How to withdraw cash from your business account?
When you own a Hungarian company, it is important to keep in mind that its Hungarian business bank account is not your business bank account. Even if you are technically allowed to withdraw cash from it, you cannot actually take the money unless the business has a reason to give that money to you. Of course, there are various legal ways to receive money from your company.
Ways you can receive money from your business in Hungary
- Salary: This will be your money. It needs to be a fixed amount every month. Make sure to set a salary that does not interfere with your cash-flow.
- Dividends: This will be your money. Normally, you can take dividends after the end of the fiscal year, at year-end closing. You can take dividend advances throughout the year, but that requires additional administration.
- Expense reimbursements: Some of your expenses may be reimbursed, but only if they are related to the operation of the company, such as the costs of commuting, or the costs of a business trip (however, in some cases, representation tax might apply). If you make a purchase that you want reimbursed, it will need an invoice made out for the company.
- Shareholder loan: That is a proper loan, which you should repay to your company at one point, and after which you are supposed to pay interest. If you don’t, your company will need to pay tax on it.
Of course, as the managing director, you are allowed to withdraw cash from the company’s Hungarian bank account. However, that is still the company’s money. You can only use it to pay company costs, while the transactions will need to be supported by invoices. Remaining cash has to be put back in the bank or in the petty cash of the company.
Additionally, you need to make copies of all the documents that prove that you used the money on the company’s behalf. Otherwise, the Tax Authority might consider the cash withdrawal as your income, after which you will have to pay personal income tax, social security contribution, and late payment fees – even years after the fact, if there is a tax inspection at the company.
Avoid getting fined
In line with the above, DO NOT:
- Take money from your Hungarian company without documentation
- Mix personal and business transactions
- Fail to report withdrawals to tax authorities
- Use company funds for private purchases
Accounting rules for Hungarian companies are quite strict. Every transaction must be properly documented, and as such, wire transactions are preferred. Cash transactions might get special scrutiny in case of an inspection, so in case you withdraw cash from your company account, make sure to save relevant documents for later so you can prove that the money was used on the company’s behalf.
Accounting with Helpers Finance
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FREQUENTLY ASKED QUESTIONS
You can receive money primarily as a salary or as dividends, although you can also get some of your expenses reimbursed, and you can also take a loan directly from your company. Before you decide how you want to proceed, make sure to discuss your needs with your Hungarian accountant to avoid unpleasant consequences later.
Yes, you can, but that will still be your company’s money. You cannot use it as your own, and you need to thoroughly document what happened to it. Make sure to save invoices and other supporting documents for future reference.
10 years. The most well-known rule for storing official documents is 5 years. However, business documents and invoices should be kept for 8 years, and other supporting documents like balance sheets or inventory lists should be kept for 10 years. To stay on the safe side of the Hungarian Tax Authority, you should store supporting documents relevant to cash withdrawals from your Hungarian company for 10 years.
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