The main tax liabilities for Hungarian companies:
Before starting a business in Hungary it is very important to know the different types of tax: the corporate tax, the dividend tax, the VAT, the local business tax and the Chamber of Commerce registration fee.
As in Hungary, you can find two very common enterprise forms, the Kft. and the Bt., in the following we collected the tax liabilities of the Hungarian Kft. (Limited Liability Company) and the Bt. (Limited Partnership).
Corporate tax (9%) – To be paid yearly:
The corporate tax, in other words, the company tax must be paid every year based on the net profit of the company. In Hungary, the corporate tax is a flat rate and it is only 9%. The flat rate means that no matter how much turnover the company has the corporate tax is only 9% and needed to be paid only after the net profit of the company.
Currently, it is the lowest corporate tax in the European Union in Hungary, which makes the Hungarian company formation very appealing.
Local business tax (0-2%) – To be paid yearly:
The local business tax is between 0% and 2 %, and the amount depends on the location of the company. The exact amount to be paid is regulated by the local government where your company is registered. It is important to note that the local business tax must be paid based on the net profit of the company after deducting expenses. Generally the local income tax is around 0,5% of the sales revenue.
Chamber of Commerce registration fee – To be paid yearly:
The 5.000 HUF (~15 EUR) Chamber of Commerce registration fee must be paid to the Chamber of Commerce in every year. Please note that this fee for the first year is included in our company formation packages.
Dividend tax (15%):
Dividend tax is the most important tax for business owners. If you receive a dividend payment, a 15% income tax must be paid on the whole dividend amount, and also a 17,5% social contribution tax must be paid up to a yearly maximum of EUR 1,900. And if you receive a salary as well, the social contribution tax can be even lower, as it can be reduced by the amount that has been paid after your salary in the same year.
So if you receive a 100.000 EUR dividend payment, you only have to pay the 15% income tax and the ~1,9% social contribution tax.
VAT (Value Added Tax) – To be paid monthly, quarterly or yearly:
In Hungary, the Value Added Tax (VAT) is 27%. The reporting and paying of the VAT can be carried out monthly, quarterly and yearly, depending on the revenues of the company. Maybe the greatest advantage of the European company formation is the common market, as selling products or services within the European common market is VAT free if the company has a valid EU VAT number.
Summarizing the above, taxes are quite low in Hungary, and setting up a Hungarian Kft. has many business benefits, especially the biggest one is the really low corporate tax that is the most favourable in the whole European Union.