Foreward by Andrew Chilvers
For companies and individuals looking to move into new jurisdictions for business opportunities, setting up a bank account is a crucial part of the process. But this is never as straightforward as it seems.
In all countries, banks are obliged to crack down on fraud and any potential financial scullduggery. As a result, they tend to be very risk averse. Regardless of where a business establishes an office in the world, local banks will generally have the newly arrived expatriates jumping through various hoops, pulling their hair out in frustration.
The new arrival will need the relevant paperwork, including personal identity papers, a personal and business address, personal references and other numerous documents. And that’s just the beginning.
Every jurisdiction has its own banks and banking rules, which are often complex and bureaucratic. Consequently, seeking advice from local legal and financial experts before setting up a bank account is imperative if a company is it get the right account for its particular business objectives. This is why it’s so important to use local advisers who are experts in the jurisdiction to provide information about the local banking rules.
What is the general risk appetite of banks in your jurisdiction and how does that affect setting up a new business bank account?
Hungary is one of the most developed economies in Central Europe. As a member of the European Union, it is a gateway to a market of more than 450 million people. Its strategic location makes it an investment destination and ideal logistics point, due to the stability and performance of the Hungarian economy which has improved significantly in recent years.
Its financial system is one of the most developed in the area. Together with its government legislation, favourable investment policies and tax incentives aimed at improving competitiveness.
The banking sector in Hungary includes approximately 50 banks including foreign and local institutions. All banks operate under the supervision of the national Central Bank in Hungary (Magyar Nemzeti Bank (MNB)) which is part of the European System of Central Banks (ESCB).
The banking system of Hungary is up to date and offers a wide range of advanced features including English-speaking customer service, as well as online banking services in the English language. It is possible to open multi-currency accounts including EUR, GBP and USD.
All main banks specialize in a wide range of industries but focus mainly on ecommerce and online services, start-ups, technology, bio-medicine, retail, and real estate.
The local government encourages foreign investments. As a result, establishing a local company, including opening a bank account in most of banks is an efficient, organized and swift process compared to most European countries. In this respect the Hungarian governments reduced the corporate income tax to be the lowest one in the EU and of today it stands on 9%.
The process of opening a bank account for foreign companies compared to local companies owned by a foreigner, is more complicated due to the changes in the anti-money laundering laws, FATCA requirements and BEPS regulations.
How accommodating are banks in your jurisdiction for opening a business and personal bank account?
Most banks in Hungary accommodate international business accounts, investment accounts and private accounts for foreign nationals.
• The vetting procedure is very similar in all major banks in Hungary:
• All banks require a reasonable connection to Hungary;
• The KYC procedure requires the following documentation:
• Company documents translated to Hungarian language and certified by notary and apostille;
• Company Extract from the last 3 months, translated to Hungarian language and certified by notary and apostille;
• KYC documents for all individuals involved in the company (directors, shareholders and beneficial owners) including passport copy and proof of address, all certified by notary and apostille;
• Specimen signature certified by a notary and apostille;
• Financial statements of the company, if any; and
• It is required for the company’s directors and signatories to arrive to a meeting at the bank.
The process for opening a bank account for international companies is more challenging and complicated due to new regulation that has been introduced to the banking system in the past few years. However, according to the local legislation it is mandatory for all Hungarian companies to open a business account in a local bank and therefore it is much efficient for international companies to register a local company and open a bank account this entity.
A large number of banks in Hungary accommodate private accounts for foreign citizens and offer “non-resident accounts” for individuals who live abroad but can prove a connection to Hungary. The eligibility for opening the account will depend on whether the individual meets the criteria the banks set.
The vetting procedure is similar in all banks:
• The KYC procedure requires the following documentation:
• Valid passport copy;
• Additional Identification certificate such as a driving license;
• A proven connection to Hungary; and
• It is required to arrive to a meeting at the bank in order to open the account.
The process for opening a private bank account for a foreigner usually takes 2-4 weeks, depending on the bank’s internal compliance procedure.
Should you join an internationally reputable or established bank rather than a local bank?
The banking system in Hungary is very stable and offers a wide range of advanced features such as full and easily operated online services in the English language, which makes it very attractive to foreign companies and individuals.
In the global perspective, the international banking system is creating challenges in the process of opening bank accounts for foreign companies, the vetting procedures are becoming more and more complicated and banks are not eager to open new accounts.
Hungary is not different. As previously mentioned, it is more difficult to open a bank account for a foreign company in Hungary and therefore the most suitable way will be to incorporate a local entity and open.
Mellius has a vast experience and professional expertise in the Hungarian market and we facilitate the process of opening a bank account in Hungary as well as in a wide range of states and banks, from Singapore to Hong Kong in the East, Switzerland, Lichtenstein and the UK in Europe, and all through the U.S. in the West.