Taxation of active income
Hungarian companies must register with the tax authorities immediately after registration and automatically receive a tax number.
Corporation tax of Hungarian companies is 9%, which is a single rate, applicable irrespective of the size of the company’s turnover or profit.
In addition, in Hungary there is also a municipal tax ranging from 0% to 2% of profits, depending on the location of the company’s business activity. In poorly developed provinces, there may be no municipal tax, but the company must be registered, have an office and actually operate in the province. In Budapest and other major cities, the municipal tax is 2%. The municipal tax is paid annually.
When a company is formed, its director makes a forecast of the expected profit, and on the basis of this a quarterly advanced payment of the profit tax is payable. If such payments are not made, the company will be fined, as a result of which the profit tax will be 10%, instead of the usual 9%.
Taxation of passive income
Tax on dividends
The tax on dividends in Hungary is 0% both on dividends received by the Hungarian company from its subsidiaries and on dividends paid by the Hungarian company to its owners. The absence of taxes on dividends, along with the low rate of corporation tax, makes Hungarian companies a unique tool for creating holding structures.
The dividends received by the Hungarian company are not included in the tax base, so when transferring them to the owners of the Hungarian company in the future, no profit tax is paid.
Intellectual Property Tax
Hungarian tax legislation provides privileges for certain types of intellectual property, such as copyrights, patents, etc. In general, it can be said that intellectual property is taxed from 4.5% to 9%.
Taxation of capital gains
The tax on capital gains can be 0% under the following conditions:
- the share of property in the object being sold must be at least 10%;
- the seller must have owned the property being sold for at least one year;
- within 75 days after the sale of the property the transaction must be declared to the Hungarian tax office.
In other cases, the capital gains tax is 9%.
Taxation of other types of passive income (income from deposits, etc.)
The tax on other types of passive income of a Hungarian company is 9%.