Internationally active companies can operate in Hungary not only through subsidiaries or branches but also by setting up a permanent establishment (PE). Choosing the optimal structure has significant tax implications, and the establishment of a PE may be the simplest way to maintain a business presence without full company registration.
What qualifies as a permanent establishment in Hungary?
According to Section 4(33) of Hungary’s Corporate Tax Act (Act LXXXI of 1996), a foreign business has a taxable permanent establishment in Hungary if it:
– Operates through a fixed place of business (e.g. an office, management base, place of representation);
– Carries out construction, assembly, or installation work for more than 3 months;
– Develops or sells real estate in Hungary;
– Performs commercial agency activities for supplying goods or services;
– Provides services through employees or other personnel for more than 183 days in a calendar year;
– Falls under the definition of a PE according to the applicable double taxation treaty.
Which activities are *not* considered to constitute a permanent establishment?
The following activities do not create a permanent establishment in Hungary:
1. Facilities used solely for storage or display of goods or products;
2. Goods stored by third parties exclusively for processing, delivery, or display;
3. Facilities used only for purchasing goods or collecting information;
4. Facilities maintained for preparatory or auxiliary activities;
5. Activities of an independent agent acting in the ordinary course of business.
Reporting obligations to the Hungarian Tax Authority (NAV)
If a foreign business starts operating through a PE in Hungary, it must register with the Hungarian Tax Authority (NAV). Registration is carried out electronically using the 23T201 form (previously 08T201). Once the registration is approved, NAV issues a Hungarian tax number for the foreign business.
Requirement to appoint a fiscal representative
The appointment of a fiscal representative is mandatory if the business:
– Is established in a third country (i.e. outside the EU), and
– Operates through a permanent establishment in Hungary.
However, if the third-country business also maintains a permanent establishment in another EU Member State, it is no longer considered a third-country entity. In such cases, appointing a fiscal representative becomes optional, provided the company can prove it has both a tax number and a PE in the other EU Member State.
Why legal support is essential
Navigating the establishment of a PE and complying with Hungarian tax and legal regulations can be complex. At Katona & Partner Attorneys’ Association, we offer full-service legal support for the registration and operation of:
– Branch offices
– Subsidiaries
– Permanent establishments
Our services include:
– Strategic legal and tax planning
– Communication with Hungarian authorities
– Fiscal representation
– Preparation of all required documentation
– Ongoing legal compliance
—Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)
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Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
Mobil: + 36 70 344 0388
Fax: +36 1 700 27 57