Corporate income taxation and tax system in Hungary
Understanding the intricacies of corporate income taxation in Hungary necessitates a solid grasp of the local tax framework, compliance obligations, and strategic avenues for tax optimization. Regardless of whether your business is a resident or a non-resident entity, it is essential to be aware of the tax responsibilities and advantages in Hungary to ensure compliance and improve your tax situation. This guide offers a summary of the corporate tax system in Hungary, detailing tax rates, filing requirements, and available services to aid in effectively managing your corporate income tax.
Corporate income tax system
Hungary has a corporate income tax set at a uniform rate of 9%. This tax is applicable to resident companies concerning their global income and to non-resident companies based on their income sourced from Hungary. Certain sectors, including financial institutions and energy firms, may be subject to additional surtaxes. Furthermore, Hungary adheres to international tax regulations like the EU’s ‘Pillar Two’ directive, which establishes a global minimum tax rate of 15% for multinational corporations.
Tax exempt
Hungarian companies typically do not have to pay corporate income tax on dividends received, except in cases where the dividends come from a controlled foreign company (CFC). Capital gains may also be tax-exempt if the participation exemption is met, which necessitates acquiring at least 10% of shares in a subsidiary that has been held for a minimum of one year. Moreover, there could be additional exemptions for specific research and development activities and development tax incentives.
Tax return
Corporate tax returns are required to be submitted by 31 May of the year after the tax year, or within five months after the fiscal year-end if it is not aligned with the calendar year. Companies are responsible for determining their own tax obligations, and failure to comply can lead to penalties that vary between 50% and 200%. Additionally, interest on late payments is applicable.
Tax compliance and reporting obligations
It’s crucial for businesses to carefully manage the intricate realm of tax compliance to steer clear of penalties and maintain smooth operations. Organizations need to fulfill various reporting requirements, such as adhering to filing deadlines, keeping precise and thorough documentation, and guaranteeing that all tax returns comply with both local and international regulations. Proper reporting is not merely a legal obligation, but also vital for preserving the financial integrity of the business.
We offer services aimed at assisting your business in managing these responsibilities efficiently, making certain that all submissions are precise, prompt, and completely adhere to the requirements set by the relevant tax authorities.
Corporate income tax for non-residents
Foreign companies are taxed on income sourced from Hungary. Depending on existing tax treaties, non-residents might enjoy lower tax rates or exemptions. Profits generated from selling shares in a Hungarian company are usually not taxed, except when they are linked to a Hungarian real estate company. Typically, there is no withholding tax applied to dividends, interest, or royalties paid to non-residents.
Managing corporate income tax risks
Properly handling corporate tax risks is crucial for maintaining your business’s financial stability and ensuring compliance. These risks can arise from alterations in legislation, international transactions, and intricate tax arrangements. If not managed appropriately, they can result in unforeseen liabilities and penalties.
To reduce these risks, companies need to routinely evaluate their tax practices, keep informed about changes in legislation, and ensure they comply with all relevant regulations. Adopting a strong tax risk management strategy that involves detailed documentation and proactive modifications to the business structure can help avoid expensive problems.
We provide assistance to your business in recognizing and handling corporate tax risks, helping you stay compliant and secure within a constantly changing tax landscape.
Corporate income tax services
Our group of specialists provides a wide array of corporate income tax services designed to address the specific requirements of businesses that operate in or are connected to Hungary. We offer assistance with various aspects, including tax compliance, strategic planning, navigating international tax treaties, and reducing tax liabilities. Our offerings encompass the preparation and submission of corporate income tax returns, representation in interactions with tax authorities, and continuous advisory support to keep your business in line with Hungary’s tax regulations. Additionally, we guide you in utilizing tax incentives, handling cross-border tax responsibilities, and optimizing your overall tax strategy to align with your business objectives.
Contact us
If you want to comply with Hungary’s corporate income tax regulations while improving your tax situation, we are ready to assist you. Reach out to us for more information about our services or to arrange a consultation with one of our tax specialists. We can help you manage the intricacies of corporate taxation in Hungary, allowing you to concentrate on what is most important – expanding your business.
Disclaimer
Tax laws and regulations are continually evolving and can differ depending on individual situations. The information presented here serves as general guidance and may not represent the latest changes. It is strongly advised to seek assistance from a qualified tax professional for specific and current advice tailored to your circumstances.