Hungary, a country in Central Europe and a member of the European Union, attracts foreign investors with its economic stability, the possibility of electronic company registration, low company maintenance costs compared to neighbouring European countries, the lowest income tax in Europe (less than 10%) and no tax on dividends received. Financial statements can be presented in a simplified form, provided certain criteria are met.
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Hungarian companies must annually file financial statements and an annual report with the Ministry of Public Administration and Justice in electronic form. Financial statements are available to the public at the ministry’s website. Financial statements can be in forints, euros or US dollars in accordance with the Hungarian generally accepted accounting principles, which are similar to international accounting standards.
In Hungary, each company must file an annual report besides financial statements.
An annual report can be full, simplified or consolidated. Companies can prepare a more detailed report than required.
A simplified report is allowed for companies whose total assets do not exceed 1 200 000 000 HUF, turnover is not more than 2 400 000 000 HUF and number of employees is under 50 during 2 straight years.
Companies that do not meet these criteria must prepare a full report. Special rules apply to financial institutions and insurance companies.
Financial year coincides with calendar year with some exceptions. Financial year can be different from calendar year, for example, for branches of foreign companies provided that it coincides with the foreign company’s financial year. Financial year lasts 12 months with some exceptions.
The management of a company must prepare an annual report within 150 days after the end of the financial year (180 days in the case of a consolidated report). An annual report must include a balance sheet, income statement and notes to financial statements.
If a company does not comply with the obligation to publish and file documents, it can be imposed with a fine of up to 500 000 HUF (~ 1 600 EUR). After the deadline for filing accounts, the National Tax and Customs Administration sends the company an official penalty notice giving an additional 30 days for filing accounts.
If the company violates and does not file accounts within the provided additional period, the National Tax and Customs Administration sends the company the second official notice giving 60 more days for fulfilment of unfulfilled obligations and concurrently charging a penalty of up to 1 000 000 HUF (~ 3 200 EUR).
If the company has not published its report by the expiration of the second additional period, the National Tax and Customs Administration deletes the tax number and initiates the procedure of pronouncing the company “terminated”.
Besides standalone financial statements, companies that make up a group of companies must prepare a consolidated report if two of the following criteria are exceeded for 2 straight years:
Banks, financial institutions, insurance companies and listed companies must make consolidated financial statements and present them to state authorities for publication irrespective of the criteria in any case.
A parent company is not required to make consolidated annual financial statements if it itself is a subsidiary of a company that prepares consolidated annual financial statements in accordance with EU requirements (it does not apply to listed companies).
Companies are exempt from audit of financial statements if the following conditions are met during two straight financial years:
Audit must be conducted in accordance with the Hungarian state auditing standards adopted on 1 January 2001 and based on international auditing standards. In order to become an auditor, an individual must have three-year experience and pass qualification examinations.
Auditors must be members of the Chamber of Hungarian Auditors.