Tax & VAT · Guide
Hungary's 9% corporate tax, explained honestly
Hungary advertises the lowest corporate tax in the EU — 9%. That's true and genuinely attractive. But the headline rate isn't the whole story. Here's the complete picture a founder should weigh before incorporating.
The headline: 9% corporate tax (TAO)
Corporate tax (társasági adó) is a flat 9% on taxable profit — the lowest standard corporate rate in the European Union. For a profitable, EU-facing company this is a real, durable advantage, and it's the main reason founders look at Hungary.
The trade-off: 27% VAT — the highest in the EU
Hungary's standard VAT (ÁFA) is 27%, the highest rate in the EU, with reduced rates of 18% and 5% for specific categories. For B2B trade within the EU, VAT is largely pass-through and reclaimable — so it's often neutral. For B2C and domestic sales, however, that 27% is a real factor in your pricing. From 2026, the VAT exemption (alanyi adómentesség) threshold is 20 000 000 Ft (approx. €50,633).
Local business tax (HIPA): up to 2% of revenue
Municipalities charge a local business tax (helyi iparűzési adó, HIPA) of up to 2% — and crucially it's on net revenue, not profit. In Budapest it's the full 2%. Because it hits the top line, low-margin businesses should model it carefully.
Personal and dividend taxes
Personal income tax (SZJA) is a flat 15%. When you distribute profit, dividends to an individual carry 15% personal income tax plus 13% social contribution tax (szocho), up to an annual cap. If you employ staff, budget for the employer social contribution (szocho) of 13% on top of gross wages.
So is it worth it?
For a profitable company that mainly sells B2B across the EU, Hungary's 9% corporate tax can be very compelling and the 27% VAT is largely neutral. For B2C or thin-margin domestic businesses, the 27% VAT and revenue-based HIPA matter more. The right answer depends on your model — we're happy to run the numbers with you.
Hungary corporate tax — FAQ
Is Hungary corporate tax really 9%?
Yes — corporate tax (társasági adó, TAO) is a flat 9% on taxable profit, the lowest standard corporate rate in the EU. The catch is that it sits alongside other taxes (VAT, HIPA, dividend taxes) that affect the real cost of doing business.
What is the total tax burden in Hungary?
It depends on your business, but a profitable company typically faces 9% corporate tax, local business tax (HIPA) up to 2% of net revenue, and — when profits are distributed — 15% personal income tax plus 13% social contribution on dividends (up to an annual cap).
Why is Hungarian VAT so high?
Hungary's standard VAT (ÁFA) is 27% — the highest in the EU. Reduced rates of 18% and 5% apply to specific goods and services. VAT is generally pass-through for B2B EU trade, but it matters a lot for B2C and domestic sales.
What is HIPA (local business tax)?
HIPA (helyi iparűzési adó) is a local business tax of up to 2% charged on net revenue (not profit) by the municipality where you operate. In Budapest it is the full 2%. Because it is on revenue, low-margin businesses feel it more.
How are dividends taxed in Hungary?
Dividends paid to an individual are subject to 15% personal income tax plus 13% social contribution tax (szocho), the latter up to an annual cap. Plan distributions with an accountant to manage the total.
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