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Hungary: Country and Foreign Investment

Executive Summary

Hungary is situated in central Europe, bordered by seven countries – Austria, Croatia, Romania, Serbia, Slovakia, Slovenia and Ukraine. It has an area of 93,028sq km and is landlocked. The population of Hungary is estimated to be 9.95m. The official language is Hungarian.

The current President is Janos Ader, since 10 May, 2012.

Unemployment rate for 2011 was 11%. The service sector employs 64.4% of the population, followed by industry 30.9% and agriculture 4.7%.

The currency is the Hungarian Forint (HUF).

The corporate income tax rate on net profits was reduced to 10% with effect from July 1, 2010 for a tax base up to HUF500m. Above that, a tax rate of 19% applies. The profit base for corporate tax purposes is the accounting profit, based on world-wide profits of the company. No distinction is made between capital gains and regular income. Arm's length standards are required.

A local business income tax of 2% applies in many towns, which is based on gross profit (revenues minus cost of goods sold and subcontractor fees). Hungarian offshore companies are exempted from local income tax.

For reinvested profits the 10% or 19% is a final tax; profits distributed as dividends to individual shareholders are subject to dividend tax at either 10% or 20%.



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