Hungary attracts foreign investors with its openness towards new businesses and by allowing full foreign ownership for companies. The types of legal entities
available in the country suit any business needs and investors will be pleased with the options they have in Hungary.
Hungary is a member of the European Union and the Schengen Area. A number of double tax treaties
ensure that companies that operate both in Hungary and in other countries, like foreign branches, are not taxed in both countries. The currency in Hungary is the Hungarian Forint.
If you want to open a Hungarian company, there are some basic facts about taxation in Hungary which should be kept in mind.
Corporate taxation in Hungary
The corporate tax rate in Hungary
is 10% up to the amount of 500 million HUF and 19% over this amount. This tax applies on the company’s accounting profits. A company in Hungary
is considered a resident company if it is incorporated in Hungary of it has its management office in Hungary even though it is incorporated abroad.
Dividends received by a Hungarian company are exempt from corporate tax, except for those received by a controlled foreign company. Dividends paid to a non-resident company are not subject to withholding taxes. Dividends paid to a non-resident individual can be subject to a 16% withholding tax. The same principle applies to royalties paid to legal entities or individuals.
Hungary does not impose capital duty tax, payroll tax or stamp duty tax. A real property tax applies at a municipal level and a social security tax applies for all employers in Hungary. A transfer tax is also applicable. If you want to open a company in Hungary, one of our lawyers can offer you detailed information about the taxes for corporations.
Personal taxation in Hungary
Resident individuals must pay taxes on their worldwide income while foreign residents are only taxed on the income produced in Hungary. The taxable income is that produced by an individual through employment or derived from a trade or profession. Employees in Hungary are also required to make social security contributions.
The tax year in Hungary is generally the calendar year and tax returns and any tax payments must be made until 20 May the following year. Penalties apply for underpayment or late payment.