Last updated on: 21 February 2024.
When you set up a Hungarian company, you probably expect to make money on it. But how much of the company’s revenue can you actually take for yourself? Learn the basics of Hungarian corporate taxes, and how to take dividend from your company.
From revenue to profit
The money your Hungarian company gets from sales is its revenue. However, you always have various costs connected to company operation, which must be deducted from your revenue to calculate your profit. These costs will include rental fees for your office or shop, procurement of equipment you use, materials you process or goods you resell, and taxes you have to pay.
When calculating costs, you already come across the first major tax item: the local business tax. It is set by the local municipality where your company is registered, and it is between 0-2% of your revenue – although its tax base can be reduced by various items, especially if your company is reselling goods bought from other providers.
Corporate tax is based on your profit
In Hungary, corporate tax is only 9%, which is the lowest in the EU. It is based on your Hungarian company’s profit, so it is calculated after the deduction of all of the company’s expenses, including other taxes and contributions. It is paid to the Tax Authority in quarterly instalments based on an estimate of the overall yearly profit, and it is calculated precisely at the end of the fiscal year for the year-end closing, when you are expected to pay the remaining difference – or when you can claim returns in case you have been overpaying.
The dividend is the money you can use as a person
When operating a company in Hungary, it is essential that the company can spend money only on things relevant to its operation. When you want to spend company money on personal expenses, you take a dividend from the company – which then becomes your own money, and you can spend it on whatever you want.
Before you can spend the dividend you took from your company, you must pay taxes from it. How much you pay in taxes on your dividend depends on whether you are a tax resident in Hungary or elsewhere, and whether you have any other income.
If you are Hungarian tax resident, you pay to the Hungarian Tax Authority
- 15% for personal income tax,
- 13% social contribution tax.
The 15% personal income tax cannot be avoided or reduced, but the 13% social contribution tax has a cap on it. This cap equals the social contribution tax to be paid after the double of the current Hungarian minimum wage. In 2023, it is
- HUF 266,800 x 2 x 12 x 13% = HUF 832,416 = ca. EUR 2,200
Let’s see an example!
To help you understand how taxes related to company operation in Hungary work, let’s see an example.
Let’s assume your Hungarian company has a yearly revenue of EUR 100,000, while you spend EUR 50,000 on various expenses.
- Your company pays EUR 2,000 for the 2% local business tax.
- Your company has a profit of EUR 48,000, which is the tax base for the corporate tax.
- Your company pays 9% corporate tax, which is EUR 4,320
- Your company is left with EUR 43,680. You as the owner can decide how much of that you want to leave in the company and how much you take as dividend.
- You decide to take EUR 30,000 as dividend. EUR 13,680 of the profits remain in the company to cover future expenses or investments.
- You pay 15% personal income tax, EUR 4,500
- You pay
13% social contribution tax, EUR 3,900the maximum amount of social contribution tax after the double of the minimum wage, EUR 2,200 - You now have EUR 23,300 which you can spend as you wish.
Alternatively, if the EUR 50,000 initial expense included costs connected to a salary you take from the Hungarian company, and that salary was at least double the minimum wage:
- You pay 15% personal income tax, EUR 4,500
- You pay no social contribution tax
- You now have EUR 25,500 which you can spend as you wish.
Need some help? Let us know!
The Helpers Team has more than 15 years of experience supporting foreigners moving to Hungary and setting up shop here, while Helpers Finance is specialized in providing accountancy and bookkeeping to small and middle-sized companies. Take a look around the blog for other resources, or contact us today to ask for customized solutions.
