What is the corporate tax rate in Hungary?

When considering forming a new company, one of the critical factors ore the operating costs, especially the corporate tax rate. This aspect can significantly impact your business’s financial planning and overall profitability. Hungary is known for its attractive corporate tax regime, which is a crucial consideration for both domestic and foreign investors.

Overview of Corporate Tax in Hungary

Hungary has one of the lowest corporate tax rates in the European Union, set at 9% since 2017. This competitive rate is aimed at attracting foreign investment and encouraging the growth of new businesses. Unlike many other EU countries, which may impose higher tax rates, Hungary’s flat corporate tax rate applies uniformly across all sectors, making it particularly appealing for entrepreneurs.

With the 9% corporate tax rate, the company formation in Hungary offers significant financial advantages, making it an attractive option for entrepreneurs looking to maximize their profits.

Key Features of Hungary’s Corporate Tax System

1. Flat Rate: The 9% corporate tax is a flat rate, meaning that all corporations, regardless of their size or industry, pay the same percentage on their taxable income. This simplicity helps businesses predict their tax liabilities more accurately. Additionally, as of 2024, a new 15% corporate tax rate is be applied specifically to large companies with annual revenues exceeding €1 billion, aimed at ensuring a more equitable tax structure while still maintaining Hungary’s competitive environment for smaller enterprises.
2. Tax Base: The tax is levied on the net profit of the company, which is calculated as total income minus allowable expenses. It is essential for business owners to maintain clear and accurate records to maximize deductions and minimize taxable income.
3. Incentives for Startups: Hungary also offers various tax incentives and allowances for startups and small enterprises. For instance, specific industries, such as technology and research and development, may benefit from additional tax credits, reducing the effective tax burden further.
4. Dividend Tax: While corporate income is taxed at 9%, dividends paid to shareholders are subject to a separate tax. The current dividend tax rate is 15%. It’s important for business owners to consider this when planning distributions.
5. International Agreements: Hungary has signed numerous double taxation treaties with various countries. These agreements can help prevent double taxation of income and provide a framework for tax benefits, particularly for foreign investors.