Last modified: 03/02/2025 14:47

Corporate taxation

(1) The corporate income tax rate is flat at 9%.

(2) Various surtaxes are imposed on e.g. financial institutions, retail and energy companies.

(3) All municipalities are entitled to levy local business tax at a maximum of 2 percent on adjusted total trading turnover. Interest income and dividend income are exempt from local business tax purposes. Royalty exemptions, on the other hand, have been significantly narrowed down, in line with the OECD Nexus approach.

(4) No withholding tax is imposed on capital gains paid to a legal entity. Capital gains are subject to the normal CIT rate (9%); however, the participation exemption regime may apply.

Residence: A company is resident in Hungary if it has its place of management or registered office in Hungary.

Basis: Resident legal entities are taxed on their worldwide income (comprehensive tax liability), while non-resident companies only on their income from their Hungarian permanent establishment’s business activities (limited tax liabilities). / A resident company is subject to unlimited corporate income tax liability (corporate income tax) on its worldwide profits and gains, with the option to exclude profits and gains of foreign permanent establishments (PEs). The foreign owner of a real estate holding company may also be subject to Hungarian CIT in the case of the alienation or withdrawal of its shares in the real estate holding company. A non-resident company is subject to limited corporate income tax liability if it has neither its place of management nor its registered office in Hungary. In that case, it is subject to Hungarian corporate income tax on income derived from Hungarian sources only.

Taxable income: All the income of a company is generally considered to be business income. There is no distinction made between capital gains and other, ‘ordinary’ income. The taxable income of a company is computed based on the annual accounts prepared in accordance with Hungarian GAAP (as a general rule), subject to certain adjustments for depreciation, provisions, tax loss carry forwards, impairment, transfer pricing adjustments and other corrections.

Significant local taxes on income: None, apart from the differing trade-tax rates depending on the local-authority area in which the company carried out business activity. See also comments under the tax rates.

Alternative minimum tax: Except in the first tax year of a company’s existence, as well as in some other defined cases, there is a minimum tax base threshold of 2 percent of the total adjusted income. If neither the profit before tax nor the tax base reaches this minimum tax base threshold, the taxpayer can opt either to pay the corporate income tax based on the minimum threshold or to complete a statement on the cost structure in the tax return to declare that the income was a result of prudent management.

Taxation of dividends: The dividend income received from domestic or foreign subsidiaries, in general, is not taxable, i.e., a participation exemption for dividends is available under Hungarian law, according to which the Hungarian company’s pre-tax profit can be decreased by the amount of dividends, unless it originated from a controlled foreign company (CFC). However, from 1 January 2021, dividend received from a CFC may also be exempted to the extent it is associated with genuine arrangements carried out by CFC.

Capital gains: There is no separate capital gain tax in Hungary. Capital gains are treated as ordinary income for tax purposes and taxed at a rate of 9%. In general, gain on the sale of assets is equal to the sales revenue reduced by the tax book value of the assets for CIT purposes. If a participation is registered within 75 days, or a certain intangible asset is registered within 60 days of the acquisition with the tax authority and held continuously for at least one year, capital gains arising from the alienation or contribution in kind of the participation or the intangible asset, are generally exempt from CIT.

Losses: Company is entitled to utilize the tax losses for 5 years up to 50% of the pre-tax profit of the financial year. Special rules are applied to mergers and acquisitions.

Foreign tax relief: Relief is given for most foreign taxes by the credit method. Where double tax treaty is available, the provisions of the treaty override the local Hungarian rules.

Participation exemption: See above under ‘Taxation of dividends’ and ‘Capital gains’.

Holding-company regime: Hungary supports holding companies, among others, with participation exemption on capital gains and dividends received (please see above), WHT exemption on dividend, interest and royalty payments made to companies, etc.

Tax-based incentives: In order to support local investment, wide range of tax or tax base incentive programmes were implemented, including: • Tax credit from corporate tax payable, such as: – Development tax allowances in specific regions of the country, corporate tax may be reduced by up to 60% of the value of certain types of investments (up to 80% of the annual corporate tax base) – Investments for energy efficiency purposes – Film and certain sports incentives • Tax incentives for small and medium-sized companies. • Tax base incentives for aquiring start-ups Tax allowances are available to companies undertaking research and development (R&D) activities. A super-deduction (200%) is granted for qualifying expenditure where the R&D activities are carried out within the scope of the taxpayer’s business activities or with respect to cooperative R&D activities conducted under an agreement with a third party. • Tax exemption for intangible assets (Patent box): Hungary’s patent box regime applies a zero percent rate in the case of capital gains of reported qualifying IP, and 50% of net income (profit) qualifying as royalties could be taken as a special deduction in calculating the corporate income tax base, with the adjustment capped at 50% of the total accounting profit before tax.

Group relief/fiscal unity: Besides VAT group taxation, from 2019 taxpayers are able to opt for a group taxation regime for CIT purposes. Group taxation is available to affiliated companies resident in Hungary, provided they meet certain conditions prescribed by the legislation, such as affiliated companies having at least 75% direct or indirect control over each other, having the same year-end, and that they prepare their financial statements in the same method (IFRS or Hungarian GAAP). Corporate tax group may achieve cost and tax savings: • The carry forward losses generated during the period of group taxation may be taken into account by the group, under certain conditions; • During the period of corporate group membership, transfer pricing documentation obligation only applies at group level, i.e. for the intra-group transactions among the group members no documentation is needed (with a few exceptions). • The members of the group are exempted from the transfer pricing adjustments for their intra-group transactions from corporate income tax point of view (exceptions may be made for pre-group transactions) • The group is considered to be one single taxpayer for the purposes of tax relief; the group may benefit from the tax relief if one of the group members meets the conditions.

Small company/alternative tax regimes: n/a

Corporate taxation: compliance

Tax year: The tax year is generally the calendar year. If the accounting period has changed to a financial year in accordance with the Accounting Act, the financial year is also a tax period.

Consolidated returns: None, except for corporate tax groups.

Filing and payment: Annual tax returns must be filed electronically and tax paid by 31 May of the following tax year, or within five months of the year-end in case the taxpayer elected different financial year. Tax advances (instalments) must generally be paid quarterly or monthly depending on the previous year’s tax liability.

Penalties: Late tax payments and tax refunds are generally subject to late payment interest at the National Bank of Hungary’s base rate plus 5%. In the case of underpayment, a penalty of 50% may be imposed. The late payment interest and the penalty are not deductible for corporate income tax purposes. In the case of non-compliance with certain tax obligations, default penalty may be imposed as a sanction in an amount of up to one million forints (EUR 2,450). Under special circumstances, default penalty may be imposed in a different amount (e.g. up to two million forints (EUR 4,900) in the case of employment of non-registered employees, or up to five million forints (EUR 12,250) may be imposted per documentation in the case of non-compliance with the TP documentation obligations relating to determining arm’s lenght prices).

Rulings: A taxpayer may apply for a binding ruling on the tax consequences of a proposed transaction (in certain cases ongoing transactions may also be covered). Advance pricing agreements (APAs) can also be obtained. Administrative fees may apply. Non-binding rulings can also be requested from the Tax Authority or from the Ministry of Finance. In this case there is no official fee, however, the deadline for giving answer is not strict either.

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Taxation of individuals

Residence: Hungarian citizens with exception of dual citizens without Hungarian residence, EEC member state citizens with more than 183 days of staying, third country citizens with residence permit and persons only with Hungarian residence. An individual is tax resident in Hungary if any of following criteria are met. • They are a Hungarian citizens. • They exercise their right to free movement for at least 183 days in Hungary in the calendar year (in case of EEA Member State citizens). • They are a third-country/jurisdiction citizen having a settled status under Hungarian law or stateless. Furthermore, if none of the above applies: • They have a permanent home solely in Hungary. • Their center of vital interests is in Hungary (provided that the permanent home criterion is not decisive). • They have a habitual abode in Hungary (they spend more than 183 days in Hungary in a calendar year; provided that the previous two criteria are not decisive).

Basis: All resident individuals are taxed on their worldwide income. Non-resident individuals are taxed on Hungarian source income only.

Taxable income: The tax base is the taxable gross income received as (i) income from dependent personal services, (ii) income from independent personal services, and (iii) all other income that is determined as ‘other income’ or ‘separately taxed income’ in the Act on PIT.

Capital gains: Generally taxed at a rate of 15%. An additional 13% social tax is also payable, if certain conditions are not met (subject to a cap).

Deductions and allowances: Individuals can claim different types of allowance: e.g., tax base allowance for mothers raising four or more children, personal income tax base allowance (disabled person’s allowance), newlywed allowance, family tax and contribution allowance. In addition, the long-term investments are supported by a tax allowance such as payments to voluntary mutual pension funds and investments on pension accounts.

Foreign tax relief: The credit of foreign tax can be applied up to the amount of tax that would be payable on that income in Hungary. If Hungary has no DTT concluded with the concerned foreign country, the tax that can be credited against Hungarian tax liability is 90 percent of the tax paid abroad but may not exceed the tax calculated with the Hungarian tax rate.

Taxation of individuals: compliance

Tax year: Calendar year

Filing and payment: A tax declaration has to be filed and tax paid until the 20th of May of the following year. Hungary applies a self-assessment regime. Accordingly, individuals can prepare and submit their own tax returns, or review the draft tax return prepared by the Hungarian Tax Authority and, if necessary, amend it.

Penalties: Late payment interest is charged on overdue payments if the tax payments are made after the deadline, at the National Bank of Hungary’s base rate plus 5%. The tax authority may also levy a tax penalty on taxpayers who claimed tax refunds or subsidies without eligibility or did not pay the tax properly. Under special circumstances, default penalty may also be imposed in a different amount.

Rulings: Rulings may be obtained from the tax authorities on various tax matters.

Withholding taxes

(1) Payments received by resident individuals can also be subject to social contribution tax at a rate of 13%

(2) Unless the rate is reduced under a tax treaty.

Branch remittance tax: There is no branch remittance tax in Hungary.

Anti-avoidance legislation

Transfer pricing: The transfer pricing rules apply to related-party transactions, where the relationship is determined on the basis of either direct or indirect majority control. In addition to the majority of voting rights, i.e., more than 50% of the voting rights in the controlled entity held either on the basis of its participation in the share capital or on the basis of an agreement with other shareholders of the legal person, majority control can also be secured by virtue of rights for the appointment or removal of the majority of the directors or supervisory board members. Where the consideration applied in related party transactions is not arm’s length, the transfer pricing rules require an adjustment to the tax-base. The OECD Transfer Pricing Guidelines (TPG) are not legally binding, but acceptable as an explanatory instrument. Primary legislation regarding arm’s length principle and transfer pricing are stipulated in Act on Corporate Income Tax (Article 18), regulation which requires taxpayers to prepare transfer pricing documentation. Further documentation is the Ministry for National Economy Regulation of 32/2017 on determining the content of documentation according to Act on CIT Article 18 section 2. Hungary adopted country-by-country reporting requirements, too.

Interest restriction: Thin capitalization, interest deduction limitation rules are applicable in Hungary. From 1 January 2019 the new legislation, which is implemented on the basis of the EU’s Anti-Tax Avoidance Directive (ATAD) replaced the former equity-based (3:1 debt-to-equity ratio) thin capitalization regulations. According to the new legislation the non-deductible interest should be calculated using the tax EBITDA. Based on the general rules, the amount by which net financing costs exceed the 30% of the tax EBITDA or HUF 939.810.000 (EUR 2,230,000) must be added back to the tax base, whichever is higher. A major point of the amended law is that any interest paid to financial institution will also be subject to the interest deduction limitation. A carry forward mechanism also exists, which enables, with certain limitations, the use of cumulated unused interest deductions from previous years to deduct from the current year’s tax base. Members of consolidated groups can apply special rules. For this purpose, tax EBITDA means an adjusted corporate tax base, which means the current year’s tax base modified with tax depreciation, net borrowing costs and utilisation of carried forward unused interest capacities.

Controlled foreign companies: As of January 1, 2019, new Control Foreign Company (CFC) rules apply in Hungary. The non-resident company is treated as a CFC if it is controlled by a Hungarian resident or jointly with related parties, by direct or indirect share participation in the share capital or voting rights of at least 50% or at least 50% profit share, and the corporate income tax of the CFC paid abroad is lower than 50% percent of the Hungarian tax. In such cases, the corporate income tax base of the CFC will be included in the corporate income tax base of its Hungarian controlling company and taxed in accordance with Hungarian tax legislation. Regardless of the above, a foreign company or branch cannot be a CFC if it has a real economic presence in the state of its residence. This fact needs to be verified by the company itself. Furthermore, under a certain level of profit, the entity may avoid qualifying as a CFC. However, the foreign company will no longer be automatically exempt from handling as a CFC solely on the basis that one of its related parties is listed on a recognised stock exchange.

Hybrid mismatches: As of 1 January 2020, the respective provisions of the ATAD II (EU Directive 2017/952) have been incorporated into the Hungarian CIT legislation regarding hybrid mismatches to meet the implementation requirements as set out in the Directive. For this reason, among others, the following were introduced: (i) hybrid mismatch rules under financial instruments, (ii) hybrid payments made to a hybrid entity or to a PE, (iii) hybrid payments made by a hybrid entity, and (iv) double deductions achieved by payments made by a hybrid entity or PE. In the above cases, the respective costs’ deductions must be denied, or the income shall be taken into consideration when calculating the tax base.

Disclosure requirements: Based on DAC6 regulations (EU Directive 2018/22) Hungarian regulations set out that an intermediary (e.g. tax advisors, accountants) is required to report cross-border tax arrangements (i.e. the law does not address domestic arrangements) that relate to taxes set out in the Directive on Administrative Cooperation (i.e. VAT, customs duties, excise duties and social security contributions are excluded from the scope of the reporting regime). Cross-border deal structures that correspond to one of the listed characteristics are subject to the disclosure obligation. The occurrence of certain characteristics only results in actual disclosure obligation, if the deal structure also passes the so-called “primary benefit” test, which is the case when the primary purpose of the transaction or deal structure is to reach a tax advantage. This may not only occur if the transaction is directly carried out for the purpose of the tax advantage, but – raising many questions of interpretation – includes the case when, due to the realisation of the given deal structure, some of the players can reasonably expect a tax advantage. The assessment of this condition may raise many questions for participating advisors, as the objective assessment of the primary benefit is not always possible.

Exit taxes: From 1 January 2020, exit taxation were introduced in Hungary by implementing ATAD regulations. Taxpayers are required to increase their corporate income tax base by the amount the fair market value of transferred assets and activities exceeds the book value (section 16/A of the Act on CIT). In general, exit tax rules would apply when a taxpayer: – Transfers its place of effective management to a foreign country and becomes a foreign tax resident as a result, or – Transfers its assets or business activities connected to its business in Hungary to a registered seat or branch located in a foreign country, and as a result the transferred assets and business activities would not be taxable in Hungary. Subject to certain conditions, the exit tax can be paid in five instalments if the effective place of management, assets or activities are transferred to an EU member state or an EEA country that has a mutual assistance treaty for the recovery of claims relating to taxes concluded either with the EU or with taxpayer’s EU member state. Special exemptions may apply.

General anti-avoidance rule: A general anti-abuse rule applies across most important taxes. It allows the tax authorities to counteract tax advantages arising from abusive arrangements. There are many targeted anti-avoidance rules for specific situations. Hungary uses both the substance-over-form principle and a generic anti-avoidance rule where the main purpose of the transactions is tax avoidance.

Digital services tax and Other significant anti-avoidance legislation: n/a

Value-added tax/Goods and services tax

Type of tax: Value-added tax (VAT) on EU model. Applies to supplies of most goods and services and to imports. There is a broad range of exempt supplies.

Standard rate: 27%

Reduced rates: 18% / 5% / 0% (a preferential VAT rate of 5% applies to certain goods and services, such as fresh milk, books, periodicals, district heating, internet-access services, commercial accommodation services, certain newly built real estate and residential property, and medicines. A VAT rate of 18% applies to certain products and services, as, for example, certain dairy products and products made from grain, flour, starch or milk. A VAT rate of 0% applies to daily newspapers).

Registration: No registration threshold (except distance selling).

Filing and payment: Monthly, quarterly or annual return periods, depending on the amount of VAT payable. VAT is reported and paid within 20 days after the tax period. In order to facilitate data cross checks the National Tax Authority (NAV) has implemented requirements to electronically disclose the details of all customer and vendor invoices. Penalties for late filing and incorrect returns.

Social security contributions

Employers pay a 13% social tax on gross salary. The employees’ social security contribution rate is 18.5% , which is withheld from gross salary.

At companies that have more than 25 employees, the headcount of disabled employees should reach 5% of their total headcount. Companies not fulfilling this requirement are obliged to pay rehabilitation contribution based on the number of disabled employees they fail to employ. (Nine times the minimum wage prescribed by law for a full-time employee/each disabled person the company failed to hire under the rule above/year.)

Self-employed

Self-employed people pay the same social security contributions as employed workers. 18.5% of declared monthly earnings in the form of a social contribution tax.

Other taxes

Capital duty: There is no capital duty in Hungary.

Immovable property taxes: Local taxes – land tax, building tax. Immovable property tax is calculated based on the area of the real estate, its location, and its type, as well as the tax rate of each municipalities.

Transfer tax: The transfer of real estate or shares in company holding Hungarian real estate is normally subject to a real estate transfer tax. The amount of the transfer tax is 4% of the value of the real estate being transferred, but if the real estate is valued more than 1 billion forints (approximately EUR 2.45 million), the tax is 2% on the excess and the maximum tax payable for any real estate is 200 million forints (approximately EUR 490,000). There are few exceptions, generally for real estate serving a specific purpose, such as sports, health care, etc.

Stamp duty: Hungary does not levy a capital duty. The registration of companies and the increase of their capital are generally subject to stamp duty. In addition, various stamp duties are payable in administrative and judicial procuedures.

Net wealth/worth tax: None.

Inheritance/gift taxes: This tax is imposed on Hungarian residents (testators/heirs and donors/donees). An individual who is not resident in Hungary under national tax rules is liable to this tax only in relation to assets situated in Hungary. The general rate for both inheritance and gift tax is 18%. Nevertheless, for residential properties and related rights, a preferential tax rate of 9% applies. The Hungarian law sets out several cases where an exemption from inheritance and gift tax may apply (e.g. Succession and gifts to lineal relatives or a spouse are exempt from both taxes).

Other: Global Minimum Tax:

As a member state of the European Union, Hungary has implemented legislation to transpose the EU Directive on global minimum tax into national law. This legislation closely aligns with the Model Rules developed under the coordination of the OECD. For the interpretation of these laws, the OECD’s Administrative Guidance should be considered. The Undertaxed Profits Rule (UTPR), which ensures that profits escaping taxation in low-tax jurisdictions are subject to additional tax, will only be applicable starting in 2025.

The global minimum tax applies to all multinational enterprise (MNE) groups starting from the 2024 tax year. This includes groups whose consolidated revenue reached or exceeded EUR 750 million in at least two of the four preceding years (2020, 2021, 2022, or 2023). This threshold is consistent with the Country-by-Country Reporting (CbCR) obligation. Therefore, if the parent company of a group was subject to CbCR in at least two of these years, the group is likely also subject to the global minimum tax.

An MNE group’s liability for top-up tax arises when the effective tax rate (ETR) of its subsidiaries in a given country falls below 15%. In such cases, the difference between the actual tax paid and the 15% minimum is payable as a “top-up tax.” For example, in Hungary, subsidiaries of such groups will be required to pay a Qualified Domestic Minimum Top-Up Tax (QDMTT).

MNE group members in Hungary must file a reporting form within 12 months of the start of the tax year. The report should include details about the Ultimate Parent Entity (UPE) and Hungarian group members.

Other taxes:

Customs duties: customs duties are levied under a common system on imports into the EU and the rates depend on various criteria.

Transfer tax is also imposed on the aquisition of vehicles.

Environmental product charges are payable for the following products based on their weight: other petroleum products, other chemical products and other plastic products. The product charge is based on the weight of the product in kilograms. The product charge payable shall be determined by multiplying the product charge rate by the quantity subject to the obligation, rounded to the nearest thousand forints. As a general rule, the taxpayer shall submit a quarterly return to the NAV by the 20th of the month following the quarter.

From July 1, 2023, producers or first domestic distributors in Hungary shall cover waste management costs for certain products under Extended Producer Responsibility (EPR). EPR charges are payable for the following products based on their weight or capacity: e.g., packaging materials, certain single-use plastic products, electronic appliances, frying oil and fat, etc. The payable EPR charge shall be determined according to the Government Decree by multiplying the prescribed charge rate by the quantity subject to the obligation. Registration on the MOHU portal and OKIR gate is required, with quarterly data reporting. Public health tax is payable for the following products: e.g., energy drinks, softdrinks containing sugar, pre-packed products with sugar, cocoa powder with sugar, salty snacks, artificial food seasonings, alcoholic drinks.

Tax treaties

Hungary has an extensive double tax treaty network and has entered into treaties with around 80 countries. Hungary also signed and ratified the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Sharing. The United States unilaterally terminated the double taxation treaty with Hungary in 2023. The treaty’s provisions remained applicable for tax assessments until December 31, 2023. Starting January 1, 2024, income from abroad will be taxed according to the domestic laws of each country. Income from the USA will be treated as income from a non-treaty country.