Market overview

In 2017 Hungary introduced the lowest corporate tax rate in the EU in an effort to attract large foreign companies to set up business in the country. The tax rate was cut to 9% for all businesses. The previous rate was 10% for companies with revenue of up to $1.8 million and 19% for those above this threshold.

"One new trend that is overlooked is the change in corporate income tax. It has had an indirect impact on transfer pricing," said Zoltán Lipták, a partner at EY. "In the new BEPS environment it sends a clear message to multinationals that Hungary is a significant place. It is easy to build on, even in a BEPS environment."

Hungary has undergone a slew of legal changes in recent years, and tax professionals expect more of the same.

"Hungary is always interesting because the Hungarian government changes tax laws as frequently as Cristiano Ronaldo changes his girlfriend," commented Tamás Gyányi, partner at WTS Klient Advisory in Budapest.

The Hungarian government adopted country-by-country reporting (CbCR) requirements into domestic legislation in May 2017, in accordance with the OECD's BEPS principles.

However, experts and taxpayers were less fazed by the new TP requirements introduced this year because the country has had its own TP legislation in place since 1992.

"In the past, transfer pricing regulations have caused a lot of disturbances. You must have the correct market documentation and the correct databases," said Gábor Szarka, head of the department of valuation and transfer pricing at Grant Thornton. "This has been going on for a while, so companies are used to this."

CbCR covers multinational enterprises with revenues of €750 million ($884 million) or more within the financial year preceding the first reporting year.

"There are only two Hungarian companies that are big enough entities to report CbCR," mooted Gyányi.

Those that fail to submit, are late or provide false or incomplete information are liable to penalties of up to HUF20 million ($76,000). The ultimate responsibility to comply with CbCR falls on the parent entity, on behalf of its multinational entities.

As an EU member state, Hungary is also expected to introduce the EU's Anti-Tax Avoidance Directives (ATAD 1 and 2) into domestic law by December 2019.

Tax authorities

National Tax and Customs Administration
Large Tax Payers' Directorate
1077 Budapest, Dob utca 75-81
Tel: +36 1 428 5100

Tax rates at a glance

(As of July 2017)

Corporate tax 9% (a)
Capital gains 9%
Branch tax 9% (b)
Withholding tax
Dividends 0%
Interest 0%
Royalties 0%
Net operating losses (years)
Carryback 0
Carryforward 5 (c)

  1. The 19% rate is the standard rate of corporate income tax. The 10% rate applies to the first Ft500 million ($1.85 million) of taxable income. All taxpayers must pay tax on the alternative minimum tax base if this base is more than taxable income calculated under the general rules.
  2. Permanent establishments of foreign companies are subject to special rules for the computation of the tax base.
  3. Losses incurred before the 2015 tax year can be carried forward until 2025. Losses incurred in the 2015 tax year or subsequent years can be carried forward for five years.

Source: EY and Deloitte

Firm contact details

WTS Klient Tax Advisory