On social media platforms, there are often companies present that typically create content to promote their own products and services. In some cases, businesses generate significant revenue by producing popular content, even if showcasing their own products is not their primary goal.
These platforms have the common feature of providing income to content creators after a certain number of views or clicks. Any social media platform where a business earns income through views, advertisements, or promotions is considered a space for this type of activity.
After such transactions, what tax obligations does a company registered in Hungary have?
In the case of a business operating in multiple countries, the individual who has the most direct connection to the activity is considered the earner of the income. This often means that the person or entity receiving the income is the one subject to taxation. If the income is received by the Hungarian business, it is taxable here.
Income acquired by the business is taxed according to the chosen tax method during establishment. This means it can be subject to corporate tax or lump-sum tax, or, for small businesses, income tax, or in the case of artistic activities, the EKHO (Egyszerűsített Közteherviselés) simplified tax.
During company formation, it is advisable to consult with our advisors to discuss the available options and select the most suitable tax method. To assist with this, we provide a preliminary calculation.
The calculations are prepared for an annual income of 100,000 EUR and do not take into account deductible expenses. After dividends, each owner is individually liable for taxes according to their own tax residency rules as private individuals.
Under general taxation (corporate tax) regime:
Revenue: 100,000 EUR
Expenses: 0 EUR (fictional)
Profit: 100,000 EUR
Corporate tax at 9%: 9,000 EUR
Business tax max 2%: 2,000 EUR
Net profit: 89,000 EUR
Dividend base: 89,000 EUR
TOTAL TAX 11%
Dealing with VAT is a separate matter!
In Hungary, you can choose a so-called “small business exemption” up to an annual turnover of 12 million Hungarian forints (which is approximately equivalent to 31,500 Euros at the time of this article’s creation). Please note that this exemption needs to be declared separately when establishing the company!
Any revenue exceeding this threshold is generally subject to a 27% VAT, depending on where the revenue comes from.
Revenue can mainly come from three directions:
- From abroad, meaning a third country
If the revenue does not come from any EU member state, it is considered to be from a “third country.” In this case, VAT is not applicable, and it does not need to be invoiced. It should be treated as an export service, and the platform making the payment is responsible for VAT settlement.
- From within the EU, but not from Hungary
If your business partner is in the EU, the transaction will be subject to the reverse charge mechanism due to an intra-Community supply. In practice, this means that you need to issue an invoice with zero VAT. It is essential that both companies have a valid EU VAT number, which should be included on the invoice. Hungarian businesses typically obtain this number simultaneously with their establishment (upon request).
- Domestic, from a Hungarian taxpayer
If the platform is already Hungarian or has a Hungarian VAT number, the general rule applies, and the invoice should include a 27% VAT charge.
Based on the above, with a well-structured company, you can conduct your business with a total tax burden of approximately 10%. This makes Hungary a highly attractive option for individuals operating in the field of social media.