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BRANCH OFFICE IN HUNGARY
A branch office is a way for foreign companies to establish a presence in Hungary without the need to incorporate a separate legal entity. In this essay, we will discuss the benefits and drawbacks of establishing a branch office in Hungary and the legal requirements and procedures involved.
BENEFITS OF A BRANCH OFFICE IN HUNGARY
Establishing a branch office in Hungary has several benefits. Firstly, it allows foreign companies to conduct business in Hungary without the need to incorporate a new legal entity. Secondly, a branch office can use the resources and reputation of its parent company, which can help to establish the branch office in the Hungarian market. This can be particularly useful for companies that are well-known in their home country but may be less well-known in Hungary. Thirdly, a branch office can take advantage of the favorable business climate in Hungary, which offers a low corporate tax rate, a highly skilled and educated workforce, and access to the EU single market.
LEGAL REQUIREMENTS AND PROCEDURES
In Hungary, a foreign company can establish a branch office by registering with the Hungarian Company Court with the assistance of a qualified attorney-at-law. The parent company must provide certain documents, including a notarized extract from the commercial register, and a declaration from the parent company confirming that it will be responsible for the obligations of the branch office. The branch office must have a registered office in Hungary, which can be the office of a representative or a service provider. The branch office must also appoint a manager, who is responsible for the day-to-day operations of the branch office and acts as the representative of the parent company. The branch office shall also register with the Hungarian Tax Authority and obtain a tax number.
DRAWBACKS OF A BRANCH OFFICE IN HUNGARY
Although a branch office can provide significant benefits, there are also some drawbacks to consider. Firstly, the parent company is liable for the debts and obligations of the branch office. This means that the parent company's assets may be at risk if the branch office incurs significant debts or liabilities. Secondly, a branch office may be subject to additional regulatory and reporting requirements compared to a separate legal entity. For example, a branch office may need to submit reports to both the Hungarian and foreign regulatory authorities, which can be time-consuming and costly. Thirdly, a branch office may face certain restrictions on the types of business activities it can undertake. For example, a branch office may not be allowed to engage in certain types of commercial activities that are restricted to Hungarian companies.