Corporate tax rate in Hungary

When establishing a new venture, one of the primary considerations is the level of tax your company will be subject to. This is a crucial factor in determining your financial strategy. Hungary offers a highly competitive tax environment, making it an attractive choice for entrepreneurs.

Understanding the Tax System in Hungary

Hungary is renowned for offering one of the most favorable corporate tax rates in Europe. Since 2017, the corporate tax rate in Hungary has been set at an impressive 9%, which has positioned the country as a hotspot for both domestic and international investors.

Unlike many European nations that implement tiered or higher rates, Hungary’s flat tax structure applies every industries, simplifying the planning process for businesses.

With a 9% corporate tax in Hungary, company formation in Hungary becomes an even more enticing prospect for those who are planning to optimize their financial strategies.

Key Aspects of Hungary’s Business Tax Regime

Taxable Profit

Businesses are taxed based on their net profit, by deducting eligible business expenses from total income.

Entrepreneurs must keep meticulous financial records to maximize allowable deductions and minimize their tax burden.

Flat Tax Rate

The corporate tax in Hungary is 9% and applies equally to all businesses, regardless of their scale or sector. This offers predictability, allowing companies to plan effectively. However, from 2024 onward, larger corporations with revenues above 1 billion EUR will face a higher rate of 15%, ensuring a balanced approach that still supports small and medium-sized businesses.

Tax on Dividends

While the 9% corporate tax applies to a company’s profits, dividend payouts to shareholders are taxed at a separate rate of 15%. Business owners should factor this into their distribution strategies to better understand the full scope of their tax liabilities.

Double Taxation Agreements

Hungary has entered into a series of agreements with other countries to eliminate the risk of double taxation. These agreements are particularly beneficial for international investors, as they allow for smoother and more efficient tax planning when doing business in Hungary.