HUNGARY – Small Business Tax 2019

The companies fulfilling the conditions or newly formed companies and branch of foreign companies are also able to choose this special taxpayer status since y2013. The tax rate of the small business tax (SBT) is 16% in y2016, 14% in y2017 and will 13% from y2018, the minimum tax base is the annual labor cost (wages, bonuses, etc.) and till the end of y2016 the gain of the cash balance of the company.

The Small Business Tax actually replace the corporate tax (10%), the social contribution tax (19,5%) and contribution  of the vocational training fund contribution (1,5%). The corporate tax payers can choose the SBT if employ less than 50 person and their income and total assets are under HUF 1000 million in the previous business year.

It means that the employers can reduce the social tax charges from 21% to 13% from y2018, but their general tax rate on  the profit paid to shareholders is also 13%. From y2017 the calculation of the SBT changed and the minimum SBT base is roughly the labor cost of the companies.

The tax base should be increased with the following transactions:

  • dividend paid to shareholders
  • reduction of the issued capital
  • gain of petty cash balance
  • tax penalties
  • non-business purpose payments
  • non-qualifying uncollectible receivables

The tax base should decreased with the following transactions:

  • dividends received
  • increase of the issued capital
  • decrease of petty cash balance

The SBT payers don’t have to have employees and have no obligation to pay dividends to their shareholders. The SBT payers have no minimum tax base requirements.

The branch of foreign companies do not pay dividends to shareholders according to the HU laws, so the profit of the branch can be transferred small business tax free to the mother company, except the SBT payable on labor cost. The branch of foreign companies has to managed by Hungarian resident person.

Local business tax of SBT payer

The SBT payers can choose special status for the local business tax well. It means that the base of the local business tax can be the 120% of the SBT base. The general rate of the LBT is the same as for any other taxpayer, 2%.

The SBT payers’ upper limit for the annual income is HUF 3 000 million (app. EUR 9,4 million) and the upper limit for the number of the employees is 100.