Local tax, local business tax

Local tax rates in Hungary

Besides corporate tax there is also another profit based tax in Hungary, the so called local tax.

Town municipalities levy and collect local taxes as to contribute to municipality liabilities. While in opposition: corporate tax is collected by central government.

There are four main classes of local taxes: local business tax; property tax; tourism tax; and communal tax. All business meet local business tax. This one is the general local tax payable after operating in the area of the municipality. Property tax is payable by those enterprises that own land or building. Companies offering accommodation (hotel or hostel operators) collect tourism tax from their guests, and pay it to local government. Communal tax is only payable by privates.

Hereinafter you will learn about local business tax only.

Local business tax base and rate

Local business tax is payable not after total profit, but rather after gross profit. The basic concept of the tax calculation is: net turnover – allowed expenses.
Allowed expenses include: material purchases’ costs, cost of goods sold and cost of services sold (forwarded services).

Local tax is levied by the town where the company operates at a maximum tax rate of 2%. Local municipalities decide on their own about the effective tax rate valid in the area of the town, however despite this option they rarely offer reduced tax rate.

Tax reporting and payment

Your accountant will report this tax annually by the end of May, in line with general year-end closing deadline.
You’ll need to pay advances based on prior year tax and in two instalments. First payment is due by 15 March and second on 15 September. Those larger taxpayers whoose net sales income exceeded HUF 100 million in prior year are to top-up their tax to full annual tax by 20 December. In the annual tax declaration advance payments and top-up are settled against annual tax.

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