Registered office

The definition of registered office, permanent establishment and branch office are set out in Section 7 of Act V of 2006 on Public Company Information, Company Registration and Winding-up Proceedings (Companies Act).

The registered office is the company headquarters entered into the company register. It is the company’s mailing address, the place where its business and official documents are received, filed, safeguarded, archived, and where the obligations set out in specific other legislation for corporate headquarters are satisfied. The company must display a signboard or at least a mailbox to indicate the registered office. For the purpose of company registration procedures, the registered office is also the Hungarian branch office for foreign companies, the direct commercial representation of foreign entities and the permanent establishment for European Economic Interest Groupings.

As a general rule, a company is only entitled to designate a property in the articles of association as its registered office – as well as a permanent establishment or branch office – that it either owns or has the right to use based on an agreement. Such an agreement may be a contract for rent or a contract for registered office services.

Registered office services

In line with the Act on Rules of Taxation in Hungary, the use of registered office services must be reported to the National Tax and Customs Authority (NAV) if the legal relationship for registered office services was established or changed after 1 January 2017.

Self-employed persons must make a written declaration on the use of registered office services when they register at the NAV. Taxpayers registering through the court of registration must also declare the use of a registered office service in writing directly to the NAV within 15 days of the date of registration. Registration and change reporting may be submitted on forms ’T101E and ’T201T. When using such services, entities must report the name, registered office and tax number of their registered office service provider, as well as the start date and, in the case of a fixed-term engagement, the end date of the legal relationship.

Based on Hungarian Act LIII of 2017 on the Prevention and Combating of Money Laundering and Terrorist Financing, only service providers that have reported their activities to the designated supervisory authority may provide registered office services.

The amendment effective as of 10 June 2021 stipulates – as a legal consequence of declaring a registered office service provider not included in the register of the supervisory body – that if the taxpayer fails to register another suitable registered office despite notification from the NAV, or fails to withdraw its registration of the use of a registered office service, its tax number will be cancelled.

Let us look at the details of the above rule. If the taxpayer declares a registered office service provider not listed in the supervisory body’s register, the NAV will call on the taxpayer to declare another suitable registered office or to withdraw the registration of the registered office service used. The amendment allows for this because in a significant number of cases, taxpayers do not declare a contract for registered office services in accordance with the regulations, but rather a simple contract for renting real estate. In this case, there is no reason to require the taxpayer to register another, suitable registered office, it simply needs to withdraw the declaration of the incorrect registered office service (within 15 days). If the taxpayer does not comply with the request, its tax number will be cancelled.

The tax number cannot be cancelled if the taxpayer has restored the legally compliant status before the decision to cancel the tax number becomes final.

Permanent establishment

According to the Hungarian Companies Act, a permanent establishment of a company is a place set out in the company’s articles of association where it carries out its activity and is a permanent and independent establishment located in a different place but in the same municipality as the registered office. If the company has a permanent establishment or a branch office, it must be entered into the business register.

In practice, therefore, any place where a company performs business outside its registered office is considered a permanent establishment.

Branch office

A branch office of a company is a permanent establishment that is located in a different municipality or (in the case of a branch office of a Hungarian company abroad) possibly in a different country than the registered office.

 Document storage location

The document storage location is the place where the documents, records, declarations, accounting and tax documents relevant for fulfilling the company’s tax obligations are kept and stored by the business owner. The company must notify the tax authority of this place or places, which can be done using the ’T201T or ’T201 forms. It is important to note that no PO Box can be specified as a document storage location.

If, in accordance with the Hungarian VAT Act, the business keeps documents, books or records that qualify as electronic invoices electronically, ensuring online access, this must also be reported to the tax authority on the ’T201T or ’T201 forms.

The documents may be stored at or transferred to another location only for the duration of accounting and data processing, but in the event of a tax inspection, they must be presented within three working days of the tax authority’s request.

Place of central administration

The place of central administration is the place where the administration, management and decision-making relating to the activities and operation of the business actually take place.

According to the Hungarian Corporate and Dividend Tax Act, the place of management is the place where the management is set up to manage the business.

The company’s articles of association may also stipulate that the registered office is the place of central administration (decision-making) too. Where the registered office is not the same as the place of central administration, the place of central administration must be indicated in the articles of association and the registration of the place of central administration in the company register must be requested. The transfer of the actual place of management abroad must be reported to the tax authority on the ’T201T or ’T201 form.

Nowadays, it is becoming increasingly common for a foreign company to move the place of central administration of its Hungarian subsidiary abroad, where decisions relating to the activities and operation of the company are actually made. However, these decisions have corporate tax implications, so in such cases it is worth consulting a tax adviser to help the company take the necessary steps and minimise the tax risk.

Although in simpler cases businesses do not have a branch office and their places of central administration and document storage are the same as their registered office, in practice – and in most cases – these are often separate. The different addresses of the company must be registered at the Hungarian authorities and must also be considered for taxation. If you have accounting questions related to the registered office, registered office services, various permanent establishments or branch offices, feel free to contact WTS Klient Hungary.

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What are registered office services and who are the providers?

In the law amendments this spring, the definition of registered office service provider was clarified in the Act on Rules of Taxation. In short, those who perform their obligations related to registered office services based on an engagement, and ensure the receipt and safekeeping of business and official documents during working hours are deemed providers of registered office services. The change valid from 20 June 2017 clarifies that providers of registered office services do so as a business-like economic activity.

Using this service is mainly a good idea for companies whose activity does not necessarily require an office, or which are able to operate more efficiently by using the administrative services offered by providers of registered office services.

The firm action by the tax authority and the reporting requirement are justified by the fact that a significant portion of tax evaders are registered at addresses of registered office service providers.

Reporting obligation

The changes that entered into force on 1 January 2017 triggered some uncertainty for those affected in terms of the reporting obligation as well. While the reporting obligation seemed to be clear for companies using these services for the first time, the interpretation of the related law was not clear regarding legal relationships established before 1 January 2017.

The Act on Rules of Taxation also received some clarification in this respect from the spring-time amendments. Those who used registered office services until 31 December 2016 (and where there has been no change in the legal relationship since then) must report the name, registered office and tax number of their registered office service provider, as well as the start date and, in the case of a fixed-term engagement, the end date of the legal relationship, to the NAV by 29 September 2017.

What else should you look out for?

Decree No. 7/2017 from the Minister of Justice, in effect from 1 July 2017, introduced much stricter rules on the conditions for registered office services. The decree was quickly amended and the relevant legal text was published in the issue of the Hungarian Gazette dated 18 July 2017. Here we highlight the following.

• Essentially, only properties owned exclusively by the engaged provider of registered office services can be used as registered offices, or properties where the provider has a right of use registered in the property register. The amendment eased this stringent provision and also allows the provision of registered office services if the owner of the property has given prior written consent for the provision of registered office services and there is a long-term bookkeeping engagement between the parties in addition to the registered office services.
• The company’s nameplate has to be well visible from public areas.
• The decree limits the parties’ contractual freedom at several points, so for example, a contract for registered office services may not be for a fixed period, except where the company is established for a fixed period of time. The parties cannot exercise their rights of ordinary termination for one year after the conclusion of the contract. Some relief has been introduced, however, in that legal relationships for registered office services, which existed when the decree entered into force, only have to be modified by the parties by 30 June 2018, and if no written contract was concluded before, this contract must be in a written form.

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2018 tax laws

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