Hungary Corporate Tax Rate: The Lowest in the OECD

Hungary’s corporate tax rate of 9% is the lowest in the OECD, making it an attractive option for businesses seeking tax savings and a foothold in the European Union. This article explores the advantages of Hungary’s tax system and why it appeals to companies of all sizes.

How much is Hungary’s corporate tax rate?

In Hungary, all business entities, except sole proprietors, are subject to corporate tax (társasági adó, TAO) unless they opt for or qualify under a different tax regime.

Hungary’s corporate tax rate is 9% of the taxable base, which is the lowest among OECD nations. Interestingly, the European average corporate tax rate is 21.5%, helping to explain why so many international companies choose to establish a presence in Hungary.

It is calculated by adjusting pre-tax accounting profits in accordance with tax laws. Adjustments may increase or decrease the base depending on factors such as allowable deductions or non-deductible expenses.

If a company’s taxable base falls below the required profit minimum (2% of revenue), it must pay tax on the minimum unless it justifies the lower result.

If you would like to learn more about the Hungarian tax system, check out our detailed guides:

• The tax benefits of forming a Hungarian company
• Offshore opportunities in Hungary
• A tax guide for expats and investors
• Rules for tax and company registration numbers

How can corporate tax be further reduced?

While Hungary’s tax rate of 9% is already remarkably low, effective tax planning can often further reduce the taxable base, cutting costs even more.

According to the National Tax and Customs Administration (Nemzeti Adó- és Vámhivatal, NAV) guide, the following qualify as tax benefits:

“5.1 Development tax allowances
Among others, development tax allowances can be obtained with regard to the following investments:
(1) investments started and operated within the administrative jurisdiction of a preferential local self-government of a value of HUF 1 billion or more;
(2) environmental protection investments of HUF 100 million or more;
(3) investments of HUF 100 million or more related to the production of films and videos;
(4) investments promoting the creation of jobs.
5.2 Tax allowance of sponsoring spectator team sports
By applying the tax allowance granted by legislation, taxpayers may achieve a tax saving if they support organisations with an approved sport development programme conducting activities in any of the following six sports.
Spectator team sports include:
(1) football;
(2) handball;
(3) basketball;
(4) water polo;
(5) ice-hockey;
(6) volleyball
5.3 Additional tax allowances
In addition to the above, the assessed tax may be reduced with the following tax allowances:
(1) Tax allowance for supporting film making,
(2) Tax allowance for supporting cooperatives to create community funds,
(3) Tax allowance for the SMEs investment credit interest,
(4) Tax allowance for supporting energy efficiency investment, renovation,
(5) Tax allowance for supporting live music service,
(6) Tax allowance for research and development activities,
(7) Tax allowance for investment in the construction of an electricity storage facility”

While Hungary offers some of the most beneficial offshore opportunities in the European Union, the tax system can be quite challenging to navigate. Our international tax experts are here to guide you through every step of the process, from starting a company in Hungary to finding the ideal tax strategy for legally minimizing costs.

FAQ

What are the corporate tax rates in Europe?

The average corporate tax rate in Europe is 21.5%, which is significantly higher than what Hungary offers.

Corporate tax rates in Europe by nation are as follows:

• Austria: 23.0%
• Belgium: 25.0%
• Bulgaria: 10.0%
• Croatia: 18.0%
• Cyprus: 12.5%
• Czechia: 21.0%
• Denmark: 22.0%
• Estonia: 22.0%
• Finland: 20.0%
• France: 25.8%
• Germany: 29.9%
• Greece: 22.0%
• Hungary: 9.0%
• Ireland: 12.5%
• Italy: 27.8%
• Latvia: 20.0%
• Lithuania: 16.0%
• Luxembourg: 24.9%
• Malta: 35.0%
• Netherlands: 25.8%
• Poland: 19.0%
• Portugal: 30.5%
• Romania: 16.0%
• Slovakia: 21.0%
• Slovenia: 22.0%
• Spain: 25.0%
• Sweden: 20.6%

What is the personal income tax in Hungary?

The personal income is taxed at a flat rate in Hungary (személyi jövedelemadó, SZJA), the rate is 15%. Employees also pay an 18.5% social security contribution (társadalombiztosítási járulék), and employers contribute a 13% social tax (szociális hozzájárulási adó, SZOCHO). This results in employees receiving approximately 66.5% of their gross salary as net income.

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