In the post-Brexit business landscape, many UK companies are seeking to expand their presence in the European Union by opening subsidiaries. Establishing a subsidiary in an EU country offers businesses better access to the single market, more favourable tax arrangements, and smoother logistics for European customers. However, this move comes with legal, administrative, and strategic challenges. Whether you’re considering France, Germany, or looking into company formation Hungary, it’s crucial to understand the essential steps before you proceed. Here are the five most important tips UK companies should follow when setting up a subsidiary in a European country.
1. Choose the right country based on your business goals
Not all European countries offer the same advantages for foreign subsidiaries. When selecting the location, UK companies should align their decision with long-term business goals, industry requirements, and local regulatory conditions.
For instance, if you’re looking for low corporate tax rates, a central location, and access to a skilled yet affordable workforce, Hungary is a strong candidate. Company formation in Hungary processes are relatively streamlined, and Hungary offers one of the lowest corporate tax rates in the EU at just 9%. In contrast, if you prioritize a larger domestic market, Germany or France might be more suitable despite their higher costs.
2. Understand legal structures and compliance requirements
Each EU country has its own legal framework for foreign business entities. UK businesses must choose the right legal structure for their subsidiary—whether it’s a private limited company, a branch office, or another form.
In many countries, including Hungary, the most common structure for subsidiaries is a private limited liability company (known as Kft. in Hungary). These entities must comply with local rules regarding corporate governance, financial reporting, tax filings, and employee rights. Failing to adhere to these rules can lead to fines, reputational damage, or even forced closure.
Make sure to consult local legal and tax advisors to fully understand your obligations and rights as a foreign-owned business.
3. Work with a reliable local agency
When operating in a foreign jurisdiction, administrative tasks like translating legal documents, opening bank accounts, registering for VAT, and dealing with local tax authorities can become major challenges—especially if you lack language fluency or local contacts.
To simplify the process, UK companies should work with a professional agency that specialises in helping foreign investors. One recommended service provider is CompanyFormationInHungary.com, which offers tailored support in English. Their team assists with all stages of company formation in Hungary, from preparing documentation and registering the company, to obtaining tax IDs, social security registration, and setting up business bank accounts. Their experience ensures full compliance with Hungarian laws and accelerates your market entry.
4. Factor in tax planning, accounting, and local banking
Once the subsidiary is established, it becomes subject to local corporate tax rules. Hungary’s 9% corporate income tax is highly competitive, but other taxes may also apply—such as local business tax, payroll taxes, and VAT. Tax incentives may be available, especially for companies creating jobs or investing in R&D.
You’ll also need a local accountant who understands both domestic and international reporting standards to ensure full tax and financial compliance. Proper tax planning is essential to avoid double taxation and to benefit from any tax treaties between the UK and the host country.
5. Prepare for cultural and workforce integration
Beyond legal and financial issues, one of the most underestimated aspects of launching a subsidiary is integrating into the local business environment. Each European country has its own culture of management, negotiation, and employee relations.
In Hungary, for example, business culture tends to be formal and hierarchical. Punctuality, detailed contracts, and respect for rules are expected. Labour laws protect employee rights, and employers must provide written contracts, adhere to probation periods, and ensure compliance with working time regulations and occupational safety laws.
UK businesses should either train their teams on local customs or hire local managers who understand both the cultural and legal frameworks. This helps avoid misunderstandings and fosters stronger local relationships.
Conclusion
Establishing a subsidiary in Europe is a powerful step for UK companies aiming to expand their market, bypass post-Brexit trade hurdles, and strengthen their international operations. However, success depends on making informed decisions—starting with the right location, legal setup, and local partners. Whether you’re looking to tap into a large consumer base or optimise costs through company formation in Hungary, being prepared is the key to long-term success.
Partnering with professionals can streamline your entry into the European market and ensure full compliance with local laws, saving you time, money, and stress during your expansion journey.
