The Hungarian taxation system is auspicious for foreign individuals who incorporate in Hungary, mainly with the low tax rates for corporate tax (9%) and local business tax (0-2%), the opportunity for VAT free trading and the fact that Hungary has signed tax treaties in the subject of the avoidance of double taxation with more than 80 countries so far.
Simultaneously with the company registration, you will be able to obtain an EU VAT number for the company (our incorporation fee contains the obtainment of this as well), with which you will be able to do trading with 0% VAT with companies registered in the EU and which also have an EU VAT number. If you are doing business with an EU company which does not have an EU VAT number, or with a Hungarian company or with private persons, the VAT is payable.
There are three exceptions when you are entitled to do VAT free trading:
Please note that if you choose to do VAT free trading, then you will not have the opportunity to deduct the VAT from your purchased goods and used services.
The VAT rate is 27% in Hungary usually, but there can be exceptions where the tax rate is lower than 27%.
In certain cases the tax rate could be 18% for certain services, mostly for accommodation services.
In other cases the tax rate could be 5% in the commercial zone for some products such as milk, eggs, cattle meat, books, medical oxygen etc.
There are cases when you have to pay differential VAT, mostly when you are doing vehicle trading activity. In this case the VAT has to be paid on the basis of the difference of the purchase price and the sale price.
In connection with the corporate tax which rate is 9% in Hungary (it is the lowest in Europe), is an obligatory for any foreign individuals who set up a company in Hungary. The tax advance has to be paid until the 20th of the month following the quarter. At the time of the yearly closing which is 31th of May every year, the remaining amount of the corporate tax has to be paid if the tax advances don’t settle it totally.
Generally the tax base of the corporate tax is the net amount of the company’s total income from which the net amount of the costs and expenditures have to be deducted. After that this tax base may vary depending on the tax decreasing and increasing items.
Mainly in those cases when your company is unprofitable, the tax base can also be the 2% of the net amount of your company’s total income.
The tax base will be the bigger amount from the above two cases.
In regards to the local business tax, its rate is 0-2%, subject to the registered address of your company. If you choose our registered address service the rate will be 2% (it has a 2% rate in everywhere in Budapest). You have to pay the tax advances in two parts, until 15th March and then until 15th September. Just like in case of the corporate tax, at the time of the yearly closing the rest amount has to be paid if the tax advances do not settle it totally. The tax base is the net amount of your company’s annual income, from which the material costs, the costs of the subcontractors and the purchase value of the sold goods have to be deducted.
The chamber contribution fee is also an obligatory for foreigners who are setting up a company in Hungary. It has to be paid yearly, until 31st March by bank transfer. The amount of the chamber contribution fee is 5000 HUF (approximately 15 EUR).
At the following year 31st May you have to make an annual report in connection with your business activities and you have to submit the corporate and the local business tax.
If you entrust us with your confidence you do not have to deal with making the annual report, calculating the base fees and following the changes in the Hungarian financial/tax laws. All you have to do is to send us the necessary information we need and transfer the fees as soon as it is due. Also we will immediately notify you if any changes occur in the Hungarian regulatory environment.
If you have further questions please do not hesitate to contact us.