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Hungary: significant tax advantages for smaller companies

Contributed by Company Express kft
14 July, 2020

The Hungarian Government has established exceptionally favourable tax conditions for investors in the past few years which increased the number of the foreign investors significantly in Hungary year after year worldwide. In addition, the Government drawn up several taxation legislation which pronouncedly auspicious for larger companies, not forgetting the smaller companies either.

The most efficient help from the Government is establishing the so-called KATA taxation system, which, inter alia, makes possible for the smaller companies to perform their business activities without paying numerous taxes.

This type of taxation system is available for the Public Limited Companies, for the General Partnerships, and for the private entrepreneurs. The above mentioned companies and entrepreneurs which yearly income does not exceed the 12.000.000 HUF upper limit, shall be exempted from the paying of several taxes. If you do intend to do your business below this limit, you shall also have the right to choose the VAT exempt status which can be especially advantageous if you principally wish to do business with natural persons. However it is an important rule that this type of taxation system varies according to date, so for example if you become a taxpayer under this system on the 1st of October, the limit shall be 3.000.000 HUF by the end of the given year.

According to this type of taxation system the only payable taxes are the specified general tax, which costs 50.000 HUF/month, and the local government tax. There are two ways to settle the local government tax in this case, you can either pay fix 50.000 HUF/year or you can also pay the 1% rate of the tax base. This will enable you shall be exempt from paying several necessary taxes, inter alia from the paying of the corporate tax.

An additional advantage that operating under this type of taxation system is significantly facilitates the bookkeeping and administration of your company also.

As you can see from the above the Hungarian Government besides that has established specifically preferential investment conditions, inter alia with the 9% corporate tax which is still the lowest in Europe, paid attention to the smaller businesses also with establishing these favourable taxation types. If you are considering establish your business in Europe it is worth to consider the incorporation of a Hungarian company whereas the conditions for establishing a business in Hungary shall become better and better nowadays.


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