Insight
Doing business in Hungary
May 2025
Hungary offers a strategic location and competitive business environment within the European Union. This overview explores key aspects of doing business in Hungary, including company setup, workforce characteristics, banking infrastructure, and accounting practices.
Setting up a company
Hungary offers several company types tailored to different business needs. The most common and widely used form is the Kft. (Limited Liability Company) due to its flexibility and limited liability for owners. A Zrt. (Private Limited Company) can issue shares, though they are not publicly traded. This structure is suitable for more complex setups with higher capital requirements or intricate corporate governance. A Bt. (Limited Partnership) combines features of partnerships and companies but requires at least one owner with unlimited liability. This structure is less popular but is occasionally preferred by German parent companies. Company registration in Hungary is efficient and streamlined, typically allowing a Kft. to be registered within one business day. The process utilises digital tools, enabling online signing of foundation documents with hard copies sent via post. Despite this convenience, opening a bank account requires the company representative’s physical presence due to money laundering regulations.
Workforce
Hungary’s workforce is a significant asset, combining high levels of education with specialised skills in areas such as engineering, IT, and manufacturing. English proficiency is widespread among professionals, facilitating communication for international businesses. The labour market is supported by robust vocational training programs and a growing number of Science, Technology, Engineering and Mathematics (STEM) graduates, catering to the needs of innovative and technology driven sectors. Additionally, competitive wage levels compared to Western Europe further enhance Hungary’s appeal as a destination for businesses.
Banking
Hungary has a robust banking infrastructure, integrating international banking giants and strong domestic players such as OTP Bank, a Hungarian founded institution with a significant regional presence. Banking services are relatively costly due to sector-specific taxes and transaction levies.
These costs have driven the growth of alternative banking solutions like Wise and Revolut, particularly amongst SMEs seeking to reduce operational expenses. While personal presence is required for account opening, nearly all other banking operations can be efficiently handled online. User-friendly platforms provide robust tools for managing daily transactions, monitoring accounts, and accessing various credit and financing options.
Accounting
Hungarian accounting standards are harmonised with EU directives, making them comparable to international financial reporting standards (IFRS). Publicly listed companies and financial institutions are mandated to use IFRS. Many international subsidiaries operating in Hungary voluntarily adopt IFRS for consistency within their corporate groups. Hungarian accounting professionals are highly skilled in IFRS, ensuring compliance and reliable in financial reporting.
Digitalisation
Hungary has made significant strides in digitalisation, particularly in taxation and bookkeeping. Businesses manage all tax-related matters through the Client Gate, a centralised digital platform for tasks ranging from filing tax returns to submitting audit documents. Sales transactions are reported in real time to the tax authority (Nemzeti Ado-es Vamhivatal or NAV). This applies to data from invoicing software and cash registers, with limited exceptions for private individuals like farmers selling products at local markets. NAV’s central database allows companies to rebview and download both issued and received invoices. Advanced bookkeeping software and ERP systems to automatically download, process, and record this data, allowing bookkeepers to focus on verification and accounting rules. Online cash registers and mandatory invoice reporting have effectively reduced the shadow economy, improving transparency and tax compliance.
Taxation
Hungary’s tax framework is both competitive and diverse. The standard VAT rate of 27% is the EU’s highest, generating significant government revenue. This allows Hungary to maintain the EU’s lowest corporate tax rate of 9%.
From 2024, certain businesses must comply with the global minimum corporate tax rate. However, the 9% rate and various tax incentives, particularly for fixed asset investments, remain for other companies. Hungary has no withholding tax on dividends, interest, or royalties paid to foreign entities. Group taxation options are available for both corporate income tax and VAT.
Hungary has over 80 double taxation treaties, but the termination of the treaty with the United States presents a challenge for businesses operating between the two countries. Local municipalities also impose a 2% business tax on the gross margin (revenue minus costs like good, materials, and research and development).
Wages
Wage taxation and social contributions result in an average 40% tax burden of on total wage costs, leaving 60% as net pay. Personal income tax is applied at a flat rate of 15%, with allowances for parents and full exemptions for employees under 25 years old. These exemptions make employing young workers, particularly students, cost-effective. For example,, students under 25 employed through the Students Union incur a total employment cost of only 18%, making it an attractive option for businesses.
Social Security
Hungarian employers and employees contribute to social security at competitive rates. Employees pay 18.5% of their gross wage, and employers contribute 13%. The small business tax (KIVA) system provides a simplified tax alternative. This 10% flat tax rate covers corporate income tax and social security contributions, offering administrative ease and cost efficiency.
Political Environment
Hungary’s political landscape has been shaped by over 14 years of governance by the same political party, creating a unique economic and regulatory environment. This long-standing governance has been associated with high corruption levels, frequent and unpredictable changes to tax policies, and the introduction of sector-specific taxes, such as ‘extra profit taxes’.
The Hungarian Forint has been volatile, depreciating a 10% against the Euro in 2024. Inflation peaked at over 17% in 2024, the highest rate in the EU. However, forecasts suggest a return to more stable rates in 2025. Hungary’s decision not to support global minimum tax regulations led to the termination of its double tax treaty with the United States. The upcoming elections in 2026 may bring significant political and economic changes. A shift in governance could potentially restore Hungary’s economic growth, reduce corruption, and strengthen its position as a competitive member of the European community.
Conclusion
From streamlined company formation to a robust banking sector and adherence to international accounting standards, Hungary provides a solid foundation for businesses. Its competitive landscape, coupled with a well-educated workforce, presents significant opportunities for companies seeking growth within the European Union.
About the author
István Csomós
Budapest, Hungary
As co-founder of ICT Europe, now one of Hungary’s top five domestic accounting firms, István played a key role in its rapid growth, driven by innovative in-house software and a commitment to systematic work.
His recent achievements include developing an AI-powered financial platform to streamline bookkeeping, fostering strong academic partnerships, and expanding ICT’s international reach. He is responsible for multiple clients in ICT’s accounting department, which, in addition to core accounting services, offers tax advisory, audit, legal advisory and business process outsourcing.