months would be nice to have.
 

Mr Gus

Active Member
So if I set up a business in one of those countries you mentioned, which country in the EU will be the best to relocate to while paying the least amount of taxes? I have a lot in savings, so I'm not dependent on a monthly income but dividends every three months would be nice to have.
All depends on your situation, there is not one best option for everyone. You should gave some more information about your situation to get some answers on this..
 

thedirtyteller

New member
All depends on your situation, there is not one best option for everyone. You should gave some more information about your situation to get some answers on this..
My situation is simple. I'm a self-published writer and I sell most of my books through amazon. It doesn't matter where I live so long as the country has a tax treaty with the US or else they will take 30 percent of the income I make. I don't know what more is necessary to tell. My income is 40 000 USD to 50 000 a year
 

Mr Gus

Active Member
My situation is simple. I'm a self-published writer and I sell most of my books through amazon. It doesn't matter where I live so long as the country has a tax treaty with the US or else they will take 30 percent of the income I make. I don't know what more is necessary to tell.
You are also planning to move to one of these countries?
 

thedirtyteller

New member
You are also planning to move to one of these countries?
Yes, if it will be beneficial regarding paying taxes. I don't know which ones you were referring to, but I don't want to move to an island. Ireland could be a possibility but I would prefer to live in a country with low costs, most of eastern Europe, and some southern European countries etc
 

Mr Gus

Active Member
Yes, if it will be beneficial regarding paying taxes. I don't know which ones you were referring to, but I don't want to move to an island. Ireland could be a possibility but I would prefer to live in a country with low costs, most of eastern Europe, and some southern European countries etc
In the case you are actually moving there Bulgaria or Romania would probably your best option taxation wise. If you register as freelancer you will pay 10% in tax and you will granted a 25% standard deduction so you that comes down to 7.5% in tax, also you should get a tax credit for the 5% withholding tax paid to the US, so that will result in a 7.5% tax rate. To make it even more interesting since you said are a writer you could get a 40% deduction for royalty income, that that will bring it down to 6% in total. I am not sure how the Bulgarian authorities would deal with the tax credit since in that case you would only pay 1% in tax effectively so I would inform a local tax advisor about this.

In Romania you obviously have the micro company scheme which results in a 6-8% tax on revenue, however the US will withhold 10% they will probably also give you a tax credit but you will never pay less then 10% in corporate tax, and dividends will be 5% so it will come down to 15% in total.

The question is also for how long the scheme will last where as in Bulgaria you will have more security about the tax rates, I believe 80% in parliament should be in favor of changing the corporate tax rate before it can get changed.

So from a taxation standpoint Bulgaria, even when you compare it to Cyprus or Malta, but since you didn't want to live there anyway..
 

thedirtyteller

New member
In the case you are actually moving there Bulgaria or Romania would probably your best option taxation wise. If you register as freelancer you will pay 10% in tax and you will granted a 25% standard deduction so you that comes down to 7.5% in tax, also you should get a tax credit for the 5% withholding tax paid to the US, so that will result in a 7.5% tax rate. To make it even more interesting since you said are a writer you could get a 40% deduction for royalty income, that that will bring it down to 6% in total. I am not sure how the Bulgarian authorities would deal with the tax credit since in that case you would only pay 1% in tax effectively so I would inform a local tax advisor about this.

In Romania you obviously have the micro company scheme which results in a 6-8% tax on revenue, however the US will withhold 10% they will probably also give you a tax credit but you will never pay less then 10% in corporate tax, and dividends will be 5% so it will come down to 15% in total.

The question is also for how long the scheme will last where as in Bulgaria you will have more security about the tax rates, I believe 80% in parliament should be in favor of changing the corporate tax rate before it can get changed.

So from a taxation standpoint Bulgaria, even when you compare it to Cyprus or Malta, but since you didn't want to live there anyway..
Bulgaria is out because I write mainly adult-related content and pornography is illegal there.

How do you know the US will withhold 10 percent, which I'm not aware of and have never heard of. I currently get paid to my personal bank account in Sweden. what I do know is that in countries without tax treaties with the US amazon then withholds 30 percent of the royalties.

There is bad news coming out regarding the micro company scheme. They will lower the threshold from 1 million to 500 000 and maybe eliminate the possibility to be self-employed. Romania’s ruling coalition agrees on several changes to the tax code, including hiked taxes for gambling gains But it's still the best option since my income is nowhere near that much.

Where have you heard about freelancers in Romania only paying 10 percent tax? There must be a catch there, don't you pay some social securities or some other hidden fees or taxes as i like to call it.
 

Mr Gus

Active Member
Bulgaria is out because I write mainly adult-related content and pornography is illegal there.

How do you know the US will withhold 10 percent, which I'm not aware of and have never heard of. I currently get paid to my personal bank account in Sweden. what I do know is that in countries without tax treaties with the US amazon then withholds 30 percent of the royalties.

There is bad news coming out regarding the micro company scheme. They will lower the threshold from 1 million to 500 000 and maybe eliminate the possibility to be self-employed. Romania’s ruling coalition agrees on several changes to the tax code, including hiked taxes for gambling gains But it's still the best option since my income is nowhere near that much.

Where have you heard about freelancers in Romania only paying 10 percent tax? There must be a catch there, don't you pay some social securities or some other hidden fees or taxes as i like to call the,
The freelancer part was about Bulgaria, and yes you pay some social securities as a freelancer in Bulgaria but they are capped.

Look at the tax treaties.. In Sweden they don't withhold anything because there is a 0% rate on royalties, but that differs per tax treaty. Withholding tax rates US

It might be illegal but do they really enforce it? And if so what are the penalties? And do you even have to tell anyone it's adult content, if they don't ask then don't tell.
 

thedirtyteller

New member
The freelancer part was about Bulgaria, and yes you pay some social securities as a freelancer in Bulgaria but they are capped.

Look at the tax treaties.. In Sweden they don't withhold anything because there is a 0% rate on royalties, but that differs per tax treaty. Withholding tax rates US

It might be illegal but do they really enforce it? And if so what are the penalties? And do you even have to tell anyone it's adult content, if they don't ask then don't tell.
Ireland and Cyprus seem more lucrative now since they don't withhold taxes on royalties. Are there no other option than setting up a company in one of those companies and live somewhere else, getting paid through dividends?

I've read articles about how they have cracked down on pornography producers but that's films and not literature, but I need a stress-free environment in order to work, so I'm not going to risk it.
 

Mr Gus

Active Member
Ireland and Cyprus seem more lucrative now since they don't withhold taxes on royalties. Are there no other option than setting up a company in one of those companies and live somewhere else, getting paid through dividends?
You said you didn't want to live on a island.. But yes besides Bulgaria, Cyprus is a very good option as well.

Well most tax treaties include a LOB clause to counter artificial setups to avoid paying withholding taxes. The treaty with Hungary doesn't have one, and is relatively low tax. But then you still need to find a country with a 0% personal tax rate and that will not tax your Hungarian company or you will need to create actual substance for the company but that will cost a lot and is way to complicated and inconvenient in your situation imo.

You could also take a look at the inpatriate regime in Italy, you get a 70% or 90% reduction on your PIT depending where in Italy you relocate to and royalties are tax exempt (not sure if your income qualifies as royalties) and there is a 0% withholding tax with the US. And I believe you are allowed to sell adult content in Italy.
 

thedirtyteller

New member
You said you didn't want to live on a island.. But yes besides Bulgaria, Cyprus is a very good option as well.

Well most tax treaties include a LOB clause to counter artificial setups to avoid paying withholding taxes. The treaty with Hungary doesn't have one, and is relatively low tax. But then you still need to find a country with a 0% personal tax rate and that will not tax your Hungarian company or you will need to create actual substance for the company but that will cost a lot and is way to complicated and inconvenient in your situation imo.

You could also take a look at the inpatriate regime in Italy, you get a 70% or 90% reduction on your PIT depending where in Italy you relocate to and royalties are tax exempt (not sure if your income qualifies as royalties) and there is a 0% withholding tax with the US. And I believe you are allowed to sell adult content in Italy.
Can you email me and find some time to chat about this through discord or something else? I will pay for your time. My head is about to detonate [email protected]
 

JohnnyDoe

Mentor Group Gold
Bulgaria is out because I write mainly adult-related content and pornography is illegal there.
Writing is not (yet?) illegal.
Your business consists in creating contents (IP), licensing it to a publisher (Amazon) and receiving royalties. You (your company) are not a seller of contents or books, and you are not a publisher. You license IP.
As a director of the company, you manage the licensing of the IP.

Use this information to your advantage ;)
 

Don

Active Member
There are a few low-tax EU member states that look good on paper (Hungary, Bulgaria, Romania, Latvia, Lithuania). But once you get down to it, you'll wish you had gone with Malta, Ireland, or Cyprus instead. There are many factors that end up making them unattractive. It comes down to bureaucracy, language barrier, and things just not being set up for non-resident foreigners.

However, if you relocate there, it will become easier to run the business. The reason more people don't do that is because they don't want to live in Hungary. You will still need a local accountant or lawyer to help you out, though, because bureaucracy is still terrible.

I could be wrong but I believe that in addition to 9% corporate income tax, you pay 15% tax personally regardless of whether you pay yourself dividends or salary. Plus 18.5% social security contribution (plus 13% or so by the company). Don't take my word for it, but as I recall, the personal taxation aspect of Hungary isn't quite as attractive.

in addition companies need to pay the local business tax:

The local business tax is a type of sales tax, the rate of which varies from municipality to municipality up to a maximum of 2%. There are special rules for calculating the tax base, and in some industries the municipality tax base may be significantly higher than the corporate income tax base. If a business has several establishments, it must allocate the local business tax between the municipalities concerned.

Local business tax is to be paid on adjusted net sales. When calculating net sales, royalties received can be deducted, as well as certain special types of taxes accounted for by the company. Specific rules apply to certain types of enterprises, such as Hungarian branches of foreign companies.

The established net sales are reduced by the following factors:

  • the cost of goods sold (COGS) and intermediated services rendered;
  • the cost of subcontracted deliverables;
  • material costs;
  • the direct costs of basic research, applied research and experimental development accounted for in the tax year.
 
I don't want to live on an island, but rather somewhere in eastern Europe where it is relatively safe compared to the west.
No disrespect intended, but you consider Western Europe more dangerous than Eastern Europe? You might end up surprised.
 

thedirtyteller

New member
No disrespect intended, but you consider Western Europe more dangerous than Eastern Europe? You might end up surprised.
I've traveled across Eastern Europe and have been visiting every country except for Croatia, Slovenia and Montenegro. I speak of my own personal experience, but even statistics and the rising crime rate agree with what I'm saying and what I have experienced
 

Colorbleuart

New member
Why can't I find more threads about Hungary when they have the lowest corporate tax in Europe at nine percent? Are there any catches involved? If I relocate to Hungary to start a company, will I only be paying the nine percent whenever I pay out dividends or are there any hidden fees involved?

Hungary blocks EU deal on 15% minimum corporate tax They do the right thing in that country compared to Romania that will start cracking down on their micro company scheme. Romania’s ruling coalition agrees on several changes to the tax code, including hiked taxes for gambling gains
Hey, I just opened my company in Hungary. I can help you with everything you need. Cheers
 
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