HUNGARY – Small Business Tax 2022
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 10% in y2022. Since the minimum tax base is the annual labour cost (wages, bonuses, etc.) and the distributed dividend, the company can be tax neutral in certain conditions.
The Small Business Tax actually replace the corporate tax (9%), the social contribution tax (13% from y2022) and contribution of the vocational training fund contribution is abolished.
The corporate tax payers can choose the SBT if
- whether the taxpayer is entitled to choose the type of tax based on its form of operation;
- employ less than 50 person;
- annual income and total assets are under HUF 3000 million in the previous business year;
- the tax number of the company was not cancelled during the previous 2 years;
- its business year is the calendar year;
- has not Controlled Foreign Company
- annual net financial cost/expenditures are under ~ HUF 940 million.
It means that the employers can reduce the social tax charges to 10%, but their general tax rate on the profit paid to shareholders is also 10%. Since y2017 the calculation of the SBT changed and the minimum SBT base is roughly the labour cost of the companies in case the company does not pay dividend or increase the capital of the company from the retained earnings.
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 does 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 labour 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 as 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% (decreased to 1% in y2020 and y2021).
The SBT payers’ upper limit for the annual income is HUF 6 000 million (app. EUR 16 million) and the upper limit for the number of the employees is 100.
The small business taxpayer status is ceased in case:
- if the taxpayer has a controlled foreign company;
- the company start voluntary dissolution or will be liquidated;
- after starting merge or separation
Updated: 2022. 08.16.