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Explore the market: Hungary

Budapest view on the river

Hungarian eCommerce market wasn’t the one with the fastest growth and has even noticed a little slow down two years ago, but COVID-19 pandemia blew some wind in their sails. How it looks like right now? What Hungarians are looking for when shopping online? Let me present you with an analysis of this market.

Some statistic data

Population: 9,77 mln

GDP per capita in 2019:  $16 731

Official languages: Hungarian

Purchasing power: 143 LCU per international dollars

E-commerce market

Size of the e-commerce market

According to data from the acclaimed CIA Factbook, Hungary has about 6.17 million Internet users, who account for 62% of the total population. Eurostat‘s data from 2018 shows that 29% of Hungarians (aged 16 to 74) have bought something over the Internet in the last three months.

With an increase of 36%, the Hungarian eCommerce market contributed to the worldwide growth rate of 26% in 2020. Revenues for eCommerce continue to increase. New markets are emerging, and existing markets also have the potential for further development. Global growth will continue over the next few years. This will be propelled by East and Southeast Asia, with their expanding middle class and lagging offline shopping infrastructure.

https://ecommercedb.com/en/markets/hu/all

Average basket value

In 2018, the average order value peaked in February with over ten thousand forints per order.

https://www.statista.com/statistics/1099014/hungary-average-online-shopping-order-value/

Most popular marketplaces

The biggest player in the Hungarian eCommerce Market is emag.hu. The store had a revenue of US$128 million in 2020. It is followed by alza.hu with US$93 million revenue and tesco.hu with US$87 million revenue. Altogether, the top three stores account for 20% of online revenue in Hungary.

https://ecommercedb.com/en/markets/hu/all

Returns / complaints – legal regulations

Under EU rules, a trader must repair, replace, reduce the price or give you a refund if goods you bought turn out to be faulty or do not look or work as advertised. If a customer bought a product or a service online or outside of a shop (by telephone, mail order, from a door-to-door salesperson), he also has the right to cancel and return your order within 14 days, for any reason and without a justification.

https://europa.eu/youreurope/citizens/consumers/shopping/guarantees-returns/index_en.htm

Most popular industries and product categories

Fashion is the largest segment in Hungary and accounts for 40% of the eCommerce revenue in Hungary. This is followed by Electronics & Media with 25%, Food & Personal Care with 15%, Toys, Hobby & DIY with 12%, and Furniture & Appliances with the remaining 9%.

https://ecommercedb.com/en/markets/hu/all  

Permits, licenses, certificates by industry

STEP 1 Preparation of corporate documents by a Hungarian attorney-at-law.

Founders of the company must sign the company’s constitutive document, which, together with some other documents must be countersigned by a Hungarian attorney).

Time to complete: minimum one day.

Costs: Attorney fees range widely.

STEP 2 Opening of a bank account

Time to complete: one day.

Costs: depending on the bank.

STEP 3 Registering the company at the Hungarian Court of Registry and obtaining a tax identification number.

The company is established by the act of the court of registration. All companies and sole trader businesses must register at the competent court of registration for the company’s registered office. Applications for registering or amending details must be submitted electronically via a legal representative. The court of registration electronically records documents relating to the company and provides an electronic certificate of registration as well as confirmation of any changes made.

The “one-stop-shop” during company registration means that the Court of Registration obtains the company’s tax number and statistical code using the electronic system created for this purpose. The “one-stop-shop” in the process of registering sole trader activities means that the competent authority obtains the tax number and statistical code directly, instead of the applicant, so the applicant does not need to deal in person with the competent State tax authority or the Central Statistical Office before registration (for post-doc registration see the section entitled “Tax registration” below).

Time to complete: in the case of companies established using template constituting documents – one working hour from the issue of the company’s tax identification number (NB: this simplified registration procedure is not available for public companies limited by shares), otherwise the registration procedure takes 15 working days. It should be noted that the process could be more time-consuming if the procedure is suspended because the tax authority needs more than one day to provide the court with the tax identification number.

Costs, registration fees:

  • for limited partnerships: HUF 50,000 (cca: EUR 172);
  • for limited liability companies and for private companies limited by shares: HUF 100,000 (cca. EUR 335)
  • for public companies limited by shares: HUF 600,000 (cca: EUR 2,069)

Simplified registration procedure:

  • for limited liability companies and for private companies limited by shares HUF 50,000 (cca. EUR 172);
  • for limited partnerships: HUF 25,000 (cca. EUR 86) Publication fees: uniformly HUF 5,000 (cca. EUR 17). In the case of the simplified registration procedure, the publication is free of charge.

In the procedure of company registration legal representation is obligatory.

Required documents:

  • Instrument of the constitution on a standard form
  • Declaration to the Tax Authority to get the company a tax number
  • Authorizations of the legal representative (the counsel), or the certification of the right for representation
  • Certificate of payment of administration fees and a fee of disclosure
  • List of members
  • Declaration of the CEO not to be subject to forbidding according to Gt. 23.§ Certificate of the payment service provider for depositing the contribution is cash, as indicated in the instrument of the constitution or the official declaration of the CEO for giving a free run of the pledged contribution in cash
  • Declaration of the CEO for giving a free run of contribution in-kind as well as the assessment declaration of the members concerning the contribution in-kind.

Applications used in company registration shall be submitted by the legal representative via the Governmental Portal (magyarorszag.hu), using a general form fill-out framework program (ÁNYK) which handles the different forms for the process. In the electronic procedure of company registration, it is necessary for the council to use electronic signatures and time stamps.

Registration (and any other process which requires authorization) by electric means also requires Client Gateway (Ügyfélkapu) registration by the legal representative. The Client Gateway is the electronic identification and customer entry system of Hungarian governance. After single-sign-on and authentication of identity, the Client Gate allows users to connect with public bodies, which provide e-government services and administration. The legal representatives (counsel) have to convert all records not prepared by themselves (such as a copy of property deed, authorization, certification by payment service institutions of deposit, etc.) into electronic records. Those electronic documents assigned with qualified electronic signatures (QES) can be attached to the application directly.

STEP 4 Registration with the Hungarian tax authority, municipality, chamber of commerce, the Central Administration of National Pension Insurance

A representative of the company or an authorized tax expert can perform the administration required for the registration.

Time to complete: one day.
Costs: free of charge.

Taxpayers who are required to register their company are also required at the same time to report to the state tax authority within 15 days of the submission of the company registration application with regard to information that does not appear in the application for company registration. Similarly, all taxpayers have an obligation to report to the local tax authorities, within 15 days of the commencement of activities thereby the taxpayer (e.g. with regard to local business taxes).

Pursuant to the Decree Implementing the Act on Social Security Pension Provision, the obligation to provide information relating to the NYENYI (Individual Pension Insurance Record) form may also be fulfilled through electronic administration. The obligation to provide information relating to the Individual Pension Insurance Record Form may be fulfilled using the e-NYENYI service of the Central Administration of National Pension Insurance.

STEP 5 Data provision on employees to the tax authority

Once they have registered at the Client Gateway, employers are obliged to submit electronically on the Government Portal the data stipulated by law relating to their employees, on the form drawn up for this purpose, for the competent State tax authority of the first instance, by no later than the first day of the legal insurance relationship prior to commencement of employment.

Important note:

The fact that a company is registered in the companies register, or that an entrepreneur completes the registration required, or receives its operating license, does not necessarily mean that it may pursue unrestricted business activities. It is a basic condition for a legal operation that a company obtains the different licenses necessary for its activities.

Many manufacturing and service activities may be pursued on the basis of a simple report, while numerous activities require a premises license. Some commercial activities may be pursued on the basis of an operating license. A number of activities require an activity license prescribed by sector-specific legislation.

http://eugo.gov.hu/starting-business-hungary

Preferred payment methods, trusted payment providers

It seems that about 51 percent prefer to pay with non-cash, while 19 percent like to pay with cash. The proportion of people who like both is almost unchanged at 30 percent.

Logistics

Expected delivery time

Logistics and its corridors are evenly distributed throughout the country. For logical reasons, most logistics centers are located near the country’s borders and around the capital city – Budapest. Sea transport is based on the use of the Danube. Hungary has several ports. There are also three airports.

Parcels within Hungary are usually delivered on the next working day after the pick-up. In Europe, standard delivery times for parcels to neighboring countries generally lie between 24 and 48 hours. For all European countries at a larger distance, delivery times usually lie between 72 and 120 hours.

https://gls-group.eu/HU/en/faq

Most popular courier companies

It’s worth highlighting that Magyar Posta is offering a very good service in Hungary. Of those stores that indicating which service they use to transport their goods, 35% cited Magyar Posta as one of their providers. Moreover, GLS and DPD are among the top three shipping service companies offered by online retailers in in Hungary, at rates of 48% and 19%.

https://ecommercedb.com/en/markets/hu/all

Most popular delivery method

When it comes to choosing a delivery method, it shows that most people (72 percent) want their goods being delivered at home, via a courier service.

Same day delivery

As in many countries, also Hungarian consumers are not very strict with their expectations regarding quick delivery, same-day delivery is not necessary, to get your parcel in 24-48h is enough for them.

Shipping package regulations

Customs duties are not charged if the total value of the goods does not exceed HUF 41,000 (excluding shipping charges or insurance). Neither duty nor VAT is payable if the total value of the goods does not exceed HUF 6,000 (excluding shipping charges or insurance).

Operations carried out within the EEA are duty-free. The Common Customs Tariff of the European Union applies to goods originating outside Europe. Generally, the duty is relatively low, ranging from 5.0% to 14% on industrial goods. However, many products have reduced duties or no duties at all by virtue of trade agreements (according to Eurostat, around 70% of the imports that enter the EU do so at zero tariffs).

https://santandertrade.com/en/portal/international-shipments/hungary/customs-procedures

Running a business in HU

The legal form of business

The main legal document which prescribes the types of companies that can be registered in Hungary is the Companies Act, which grants the right to both resident and non-resident businessmen to incorporate any of the business forms prescribed by it. The following legal entities can be incorporated in Hungary: the limited liability company, the joint-stock company, the general partnership, the limited partnership, the sole proprietorship, but also branches and representative offices.

The time required for company formation in Hungary will generally depend on the type of company that the investor wants to register in this country. The process can also be delayed in the case in which the necessary documents do not fulfill the basic requirements and this is why it is highly advisable to be represented by specialists in the field, as is our team of consultants in company registration in Hungary.

The duration of the registration can vary from two weeks, in the case, one wants to register a limited liability company, to three weeks, for a branch office or a representative office, or to four weeks, in the case of the joint-stock company, which is the most complex company type that can be registered here.

Investors looking to set up a company in Hungary can also incorporate a branch or a representative office. A branch office can be incorporated in Hungary by foreign companies interested in having an office here, but which want to have full responsibility for the capital of the branch, its management, and business model. Foreign companies also have the possibility of registering a subsidiary, which represents a separate legal entity from its parent company.

Local and foreign businessmen can also opt for a virtual office in Hungary. Regardless of the chosen business form, both types of companies must be registered with the Hungarian Company Register. There are several domains in which you can launch a business in Hungary and depending on the size of your future business we can help you choose one of the legal structures above.

Companies in Hungary must also have a corporate bank account in which the investors will deposit the minimum required capital for their selected company type. The investors should also take into consideration that opening a corporate bank account can take 2-3 weeks, depending on the commercial bank at which the procedure is completed and the required documents for a specific company type.

https://www.companyincorporationhungary.com/types-of-companies-in-hungary

Bank account, banking regulations

Documents to open a bank account: a valid residence permit/work visa, an address card or proof of address, a passport. It is also possible to open an account as a non-resident and it is best to check with your banking choice so you know what are the actual requirements as these vary greatly. There are banks with special accounts that will not require a work visa or a work permit and without these openings, an account may be a challenge.

https://www.b2bpay.co/how-open-bank-account-hungary

Tax rules

The corporate tax system is very favorable for those who want to open a company in Hungary. The country has one of the lowest corporate taxes in its region, as well as a low tax rate applicable to the taxation of dividends. The Act on Corporate Tax and Dividend Tax prescribes the basic tax measures applicable to both Hungarian companies and foreign companies, and some of the highlights of the Hungarian tax system are the following:

  • starting with 1st of January 2017, the corporate income tax is applied at the standard rate of 9%;
  • the corporate tax applicable to branches of foreign companies operating here is charged at the same rate, of 9%;
  • businesses involved in the energy industry, operating as energy producers or energy distributors, are charged with a tax of 31%;
  • Hungary also charges a local business tax, and the rate at which it is applied can vary from a municipality to another, but the legislation capped the tax at a maximum rate of 2%;
  • businesses are also liable to the payment of the value-added tax (VAT) and the standard rate is 27%;
  • depending on the economic field in which the procedure for company registration in Hungary is done, businesses can benefit from reduced VAT rates, of 18% and 5%.

https://www.companyincorporationhungary.com/types-of-companies-in-hungary

Import/export regulations

Many EU member states maintain their own list of goods that are subject to import licensing. In Hungary, import and export licenses are issued by the Hungarian Trade Licensing Office (Magyar Kereskedelmi Engedélyezési Hivatal – MKEH).

The official model for written declarations to Customs is the Single Administrative Document (SAD). Goods brought into the EU customs territory are, from the time of their entry, subject to customs supervision until customs formalities are completed. Goods are covered by a Summary Declaration which is filed once the items have been presented to customs officials. The customs authorities may, however, allow a period for filing the Declaration which cannot be extended beyond the first working day following the day on which the goods are presented to customs.

The Summary Declaration must be filed by:

  • the person who brought the goods into the customs territory of the Community or by any person who assumes responsibility for carriage of the goods following such entry; or
  • the person in whose name the person referred to above acted.

The Summary Declaration can be made on a form provided by the customs authorities. However, customs authorities may also allow the use of any commercial or official document that contains the specific information required to identify the goods.  The SAD serves as the EU importer’s declaration. It encompasses both customs duties and VAT and is valid in all EU member states. The declaration is made by the person clearing the goods, normally the importer of record or their agent.

European Free Trade Association (EFTA) countries including Norway, Iceland, Switzerland, Turkey, and Macedonia also use the SAD. Information on import/export forms is contained in Council Regulation (EEC) No. 2454/93, which sets forth provisions for the implementation of the Community Customs Code (Articles 205 through 221). Articles 222 through 224 provide for computerized customs declarations and Articles 225 through 229 provide for oral declarations.

As part of the ‘SAFE’ standards advocated by the World Customs Organisation (WCO), the European Union has set up a new system of import controls, the ‘Import Control System’ (ICS), which aims to secure the flow of goods at the time of their entry into the customs territory of the EU. This control system, part of the Community Programme customers, has been in effect since January 1, 2011. Since then, operators are required to pass an Entry Summary Declaration (ENS) to the customs of the country of entry, prior to the introduction of goods into the EU customs territory.

For further information, please visit the website of the EU Customs Union.

Specific Import Procedures

Consult the website of the Hungarian National Tax and Customs Administration for further information on specific import procedures.

Importing Samples

An ATA carnet can be used for products marked to indicate they are samples with no commercial value. This makes merchandise that will be re-exported within 12 months exempt from duties and import taxes.

https://santandertrade.com/en/portal/international-shipments/hungary/customs-procedures

VAT registration thresholds

For foreign businesses trading in Hungary that are VAT/GST/Tax registered in their home state, the VAT registration threshold is nil.

For EU VAT registered companies selling goods over the internet to consumers in Hungary, the VAT registration threshold (distance selling) is HUF 8,800,000 per annum.

https://www.avalara.com/vatlive/en/country-guides/europe/hungary/hungarian-vat-registration.html

Foreign companies can register in Hungary as a VAT payer without having to set up a local company; this is called non-resident VAT turnover. There is no VAT threshold in Hungary for the registration of non-resident business entities; VAT numbers must be entered before taxable supplies begin. The company may cancel the registration date in Hungary. If you know you need to register VAT in Hungary, do not hesitate and contact us and we will help you.

VAT HUNGARY

Customer preferences

Willing to buy from foreign sellers

When shopping online, Hungarians do not limit themselves only to domestic products – foreign stores attract their attention, and many of them prefer foreign brands to domestic ones.

https://ecommercegermany.com/blog/european-ecommerce-overview-hungary

Most popular countries for import of goods

The most popular country to buy from is undoubtedly Germany. Hungarians purchase here items worth US$28.5 billion. Romania comes second with only a US$5.75 billion value of the purchase. Then comes Italy – US$5.42 billion, Austria with US$5.3 billion, and last but not least the USA – US$4.88 billion.

https://ecommercegermany.com/blog/european-ecommerce-overview-hungary 

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