Hungarian Corporate Taxation: Essential Guide

Published on October 3, 2025 and written by Cyril Jarnias

Hungary has positioned itself as a highly attractive tax destination for businesses in the heart of the European Union. With some of the lowest tax rates in Europe and a business-friendly environment, the country attracts numerous foreign investors. Discover the main tax advantages and the steps to establish your company in Hungary.

An Ultra-Competitive Tax Regime for Businesses

Hungary offers one of the most advantageous tax regimes in Europe for corporations. The country has implemented several incentive measures to attract investment:

An Unbeatable Corporate Tax Rate

The corporate tax rate in Hungary is set at only 9%, making it the lowest rate in the European Union. For comparison, the European average is around 21%. This highly attractive rate applies to profits earned by Hungarian companies, whether owned by residents or non-residents.

Tax Exemptions to Stimulate Innovation

The Hungarian government has established tax incentives to encourage research and development. Companies can benefit from a tax deduction of up to 200% of eligible R&D expenses. Additionally, income from patents and intellectual property benefits from a reduced rate of 4.5%.

An Advantageous Regime for Holdings

Hungary offers a very favorable tax regime for holding companies. Dividends received from Hungarian or foreign subsidiaries are tax-exempt. Similarly, capital gains from the sale of shares held for at least one year are completely exempt.

A Standard VAT Rate in the European Average

The standard VAT rate in Hungary is 27%, which is on the higher end of the European average. However, reduced rates of 5% and 18% apply to certain goods and services. Companies can reclaim VAT on their purchases according to the usual rules.

Setting Up Your Business in Hungary: Simplified Procedures

Establishing a company in Hungary is a relatively simple and quick process. Here are the main steps to follow:

1. Choose the Appropriate Legal Form

• Limited Liability Company (Kft)
• Joint Stock Company (Zrt or Nyrt)
• Branch Office

2. Reserve the Company Name

You must check the availability of the chosen name with the Hungarian Trade Register and reserve it.

3. Prepare the Articles of Association and Founding Documents

The articles of association must be drafted in Hungarian and signed before a notary.

4. Open a Bank Account

A bank account in the company’s name must be opened to deposit the share capital.

5. Register with the Tax Authorities

The company must register with the Hungarian Tax Authority (NAV) to obtain its tax number and VAT number.

6. Register with the Trade Register

The complete file must be submitted to the Commercial Court for the final registration of the company.

The entire process generally takes between 2 and 4 weeks. It is recommended to enlist the help of a local lawyer to assist you with these procedures.

Tax Obligations: What You Need to Know

Once your company is established in Hungary, you will need to comply with certain tax obligations:

Corporate Tax Return

The annual corporate tax return must be filed within 5 months after the end of the fiscal year. Quarterly advance payments must be made during the year.

VAT Returns

VAT returns are generally monthly or quarterly depending on the company’s turnover. They must be filed electronically.

Withholding Taxes

Hungary generally does not apply withholding tax on dividends, interest, and royalties paid to non-residents (subject to certain conditions).

Transfer Pricing

Transactions between related companies must comply with the arm’s length principle. Transfer pricing documentation must be prepared.

Social Declarations

The employer must make monthly declarations for social security contributions and income tax for its employees.

Non-compliance with these obligations can result in significant financial penalties. Therefore, it is recommended to hire a local accountant to ensure your company’s tax compliance.

Tax Treaties: Avoiding Double Taxation

Hungary has signed tax treaties with over 80 countries to avoid double taxation. These agreements notably allow:

• Reducing or eliminating withholding taxes on cross-border flows (dividends, interest, royalties)
• Determining the country with the right to tax certain income
• Providing mechanisms for eliminating double taxation

Among Hungary’s main economic partners are:

European Union: Hungary applies European tax directives, particularly the Parent-Subsidiary Directive which exempts intra-group dividends.

United States: The tax treaty provides for reduced withholding tax rates (dividends 5-15%, interest 0%, royalties 0%).

China: The tax agreement sets maximum withholding tax rates (dividends 10%, interest 10%, royalties 10%).

Russia: The treaty limits withholding taxes (dividends 10%, interest 0%, royalties 0%).

These treaties allow Hungarian companies to optimize their international taxation and avoid double taxation of their foreign income.

Hungary vs. Tax Havens: A Strategic Choice

Hungary positions itself as a credible and legal alternative to traditional tax havens. Here is a comparison with other attractive offshore jurisdictions:

• Corporate Tax Rate: 9% vs 12.5%
• Political Stability: EU Member vs EU Member
• Reputation: Good vs Excellent

• Corporate Tax Rate: 9% vs 17%
• Holding Regime: Very Favorable vs Very Favorable
• Operational Costs: Moderate vs High

• Corporate Tax Rate: 9% vs 12.5%
• Tax Treaty Network: Wide vs Medium
• Skilled Workforce: Abundant vs Limited

• The lowest tax rate in Europe
• A central location in the heart of the EU
• Competitive operational costs
• A skilled and abundant workforce
• An extensive network of tax treaties
• Good reputation and political stability

Conclusion: Hungary, a Strategic Choice for Your European Expansion

With its ultra-competitive tax regime and business-friendly environment, Hungary stands out as a prime destination for companies looking to establish themselves in Europe. The country offers numerous advantages:

• A corporate tax rate of only 9%
• Tax exemptions to stimulate innovation
• A very advantageous holding regime
• Simplified business creation procedures
• An extensive network of tax treaties
• A credible alternative to traditional tax havens

However, it is essential to have a good grasp of local tax obligations and to surround yourself with experts to optimize your establishment. With a suitable strategy, Hungary can become a real springboard for developing your activities in Europe and internationally.