Hungary Has the EU’s Lowest Corporate Tax at 9%. The Owner Still Pays More Than in Bulgaria
Nine per cent is the lowest headline corporate rate in the European Union, and the figure is correct. On €100,000 of profit taken out by the person who owns the company, Hungary costs about 28.5% and Bulgaria costs 14.5%.
The lowest rate in the European Union
Nine per cent is real. It is also not the bill.
Hungary charges 9% corporate income tax. No other member state charges less, and every ranking that puts Hungary first is telling the truth about that one number.
That is not enough. What an owner pays is built in three layers: the national corporate tax, a local tax that most comparisons omit entirely, and the charges that apply when profit moves from the company to the person.
On €100,000 of profit distributed in full to a single owner, a Bulgarian EOOD costs €14,500. A Hungarian company doing service work costs about €28,502, of which €4,000 is local business tax, €8,640 is corporate tax and €15,862 is the charge on taking the money out. Set the local tax to zero and Hungary still costs about €25,408. The 9% headline is accurate and the owner keeps roughly €14,000 less.
All euro figures on this page convert forint at the European Central Bank reference rate of 365.10 on 20 August 2026. The forint floats, so the conversions carry a date and the forint amounts are given alongside.
The tax nobody quotes
The local business tax is charged on revenue, not on profit
Hungarian municipalities levy helyi iparűzési adó, usually shortened to HIPA. The rate is capped at 2% by law, and a municipality may set less, including zero. Budapest and the larger cities charge the full 2%.
Two per cent sounds like rounding. It is not, because of what it is charged on.
The HIPA base is net sales revenue reduced by a closed list: cost of goods sold, subcontractors’ work, material costs, mediated services, and research and development. Nothing else comes off. Salaries do not come off, and neither does rent, software, marketing or accounting. A company whose main cost is people therefore pays HIPA on very nearly its entire revenue, while a trading company with large cost of goods pays on the thin margin that remains. Two businesses with identical profit can face local tax bills that differ by a multiple, and neither of them will find that fact in a table of headline rates. For larger turnover the deductible items are additionally restricted on a decreasing scale, which pushes the effect further in the same direction.
There is a second mechanism worth knowing about before it surprises you. Hungarian corporate tax is calculated on a minimum base of 2% of total revenue, with adjustments, so a company with genuine but thin margins pays corporate tax on a figure it did not earn. It rarely binds for a profitable owner-managed business. It binds exactly when a year goes badly.
A pattern that repeats in founder forums
Someone incorporates in Budapest on the strength of the 9% figure, runs a consultancy with two employees, and meets HIPA for the first time when the accountant prepares the May filing. The tax is not large in absolute terms. It is that it was never in the model, and it is charged on a base the founder had no reason to expect.
HIPA is deductible for corporate tax purposes, which softens it. It does not remove it.
And here is the part that decides the article: the local tax is the famous omission, but it is not what makes Hungary expensive.
What it actually costs
€100,000 of profit, three different companies
Hungary cannot be shown as one number.
The local business tax depends on revenue rather than profit, so the answer changes with the shape of the business and not only with its result. The same €100,000 of profit is therefore run through three companies that differ only in how they earn it. One owner, full distribution, no salary drawn.
| On €100,000 of profit | Bulgaria (EOOD) | Hungary, services revenue €200,000 | Hungary, trading revenue €1m, COGS €880k | Hungary, 0% HIPA municipality |
|---|---|---|---|---|
| Local business tax | none | €4,000 on a €200,000 base | €2,400 on a €120,000 base | €0 |
| Corporate tax | €10,000 at 10% | €8,640 at 9% | €8,784 at 9% | €9,000 at 9% |
| Total at company level | €10,000 | €12,640 | €11,184 | €9,000 |
| Available to distribute | €90,000 | €87,360 | €88,816 | €91,000 |
| Tax on taking it out | €4,500 at 5% | €15,862 (15% + capped 13%) | €16,081 | €16,409 |
| Total to the state | €14,500 | €28,502 | €27,265 | €25,409 |
| Effective rate | 14.5% | 28.5% | 27.3% | 25.4% |
| Owner keeps | €85,500 | €71,497 | €72,735 | €74,591 |
Hungarian figures assume the 2% maximum HIPA rate except in the last column, no salary drawn, and the social contribution tax cap unused by other income. Bulgarian figures assume distribution in full to one individual and no treaty relief. Forint amounts converted at 365.10 on 20 August 2026.
The column that settles it
Read the last column first. It is a Hungarian company in a municipality that charges no local tax at all, which is the most favourable version of Hungary that exists on ordinary trading profit. It costs €25,409 against Bulgaria’s €14,500.
So the local business tax explains €4,000 of a €14,000 gap. The rest is the layer on extraction: Hungary charges 15% personal income tax on dividends plus 13% social contribution tax, against Bulgaria’s flat 5% and no health charge at all.
The famous omission turns out to be the smaller half.
The social contribution tax has a ceiling, and it is a low one. Its base is capped at 24 times the monthly minimum wage, which limits the charge to roughly €2,760 a year at the August 2026 rate. On very large distributions Hungary’s marginal cost therefore falls to 15%, which is still three times the Bulgarian rate.
The layers, counted
The two systems side by side
| Item | Bulgaria (EOOD / OOD) | Hungary (Kft.) |
|---|---|---|
| Corporate income tax | 10% flat | 9% flat, the lowest in the EU |
| Minimum tax base | None, tax follows actual profit | 2% of total revenue, with adjustments |
| Local business tax | None | Up to 2% of revenue less a closed list of costs |
| Innovation contribution | None | 0.3% on the HIPA base; micro and small enterprises exempt |
| Tax on dividends | 5% | 15% income tax plus 13% social contribution tax |
| Ceiling on the dividend charge | None, 5% applies throughout | Social contribution base capped at 24× the monthly minimum wage |
| Personal income tax | 10% flat, no exemptions | 15% flat, with substantial exemptions |
| Employee and employer contributions | 10.58% and 14.12%–14.82% | 18.5% and 13% |
| Contribution ceiling | €2,300 a month since 1 August 2026 | No ceiling on employment income |
| Standard VAT | 20% | 27%, the highest in the EU |
| VAT registration threshold | €51,130 per calendar year | HUF 20,000,000, about €54,780, raised from HUF 18m in 2026 |
| Currency | Euro since 1 January 2026 | Forint, floating |
Two rows in that table rarely appear in comparisons and both matter. The minimum tax base means Hungarian corporate tax does not always follow profit. The VAT row means a business selling to Hungarian consumers charges seven percentage points more than the same business selling to Bulgarian ones, which is a pricing problem rather than a tax problem, and it lands on the customer before it lands on the accounts.
The VAT thresholds, on the other hand, are close enough to ignore. Hungary raised its exemption threshold from HUF 18 million to HUF 20 million for 2026, with HUF 22 million scheduled for 2027 and HUF 24 million for 2028. At the August 2026 rate that is about €54,780 against Bulgaria’s €51,130. Neither country gives a small business a meaningful head start over the other.
The small-business regimes
KIVA, KATA, and which of them you can still use
Hungary runs alternative regimes that change the arithmetic above completely for the companies that qualify. Older guides describe them as they were, which is why they are worth going through carefully.
KATA is closed to almost everyone reading this
KATA was the flat-fee regime that made Hungary popular with freelancers. Since September 2022 it is restricted to full-time sole traders invoicing private individuals. Income received from a company generally ends the status, with narrow carve-outs. A founder with a Kft. and business clients cannot use KATA at all, and material that still presents it as the headline Hungarian advantage is describing a regime that no longer exists in that form.
KIVA is the one that matters
KIVA, the small business tax, charges 10% and replaces both the 9% corporate tax and the 13% social contribution tax. Its base is not profit. It is personal expenses, meaning payroll, plus the balance of capital and dividend operations.
| KIVA | Condition |
|---|---|
| Rate | 10% of the KIVA base, unchanged since 1 January 2022 |
| Base | Payroll costs plus capital and dividend operations |
| Replaces | Corporate income tax and social contribution tax |
| To enter | Revenue and balance sheet total each up to HUF 3 billion, up to 50 staff |
| To stay | Below HUF 6 billion revenue and 100 staff |
That single sentence is the whole regime.
The consequence is the interesting part. Profit left inside a KIVA company is not taxed while it stays there, which puts KIVA structurally closer to the Estonian system than to Hungary’s own standard regime. A company with a real payroll that reinvests rather than distributes pays 10% on wages and nothing on retained profit, where a Bulgarian company pays 10% on the profit as it is earned.
That is a genuine advantage and it belongs on the Hungarian side of the ledger. It also disappears the moment the owner wants the money, because distributions enter the KIVA base.
The simplified local tax base
Small companies can opt out of calculating the HIPA base from costs and use a fixed base set by revenue band instead, available while annual revenue stays under HUF 25 million, about €68,470. For a small consultancy this turns the local business tax from a real cost into an administrative line, and the objection raised earlier in this article stops applying to it.
Paying yourself
Salary changes the answer in both directions
The comparison above assumed no salary. Most owner-managed companies pay one, and in Hungary that interacts with the dividend arithmetic in a way that is easy to miss.
The social contribution tax cap on dividends is reduced by other income that already carries that tax. An owner paying themselves a salary above roughly €21,220 a year has consumed the cap through payroll, and the dividend then carries no social contribution tax at all. The service company in the table would fall from €28,502 to about €25,744, because the €2,758 ceiling charge has already been paid on the salary instead.
Which is to say the charge does not vanish. It moves.
Bulgaria runs the opposite structure. Contributions total 32.7% to 33.4%, which is higher than Hungary’s combined 18.5% and 13%. They stop, though, at a ceiling of €2,300 of monthly insurable income, raised from €2,111.64 on 1 August 2026. Hungarian employment contributions have no ceiling at all, so they keep applying at every salary level. Below roughly €27,600 a year the Bulgarian rate charges more on the same salary. Above that line Bulgaria stops collecting and Hungary does not, and the difference widens with every further euro. A founder paying themselves €80,000 meets two systems that have swapped places somewhere in the middle of the range.
The exemptions Bulgaria cannot match
Hungarian personal income tax is 15% against Bulgaria’s 10%, which reads as a straightforward Bulgarian win until you look at who is exempt. People under 25 pay no income tax on employment income up to a ceiling set by the national average gross wage. Mothers of four or more children are exempt permanently, mothers of three became exempt on 1 October 2025, and mothers of two are being phased in from 1 January 2026, starting with those under 40 and reaching every age band by 2029.
Bulgaria charges 10% from the first euro, to everybody, with no equivalent relief. For a founder who falls into one of those Hungarian categories the personal income tax comparison is not close, and it runs the other way.
Where the money lands
Two EU members, one of them in the euro
Both countries are in the European Union and the single market, both issue VAT numbers that validate in VIES, and both run the same anti-money-laundering framework. On the compliance side there is little to separate them.
The separation is the currency.
Bulgaria adopted the euro on 1 January 2026, so a Bulgarian company invoicing German or Dutch clients receives euro into a euro account and books it without a conversion. A Hungarian company holds forint, and although euro accounts are ordinary there, the operating currency, the tax filings and the payroll all sit in a floating currency. Every figure on this page had to be converted at a rate that carries a date, which is the practical version of the same problem.
That cuts both ways and it is worth saying so. A weakening forint reduces the euro cost of Hungarian salaries and office space, and businesses earning in euro and spending in forint have been on the right side of that trade for years. It is a real advantage with a real risk attached, not a free one.
What we can and cannot help with
We arrange corporate bank accounts in Bulgaria, including remotely through a notarised power of attorney, and we have done so with ОББ and UniCredit. We do not open accounts in Hungary, and we do not promise any bank’s decision anywhere. Government fees, translations and notary costs are billed separately.
Where Hungary comes out ahead
Three situations where the answer is Hungary
Everything above describes profit that reaches the owner. Change that assumption, or change who the owner is, and the ranking moves.
You have a payroll and you reinvest
KIVA charges 10% on wages and capital operations and leaves retained profit untouched. A Bulgarian company pays 10% on profit as it is earned whether it distributes or not. For a company building rather than paying out, Hungary defers what Bulgaria collects, and it replaces the 13% employer charge at the same time.
The founder is under 25, or a mother
Income tax on employment income is zero for people under 25 up to the average-wage ceiling, and permanently zero for mothers of two or more children as the reform phases in. Bulgaria charges 10% from the first euro with no exemption of any kind. On a €40,000 salary that is €4,000 a year of difference.
You are building something capital-intensive
The development tax allowance can offset up to 80% of annual tax liability across as many as 13 years, with entry thresholds of HUF 50 million for small and HUF 100 million for medium enterprises. R&D relief runs to 50% of eligible cost for applied industrial research. Bulgaria offers nothing comparable.
The honest limit on all three is the same. Each depends on not taking the money out, or on the owner belonging to a specific group, or on spending at a scale most owner-managed companies never reach. For the ordinary case that this site is written for, an owner who wants the profit in their own account at the end of the year, none of them applies.
Against that, the Bulgarian case is narrower than it is usually sold. Bulgaria does not have the lowest corporate rate in Europe, and this article has just spent several sections establishing that Hungary does. What Bulgaria has is a second layer of 5% where Hungary has 28% before its ceiling, no local tax on revenue, no minimum tax base, and the euro.
The questions we actually get
Frequently Asked Questions
Does Hungary really have the lowest corporate tax in the EU?
Yes. The rate is 9% and no other member state charges less. Bulgaria is second at 10%. The ranking is accurate and it stops being decisive once the local business tax and the charges on distribution are added, which is what the rest of this page works through.
What is HIPA and how much is it?
The local business tax, capped at 2% and set by each municipality, which may charge less or nothing. It is calculated on net sales revenue less cost of goods sold, subcontractors, materials, mediated services and R&D. Salaries are not deductible, so service companies pay it on close to their whole revenue.
Which is cheaper on €100,000 of profit, Bulgaria or Hungary?
Bulgaria, by roughly €14,000. The Bulgarian total is €14,500 against about €28,502 for a Hungarian service company. Even in a municipality charging no local business tax the Hungarian total is about €25,409, because the gap is driven by the 15% plus 13% on distribution rather than by the local tax.
How is a dividend taxed in Hungary?
15% personal income tax plus 13% social contribution tax. The social contribution base is capped at 24 times the monthly minimum wage, which limits that charge to about €2,760 a year, and the cap is reduced by other income that already carries the tax. Bulgaria charges a flat 5% with no ceiling and no health contribution.
Can I still use KATA in Hungary?
Only as a full-time sole trader invoicing private individuals. Since September 2022 income from a company generally ends the status, with narrow exceptions. A founder operating through a Kft. with business clients cannot use it, and guides that still present KATA as Hungary’s main advantage are out of date.
Is KIVA better than the standard Hungarian regime?
For a company with real payroll that reinvests, usually yes. KIVA is 10% on payroll and capital operations and replaces both the 9% corporate tax and the 13% social contribution tax, and it does not tax profit that stays in the company. It stops helping once the owner distributes, because distributions enter the base.
Why is Hungarian VAT 27%?
It is the highest standard rate in the European Union, with reduced rates of 18% and 5% for specific goods and services. Bulgaria charges 20%. For business-to-business sales inside the EU the difference is neutral, but for anything sold to consumers it is seven percentage points of price.
Does the forint make Hungary riskier for a foreign owner?
It adds a variable Bulgaria no longer has, since Bulgaria adopted the euro on 1 January 2026. Earning in euro and paying Hungarian costs in forint has favoured foreign owners over recent years, but that is a currency position rather than a tax outcome, and it can reverse.
Which one, and when
Which one should you choose?
Choose Hungary when the money stays in the company. KIVA taxes payroll and distributions and leaves retained profit alone. Bulgaria offers no equivalent. Choose it also when the founder is under 25 or a mother of two or more children, where personal income tax falls to zero against Bulgaria’s flat 10%, or when the business is capital-intensive enough for the development allowance to reach.
Choose Bulgaria when the profit is meant to reach you. That is €14,500 against about €28,502 on €100,000, and about €25,409 even in the most favourable Hungarian municipality. Add a flat 10% with no minimum base, no local tax on revenue, 20% VAT instead of 27%, and a currency that does not need a conversion date attached to every figure.
Both answers assume the company is genuinely managed where it is registered. Neither country sells an exemption from that.
One of those is a headline and the other is a bank balance.
Hungary wins the rate. Bulgaria wins the payout.
Run it on your own figures
Send the annual revenue and the annual profit separately, since the Hungarian local tax depends on the first and not the second. Tell us how much you need to draw, whether you employ anyone, and where you actually live. We will run both systems and say plainly which is cheaper, including when the answer is Hungary.
Related comparisons
- Bulgaria vs Romania — the micro-company regime after the 2026 threshold cut
- Bulgaria vs Estonia — 0% on retained profit against a flat 10%
- Bulgaria vs Cyprus — 15% corporate tax after the 2026 reform, and what non-dom now costs
- Bulgaria vs the UAE — 9% outside the EU, and what the substance test costs
- Lowest tax countries in Europe — eleven jurisdictions ranked, every rate dated
- All Bulgaria vs Europe comparisons
Traced to the tax authority
Sources and basis of calculation
Every Hungarian and Bulgarian rate on this page was checked against PwC Worldwide Tax Summaries or the relevant tax authority on 20 August 2026. Where a secondary source disagreed with the tax authority, the authority was used and the disagreement is noted below.
- PwC Worldwide Tax Summaries — Hungary, corporate income tax (9% flat; the 2% minimum tax base; local business tax capped at 2% and its deduction list; innovation contribution 0.3%; KIVA entry and exit thresholds)
- PwC — Hungary, income determination (dividends: 15% personal income tax plus 13% social contribution tax)
- PwC — Hungary, other taxes (employee contributions 18.5%; social contribution tax 13%; the cap at 24 times the minimum wage and its reduction by other income)
- PwC — Hungary, taxes on personal income (15% flat; exemptions for under-25s and for mothers of two, three and four or more children, with the phase-in from 1 January 2026)
- PwC — Hungary, other taxes (VAT 27% standard, 18% and 5% reduced)
- PwC — Hungary, tax credits and incentives (development tax allowance up to 80% of liability over 13 years; SME thresholds; R&D relief)
- NAV — Kisvállalati adó (KIVA) (10% since 1 January 2022; base of payroll plus capital and dividend operations; replaces corporate tax and social contribution tax)
- NAV — increase of the VAT exemption threshold (HUF 20 million from 2026, HUF 22 million from 2027, HUF 24 million from 2028)
- PwC — Bulgaria, corporate income tax (10%)
- PwC — Bulgaria, withholding taxes (5% on dividends)
- PwC — Bulgaria, other taxes (VAT 20%; registration threshold €51,130; contribution rates)
- National Revenue Agency of Bulgaria — insurable income (maximum monthly insurable income €2,300 from 1 August 2026)
- European Central Bank — euro reference rates (1 EUR = 365.10 HUF on 20 August 2026)
Where sources disagreed. Secondary material still quotes the KIVA rate as 11%. That was the rate until the end of 2021; NAV states 10% and 10% is used here. Material describing KATA as generally available to freelancers describes the position before September 2022.
Basis of calculation. All figures assume a single individual owner, profit distributed in full in the year it is earned, no salary drawn except where the salary section states otherwise, no double tax treaty relief and no group structure. Hungarian scenarios assume the 2% maximum local business tax rate except where stated, and an unused social contribution tax cap. Forint converted at the European Central Bank reference rate of 365.10 on 20 August 2026; the forint floats and the conversion will move. These are worked examples for comparison, not tax advice for a specific business.
Last updated: August 2026.
Daniel Malbašić is a business expert with extensive experience in the field of business consulting, organization and business optimization. His expertise includes market analysis, strategic planning, and implementation of effective business solutions. Daniel is dedicated to helping companies grow and improve their operations, providing them with comprehensive support in making key business decisions.