Hungary has the lowest corporate tax rate in the EU at just 9%. But business owners should also be aware of another tax: the local business tax, or HIPA (short for “Helyi Iparűzési Adó” in Hungarian). This tax can be up to 2% of your net income and is charged based on where your business operates.
What makes HIPA “local”?
Unlike corporate tax, which is collected by the government, HIPA is set and collected by local municipalities (towns or villages). That means you will need to check the local tax rules in every municipality where your business has a presence – this includes your registered seat and any physical locations like offices or shops.
How much is it?
The maximum rate for HIPA is 2%, but it can be lower – or even 0% – depending on the municipality. For example:
- In Budapest, the rate is 2%, but you don’t have to pay if your annual revenue is below HUF 1.5 million (about EUR 3,800). This is rarely relevant to companies, however, as they are supposed to generate more revenue.
- Some towns charge 0%, but setting up your company there just to avoid tax might not be worth it.
However, having a registered seat at a 0% HIPA municipality has various downsides:
- If you open an office or shop in another town, you’ll have to pay HIPA in both places.
- This makes tax reporting more complex.
- Moving your registered seat later adds extra costs and administration.
Best tip: Plan ahead and register your business address where you actually plan to operate. Services like virtual offices (e.g. by Helpers) can help manage your mail and give you time to find your ideal location.
How is HIPA calculated?
Just like corporate tax, HIPA is a profit-based tax. Broadly speaking, the tax is based on your net income (revenue minus costs). The tax base is calculated differently, however, so you will need an accountant who knows which expenses can reduce the base of which tax.
If your annual revenue is under HUF 25 million (about EUR 62,000), you can choose a simplified “tier system”, which can make both the math and paperwork easier. Here’s how it works:
Yearly revenue | Tax base | Max. tax payable |
Below HUF 12M | HUF 2.5M | HUF 50,000 |
HUF 12–18M | HUF 6M | HUF 120,000 |
HUF 18–25M | HUF 8.5M | HUF 170,000 |
In the table, only a maximum tax payable is indicated for a 2% tax rate. If the HIPA rate is lower at your location, the tax payable will be lower.
When do you pay?
Tier system:
- Pay once a year, in advance by May 31.
- You need to submit a report only if you are moving to a different tier, or if you want to change calculation method for the following year. Then submit it by May 31.
Regular method:
- Make two advance payments (by March 15 and September 15).
- Top-up by May 31 based on your previous year’s income.
- Submit your report by May 31.
You can pay HIPA in HUF, EUR, or USD, and depending on the town, via wire transfer or bank card.
Let your accountant take care of this
Helpers offers assistance not only with setting up your Hungarian company, but also with getting you started by providing a registered seat, accountancy, and various kinds of advisory. If you let our team handle accounting on behalf of your company, that will naturally include taking care of the local business tax.
Our accountants will
- calculate how much you owe;
- send you summaries and instructions for expected tax payments;
- advise you on whether the regular method or the tier system works best for you.
Helpers specializes in supporting foreign-owned small and medium businesses in Hungary. We take care of administration so you can focus on growing your company. Feel free if you need help, and we will do our best to come up with solutions tailored to your needs.
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