3 WAYS TO USE A REAL ESTATE AS COMPANY SEAT IN HUNGARY

08 May 2017

If you want to use an apartment or flat as a seat of your company in Hungary you have more options, but be aware: the authority regularly checks the legal basis of the use of the company’s seat. At the same time, the careful planning of the use of company seat may help you to optimize your tax, so let’s see what kind of legal opportunities you have when you want to legally use your company seat.

1. Ownership

The simplest and safest way to base your company on a place that is owned by you. There is no lessor that can make you move away, and less conflicts, as you can do with your real estate whatever you want. You need no permission for changing the doors, painting the walls, etc. This means more freedom and less inconvenience for the future.

There are two technical solutions for having an own real estate as a seat or branch office:

• The company is the owner

The company may purchase a real estate right after the shareholders create the company by signing the documents. If the company purchases the real estate, all the papers of the real estate transaction have to be signed by the managing director.

• One or more shareholders are the owners

Buying real estate by the shareholders can also be a good solution for some companies, if the shareholders have the financial background for that. Doing so the company will need a legal ground for using the real estate. This can be either courtesy use or lease.

In case of courtesy use, there is no fee in exchange of the use, so the company uses the real estate for “free” or in exchange for the payment of public utility costs.

Leasing the real estate to your own company may be useful, because you will be entitled to a regular amount of money even if the company is not able to pay dividends.

In addition, leasing real estate to your company is a good tax optimizing tool, because if the yearly income from the lease is below 1 Million HUF, you have to pay only 15% personal income tax after it, while you are exempted from other charges like social security contribution ,etc. This is not the case when you receive dividends as shareholder.

2. Lease

Of course, for smaller companies buying a real estate right at the beginning might be a huge investment, so don’t be upset if this possibility is not for you. Let’s see what else you can do.

It is also possible to lease the place that company wish to use. You have two options here, too:

• The company is the lessee

The same can be done as in the case of the real estate purchase. The managing director can sign the lease contract right after signing the company establishing documents.

However, it may be a little bit difficult at the beginning to rent a real estate from a stranger for the same reasons we mentioned at ownership. Until the company is not officially registered, lessors are sceptic when it comes to conclude a contract with a company being under registration process. Signing a lease contract may be more successful if the lessor is one of the shareholders or an acquaintance you can trust.

• The shareholder is the lessee

If it is really important for you to ensure a place for your company, and you can’t wait until the company registration procedure ends, it is a good idea that the shareholder(s) sign a lease contract, and by putting a “transfer clause” into the lease, they agree with the lessor to transfer the lease agreement to the company after it is established.

During this temporary solution the company may use the place in the frame of courtesy use with the permission of the shareholder and the lessor, and once the company registration is made, the lease can be transferred by a declaration of the managing director.

3. Seat Service

If you are a smaller company just beginning your activity in Hungary, you may not have the capacity to build up a whole office yourself. If this is the case, seat service is exactly for you. There are lots of companies providing seat services for start-up businesses in Hungary.

In the meantime, lawyers are banned from this kind of activity, so even tough law firms can be the service agent of the foreign company, and foreign shareholders and managing directors, the law firm’s office cannot serve as the seat of the company.

But be careful when you choose your seat service provider: authorities can check, if you are really available at your company seat, so the receipt of official letters must be smoothly organized, in order to avoid problems and fines imposed by the court of registration.