An investor planning to open a SPV company in Hungary makes an important step towards risk minimization. The special purpose vehicles (SPVs) are enterprises representing an important protection element from bankruptcy or other losses. Our Hungarian company formation experts can help you establish a SPV company in Hungary and safely continue your business in this country.
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Advantages of SPV companies in Hungary
Securitization is starting to become more and more popular in Hungary and an interesting option for big companies intending to safely invest in this country and in Eastern Europe. The SPV provides risk isolation thus permitting capital raise and options for debt structuring.
| Quick Facts | |
|---|---|
| SPV company – definition | The SPV (special purpose vehicle) is a type of entity that is incorporated for isolating financial risks when investing in a specific project. |
|
The main investor of a SPV |
In general, a parent company decides to open a SPV company in Hungary, so that it can achieve a certain business goal in such a way that it does not impact its other companies. |
|
Securitization law in Hungary |
Hungary does not have a securitization law, its main rules concerning SPVs derive from the Civil Code and the transposed EU laws. |
| EU law applicable in Hungary (yes/no) | Yes |
| EU law on securitization |
Regulation (EU) 2017/2402 |
| Types of assets suitable for securitization purposes |
Shares, bonds, debt instruments |
| Advantages of an SPV |
It is recommended to open a SPV company in Hungary as a way to reduce the risks associated with an investment and to protect other business interest that may be, otherwise, influenced by the new investment. This entity can be used as a risk management tool and as a way to raise capital. |
| Parties involved in a SPV company |
The SPV itself, the parent company, other investors, local institutions. |
| Maximum number of investors in a SPV |
The law does not impose a maximum number of investors. |
| Legal entity used for the incorporation of an SPV company | Investors can open a SPV company in Hungary as private or public limited companies. |
| Duration of the incorporation process |
1-2 weeks |
| Institution in charge with the SPV registration |
The SPV must be registered with all institutions in charge with the incorporation process (such as the Court of Registry, the State Tax Authority), but it must also address the Hungarian National Bank, which must issue an authorization for this type of entity. |
| Capital requirements |
HUF 3 million (limited liability company), HUF 5 million (private limited company), HUF 20 million (public limited company) |
| Managing body of an SPV |
The board of directors |
| Is it necessary to obtain a specific license? | It depends on the types of activities the SPV will carry out. |
It allows an enterprise to isolate assets and to simplify several financial issues. It can offer your projects protection from operational problems and it allows the realization of different financial transactions.
Who can open a SPV company in Hungary?
The right to complete the process of company registration in Hungary for an SPV structure is granted to any type of investor, regardless of the residency. Thus, the company can be set up by Hungarian citizens or residents, EU/EEA citizens as well as third party foreigners.
For the latter, specific immigration formalities will be required, which are applicable regardless of the type of investment made in this country. Our consultants can provide the necessary legal support during this procedure.
The investors can be other legal entities or natural persons and in order to set up the company, they need to abide by the minimum incorporation requirements established for the type of company they will register here. Our team can present the basic conditions imposed under the Hungarian law.
How to open a SPV company in Hungary
The SPV can be a subsidiary company that a larger parent company incorporates in order to reduce risks and to easily manage the financial aspects of the company.
You can register a SPV under one of the legal forms available in Hungary, such as limited liability company or limited shares company. When you decide to set up a special purpose vehicle in Hungary you should keep in mind several key factors.
One of them is to find a company which is capable to provide you with sufficient financial and legal facilities. The next step is to conclude an agreement between your company and the assignor. One of our specialists in Hungarian company formation can help you with the securitization transaction.
We kindly invite all investors intending to open a SPV company in Hungary to contact one of our company incorporation experts who can give you useful information on the company formation procedure in Hungary. Below, you can watch our video presenting how to register a Hungarian SPV:
What is the law for securitization vehicles in Hungary?
With regards to the incorporation procedure, the SPV company is regulated by the same rules of law that apply to other types of companies. However, there are other regulations that are specifically designed for this sector, or legal frameworks that also apply to the SPV businesses. In the list below, our consultants in company formation in Hungary have prepared a presentation regarding these laws:
- Act XXX of 1997 on Mortgage Loan Companies and on Mortgage Bonds (it regulates the types of bonds issued by the SPV companies);
- the Securitization Regulation EU 2017/2402;
- the law has been applied in Hungary starting with 1 January 2019;
- the Civil Code (the amended version of March 2014 and 2017).
What is the main regulator of the Hungarian SPV companies?
When you open a Hungarian company, you will need to address various institutions that are involved in the registration process. After this is completed, investors will have to address other institutions, which can vary depending on the industry the company will operate in.
With regards to the Hungarian SPV company, it must be noted that the main regulator is the Hungarian National Bank (HNB). In order to have the right to operate as a SPV business in this country, investors must notify the institution on the type of securitization activity that will be carried out here.
The SPV company is also required to obtain an approval on the types of bonds issued by the company. Further on, the HNB has the power and the authority to verify numerous other aspects of the SPV business, such as its sponsors and lenders. Below, you can read our infographic on registering special purpose vehicles in Hungary:
Capital requirements
Given the SPV must be incorporated under one of the legal entities established under the Hungarian commercial law, the capital requirements will vary in accordance with the business form selected (there aren’t any thresholds specifically created for the SPV).
Thus, investors who open a company in Hungary as an SPV operating as a private company must subscribe a minimum share capital of HUF 3 million or HUF 5 million (limited liability company/company limited by shares). Those who will opt to incorporate a public company must adhere to a larger capital requirement, of HUF 20 million.
The capital requirement can increase provided that the SPV needs to be licensed. Thus, we mention that SPVs that carry out financial services will need to apply for a license and in this case, one of the licensing conditions is to have a capital of HUF 50 million. Our consultants in company formation in Hungary can provide further assistance on how to obtain a license as an SPV company.
What are the accounting procedures for SPV businesses in Hungary?
Once the process of company formation in Hungary is completed, any business has a set of obligations. The company must register for taxation, for employment taxes and it must conduct proper accounting procedures. The accounting of any business must always be completed by persons who are accredited as accountants in Hungary. The same obligations are imposed to SPV businesses.
According to the current law, the SPV company does not have to abide by any special accounting regulations, with the exception of the ones that are prescribed under the accounting procedures. The SPV has to abide by the International Accounting Standards Regulation (IFRS), which is currently in force in Hungary, as per the rules of the Regulation (EC) 1606/2002.
The law states that companies that are listed on the stock exchange (which can also include SPV companies) must prepare their annual consolidated accounts in accordance with the IFRS procedures.
Where a company is not listed, then the consolidated accounts must be prepared as per the rules of the IFRS, while the annual accounts must be completed as per the Hungarian accounting procedures. Our accountants in Hungary can provide more details on this subject.
The tax treatment applicable to SPV
Investors who plan to open a Hungarian company as an SPV should be aware of the fact that this type of structure does not benefit from a preferential tax regime. This is why the general taxation system charged to legal entities operating in Hungary will also apply in this case.
Thus, businessmen who will open a SPV company in Hungary must pay the following:
- the corporate income tax;
- the withholding tax;
- capital gains.
However, the company will not have to pay the value added tax or the stamp duty. SPVs involved in real estate can benefit from a reduced transfer tax on the direct acquisition of real estate. Our consultants in company registration in Hungary can provide more details on other tax matters concerning the SPV.
Please contact our team of accountants in Hungary for advice on the accounting procedures applicable to a SPV company. This company type has its own particularities when it comes to taxation, therefore receiving professional assistance would be recommended.