Corporate Tax in Hungary: Corporate taxation and its related regulations are central aspects of a company’s financial planning. Determining taxable income and the subsequent taxation play a crucial role in corporate strategy. This article is the first part of a seven-part series that presents the key rules of corporate taxation in Hungary. The series covers fundamental and special corporate tax rules, the extra-profit tax, the fight against tax avoidance, and penalties for non-compliance.
Basic Rules and Tax Rates
In Hungary, corporate tax and local business tax are levied on different bases:
– Corporate Tax: The standard corporate tax rate is 9%. However, for corporate groups with consolidated revenue exceeding €750 million, a global minimum tax rate of 15% is applied, in accordance with OECD and EU regulations.
– Local Business Tax: The rate for local business tax is 2%, but it can be reduced depending on regional regulations.
– The rates for corporate tax and local business tax generally do not vary based on the size of the company or the nature of the income.
Determining the Tax Base
– The tax base for corporate tax is the net profit or loss from the company’s annual financial statement.
– The tax base for local business tax is the revenue from the company’s business activities, although labor costs cannot be deducted from this base.
Tax Rules for Foreign Companies
Hungarian tax residents are required to pay corporate tax only on income generated within Hungary. Foreign tax residents are only taxed on profits earned in Hungary if:
– They operate a business in Hungary through a permanent establishment,
– They earn income through a company that owns real estate (e.g., real estate investment companies).
Tax Losses and Tax Benefits
– Tax losses can be carried forward for 5 years and used to offset future corporate tax liabilities.
– Corporate tax groups can claim tax benefits, which must be applied for by the group representative.
This article provides a general introduction to the basic rules of corporate taxation in Hungary and does not constitute specific legal advice.
For further information we are at your disposal
— Dr. Katona Géza, LL.M. ügyvéd (Rechtsanwalt / attorney at law)
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Katona és Társai Ügyvédi Társulás
(Katona & Partner Rechtsanwaltssozietät / Attorneys’ Association)
H-106 Budapest, Tündérfürt utca 4.
Tel.: +36 1 225 25 30
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Fax: +36 1 700 27 57