Freelancers can enjoy a range of benefits and perks when choosing to become a freelancer in Hungary. This guide will ensure that your freelance business remains compliant with the various tax laws and regulations that govern the country. This nation has a long history, yet it has become a center of activity for entrepreneurs and freelancers in recent years.
Enjoy unprecedented flexibility when you work as a freelancer in Hungary, and use these tips to prepare for success. This country has a rich heritage and cultural legacy to explore, so you want to reduce the amount of paperwork necessary to open a business in Hungary as a freelancer. Learn how to register for a VAT if applicable, maintain accurate accounting records and plan for tax season.
When you freelance in the EU, you may decide on Hungary. People regularly come from other countries to open business in Hungary as a freelancer. There is no requirement to register a business in Hungary in order to work as a freelancer in Hungary. Common legal terms used for this type of work include the sole proprietorship and sole trader. Sole proprietors are liable for all business obligations incurred as a result of transactional activities. However, these entities are small enough so that you will not be subjected to the same audits that larger companies regularly face.
To register as a sole trader, or sole proprietor, you should keep these points in mind:
Hungary uses a system called KATA for freelancers and self-employed individuals for reporting their income tax. Contributions to this tax system will automatically apply to the social pension system as well as health and social security. Freelancers, or sole proprietors, will have to choose between the two methods available for paying taxes when you become a freelancer in Hungary.
Here is a summary of what you need to know for reporting income tax in Hungary:
Hungary has no threshold requirement for VAT; however, you might be required to have VAT registration if you’re importing or exporting products. If you organize events inside the country, this might also apply. Supply and installation services are also linked to the VAT requirement. If you have any questions about this topic, you can contact the regulatory authority directly.
Hungary is one of the easiest countries in the EU for starting a freelance business. There is no registration requirement, but you might decide to register your business for other reasons. First, you need to select the type of business entity to use for your freelancing operations in Hungary.
Most freelancers will choose the most simple business formation, which is the sole proprietorship; however, you could also elect to form a different kind of company. General partners or limited liability partnerships are also common choices for freelancers. The type of business structure that will work best for your situation will be a very personal matter, so consult with a business advisor if necessary.
Follow these steps if you wish to register and open a business in Hungary:
Paperwork requirements and bureaucratic hurdles can frustrate even the most disciplined freelancer. For example, the simplified employment and temporary employment options are useful to freelancers, but determining which one to use can be complicated. Xolo Leap offers freelancers a way to get around confusing requirements and paperwork nightmares. Start a business by using Estonian e-Residency, which allows you to manage the company from any location on the planet.
Conducting business in any country will have high and low points, so you need to be prepared to experience the normal ups and downs of the business cycle. For example, many freelancers will experience a busy season when their services are in demand. If you know what the busy season is for your industry, you will understand that other tasks will have to be done during the off season. This kind of prioritization can help you to stay focused when business is slow. Additionally, you need to plan for these slow periods financially.
Here are some other tips to help your business succeed in Hungary:
Even with the reduction in requirements for freelancers, it can be difficult to keep track of all the tasks involved with setting up shop as a freelancer in Hungary. Xolo Leap is a product designed specifically to help freelancers with the daily tasks of running a business in Hungary. You will have access to resources for accepting payments and managing your business expenses while remaining VAT compliant. You'll also be able to receive payment, create invoices, and get rid of your tax worries as we'll handle that aspect for you.
Freelancers in Hungary can contribute to a pension plan through the system already in place, which is mandatory. This is a system where you pay into the public pension system as you earn income. This defined benefit system as covered employees and self-employed individuals since 1998.
Insurance plans in Hungary will vary widely. Many freelancers can find information about the options available by joining an association like the Association of Trade Unions of Artists, which represents some self-employed freelancers in Hungary. Contact insurance companies directly to find out if they offer coverage for the self-employed.
Whether you want to start working as a freelancer in Hungary or open your own business and become a boss, it will pose you certain challenges and questions most of which we’ve hopefully highlighted in this blog. For compliance and legal administration, Xolo Leap can help you manage with lots of ease and automation by helping to set up your Estonian business with e-Residency and maintain your tax compliant status.