Understanding Hungary’s Tax System in 2026
Taxes are a major concern for any company, especially those planning to do business in a foreign country. In Europe, Hungary continues to attract more investors as it offers one of the simplest tax systems for businesses in the region, a position it maintains in 2026.
Hungary’s standard 9% corporate income tax (CIT) rate remains the lowest in the EU. But aside from this headline rate, companies planning to invest or expand in Hungary also need to understand personal income tax, value-added tax, and local levies to get a complete picture of the costs of doing business in Hungary.
Lowest Corporate Income Tax in the EU
Hungary has used a standard 9% CIT rate since 2017, applied on the taxable earnings of resident and non-resident businesses with a permanent establishment. This tax rate is only half the EU average of 20%, making the country a highly attractive business destination.
Companies can also apply for tax deductions for research and development expenses. Holding companies, on the other hand, may qualify for exemptions on capital gains and dividend income.
Personal Income Tax and Contributions
Hungary charges a fixed personal income tax (PIT) rate of 15%, which many prefer to the progressive rates in most EU countries. Employers shoulder a 13% social contribution tax, while employees share in their social security system and healthcare insurance premiums. Understanding all these items will give you a good understanding of the costs associated with hiring employees in Hungary.
Value-Added Tax
Hungary has a 27% value-added tax (VAT) rate. Consumer-facing companies take note of this as it can affect their pricing decisions and net earnings.
However, the VAT is lower for some sectors. It’s only 18% for restaurant and catering services, and certain dairy and bakery products.
VAT is much lower at 5% for selected food products, new residential properties, and some medicines. Moreover, exporters and companies whose business involves transactions with other EU countries may qualify for zero VAT.
Local Business Tax and Other Levies
Companies pay their municipality a local business tax (LBT or commonly called HIPA) of up to 2% of their adjusted net revenue. They can deduct this amount when computing their CIT, thereby softening the burden.
Sectors such as financial institutions, retailers, and energy suppliers pay surtaxes. Companies in these industries should consider these levies when assessing business costs in Hungary.
Global Minimum Tax and Pillar Two Compliance
Hungary has adopted the Organization for Economic Co-operation and Development’s Pillar Two global minimum tax system into its domestic law. Multinational companies with consolidated revenues exceeding Euro 750 million pay a minimum of 15% across all jurisdictions.
A company paying Hungary’s standard 9% rate would need to pay the difference to meet the 15% global minimum. However, for most small and medium-sized enterprises, Pillar Two does not apply, so they pay only the standard 9% CIT, without any additional rate.
Double Tax Treaties and Cross-Border Planning
Hungary has double tax treaties with many countries, preventing double taxation when income moves between borders. This can significantly reduce the tax on dividends, royalties, and interest that cross between Hungary and other countries. This makes Hungary a tax-efficient base for group financing arrangements, international holding structures, or regional headquarters serving Europe.
Why Hungary Stands Out in 2026
Hungary’s tax system remains one of the most competitive in Europe, built on favorable rates and a structure that does not overcomplicate compliance. Many businesses favor the country’s low corporate tax, fixed personal income tax, and tax treaties with several countries.
While high VAT and other levies present additional costs, this may not be true for specific businesses and companies that qualify for the 9% CIT. Overall, seeing the whole picture leads to better decisions and fewer surprises for companies planning to do business or expand their operations in Hungary.
https://taxsummaries.pwc.com/hungary/corporate/taxes-on-corporate-income/
https://taxsummaries.pwc.com/hungary/corporate/other-taxes/
https://taxfoundation.org/data/all/eu/corporate-income-tax-rates-europe/
https://immigrantinvest.com/blog/hungary-tax-optimisation/
https://www.state.gov/reports/2025-investment-climate-statements/hungary/
https://taxfoundation.org/research/all/global/2025-international-tax-competitiveness-index/
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