Company Formation & Tax in Hungary
The EU's lowest corporate tax rate — the Kft, a flat 9% CIT, and the offsetting taxes (VAT and local business tax) you need to plan around.
Hungary's headline draw is unambiguous: at a flat 9%, it has the lowest corporate income tax rate in the European Union. The full picture is more nuanced — a high VAT rate and a turnover-based local business tax mean the effective burden depends on the business — but for profitable, EU-facing companies it's a genuinely competitive base.
Choosing an entity
The standard vehicle is the Kft (korlátolt felelősségű társaság, private limited company), with a minimum capital of HUF 3,000,000 (about €7,500) that — usefully — need not be deposited before incorporation. Larger or investment-ready structures use the Zrt (private company limited by shares, HUF 5,000,000). Formation requires a Hungarian attorney and is filed electronically with the Company Court; on approval, NAV issues the tax ID and an EU VAT number. 100% foreign ownership is permitted with no local-director requirement.
Corporate tax and VAT
| Tax | Rate |
|---|---|
| Corporate income tax (flat) | 9% — lowest in the EU |
| VAT (ÁFA, standard) | 27% — highest in the EU (reduced 18% / 5%) |
| Local business tax (municipal) | up to 2% of revenue |
| Withholding tax to foreign companies | 0% |
Corporate income tax is a flat 9%, applying to most entities including the Kft and Zrt, with capital gains taxed at the same rate and zero withholding tax on dividends, interest and royalties paid to foreign companies. VAT is 27% standard — the EU's highest — with reduced rates of 18% and 5% and a registration threshold of around HUF 20 million; real-time invoice reporting to NAV is mandatory. A separate local business tax of up to 2% is levied by municipalities on adjusted revenue. An alternative small-business regime (KIVA) replaces CIT and part of the social contribution with a single tax.
Frequently asked questions
What is the corporate tax rate in Hungary?
A flat 9% — the lowest in the European Union.
How much capital do I need for a Kft?
HUF 3,000,000 (about €7,500), which need not be deposited before incorporation.
What is the Hungarian VAT rate?
27% standard — the highest in the EU — with reduced rates of 18% and 5%.
What is the local business tax?
A municipal tax of up to 2% levied on a company's adjusted revenue, separate from corporate income tax.
Official sources
- National Tax and Customs Administration (NAV)
- Company Register (e-cégjegyzék)
- HIPA — Hungarian Investment Promotion Agency
This guide is general information prepared by ARM Management and is current as at June 2026. It is not legal or tax advice; the local business tax varies by municipality and rules change. Confirm against NAV, or with an advisor, before acting.
Establish in Hungary the right way.
ARM Management advises international companies on Hungarian Kft formation, the 9% regime and the offsetting VAT and local taxes, alongside wider CEE structuring. Begin with a confidential conversation.