Hungary Taxes 2025
Hungary has a competitive tax system that applies to both domestic and foreign investors.
The country offers a flat corporate tax rate of 9%, the lowest in the European Union, along with various tax incentives.
Below are the key taxes that foreign investors should consider when operating in Hungary.
1. Corporate Income Tax (CIT)
- Flat rate: 9% on taxable corporate profits.
- Applies to all businesses, including foreign-owned companies operating in Hungary.
- Dividends received (except from offshore entities) are exempt from CIT.
- Capital gains from the sale of shares are tax-exempt if the shares are held for at least one year and registered as an invested asset.
2. Local Business Tax (LBT)
- Municipal tax levied at a maximum rate of 2% of a company’s net revenue (excluding material costs, subcontractor fees, and other deductions).
- Rates may vary depending on the local government where the company is registered.
3. Value-Added Tax (VAT)
- Standard VAT rate: 27% (one of the highest in Europe).
- Reduced VAT rates:
- 18% (e.g., certain dairy products, baked goods, hotel services).
- 5% (e.g., pharmaceuticals, books, certain food products, new residential properties).
- VAT registration is required for businesses conducting taxable activities in Hungary.
- EU businesses can reclaim Hungarian VAT under the EU VAT refund system.
4. Withholding Tax
- Hungary does not impose withholding tax on dividends, interest, or royalties paid to foreign entities, except when required by international tax treaties.
5. Personal Income Tax (PIT)
- Flat rate: 15% on employment income, capital gains, and other personal income.
- Social contributions:
- Employer’s contribution: 13% (social contribution tax).
- Employee’s contributions: Social security contribution: 18.5% (covers pension, health insurance, and labor market contributions).
6. Real Estate and Property-Related Taxes
- Stamp duty on property transactions: 4% up to HUF 1 billion (~EUR 2.5 million) and 2% on amounts exceeding this limit.
- Building and land tax: Determined by local municipalities based on size or market value.
7. Innovation Contribution
- Companies subject to local business tax (except SMEs) must pay an innovation contribution of 0.3% of net revenue.
8. Environmental Product Tax
- Applies to certain goods (e.g., batteries, packaging materials, electronic devices) based on environmental impact.
9. Tax Treaties and Double Taxation Avoidance
- Hungary has signed more than 80 double taxation treaties to prevent double taxation of foreign investors.
- Foreign investors can claim tax credits or exemptions under these agreements.
Conclusion
Hungary offers competitive tax rates, a low corporate tax rate of 9%, and no withholding tax on most cross-border payments. Foreign investors should consider local business tax, VAT, and sector-specific contributions when planning their operations in Hungary.
Note: The information in this site is for general guidance only. Users of this site are advised to take professional advice before taking practical tax decisions.
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