Hungary

The 9% advantage, without the headline-rate trap

Hungary’s standard corporate income tax (TAO) is 9% of the adjusted tax base. A Kft. can therefore be an attractive EU operating company, but accounting profit is not automatically taxable profit: depreciation, provisions, related-party transactions and loss utilisation require adjustments. Resident companies are generally taxed on worldwide income.

Local business tax (HIPA) is a separate calculation, capped at 2% and generally based on net sales less specified deductions. Salaries and ordinary service expenses are typically not deductible from this base. A labour-intensive consultancy can therefore pay HIPA even when its corporate-tax profit is small. We model TAO and HIPA separately rather than presenting “9% total tax”.

Kft. formation: capital, representation and documents

A Kft. is the standard limited-liability form for many privately owned businesses and may have a single shareholder. Minimum registered capital is HUF 3 million. Capital is a company asset, not our formation fee; payment timing and any non-cash contribution need to be reflected correctly in the constitutional documents.

The practical file includes the proposed name, Hungarian registered office and right to use it, business activities, ownership chain, managing director, founding instrument and signature documentation. Hungarian legal representation is required for the electronic court-registration process. Foreign corporate founders need registry evidence and authorised-signatory documents; translations, legalisation and powers of attorney are assessed before signing.

VAT, EU customers and online invoice reporting

The standard VAT rate is 27%; reduced rates apply only to qualifying supplies. An EU customer does not automatically make a transaction VAT-free. B2B service place-of-supply rules, customer VAT status, goods movements and evidence determine whether reverse charge, an exemption or Hungarian VAT is appropriate. B2C digital sales may require OSS analysis.

We plan the domestic and EU VAT identification requirements before the first relevant transaction. NAV Online Számla reporting must be built into invoicing for invoices within its scope. Small-business VAT exemption has its own eligibility and turnover rules and does not remove every cross-border registration or reporting obligation.

KIVA, R&D and distributions: different tools

Eligible smaller businesses can consider the 10% small-business tax (KIVA), which replaces corporate income tax and employer social contribution tax within its statutory scope. Its base is not ordinary corporate profit: personnel payments and capital or dividend movements matter. A payroll-heavy business retaining earnings may obtain a different result from a company distributing most profits; eligibility and exit consequences must be checked.

R&D and development incentives require qualifying activities, documentation and, where relevant, approvals. Under domestic rules, Hungary does not withhold tax on dividends, interest or royalties paid to non-individual recipients. That rule must not be advertised as “tax-free dividends” for an individual owner: personal taxation, social charges and the recipient country remain separate questions. Large groups also need a Pillar Two review.

Banking and a credible operating footprint

Bank onboarding is separate from court registration. Prepare the ownership chain and beneficial-owner information, directors’ identification, source of funds, expected countries and transaction volumes, and contracts or evidence supporting the business model. Personal attendance and additional evidence depend on the bank.

A registered office is not evidence that all management happens in Hungary. We examine who signs contracts, where directors make decisions, where staff work and how the business earns its income. Foreign effective-management, permanent-establishment and controlled-foreign-company rules can undermine an incorporation-only tax plan.

Accounting and the compliance calendar

For a calendar-year company, annual accounts and the standard corporate-tax and local-business-tax returns are generally due by 31 May of the following year, subject to applicable deadline rules. Advance tax instalments and VAT return frequency are tracked separately. Payroll reporting, employee registration and director social-security treatment need to be established before remuneration begins.

Maintain Hungarian statutory books, electronic official correspondence access, current company and beneficial-owner information, and supporting invoices. Related-party contracts may trigger transfer-pricing documentation and disclosures. Audit, innovation contribution and global-minimum-tax obligations depend on company or group characteristics; a small standalone company must not be treated like a large multinational, or vice versa.

What we settle before incorporation

Our planning starts with forecast turnover, deductible costs, payroll, distributions, customer locations and the owner’s tax residence. We compare TAO with KIVA where relevant, choose the actual operating municipality, and define the legal, accounting and banking work needed. The proposal separates capital, professional fees, third-party charges and recurring obligations.