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Dec 08, 2016

Hungary introduces Europe's lowest corporate tax rate

There are 800-900 companies in Hungary that paid 19 percent corporate profit tax in 2016. As a result of the new rate, they could save 132 billion HUF in 2017 and 140 billion HUF in 2018

The new 9 percent flat corporate profit tax rate will ensure Hungary becomes one of Europe's most important tax havens.

According to origo.hu, the rate, introduced on January 1, 2017, will put Hungary in a very good position in the international race for investments as Hungary will offer even better conditions than Ireland and Cyprus.

Hungary’s current corporate tax rate is split into two brackets; companies with an annual revenue below 500 million HUF pay a 10 percent tax on corporate revenues, while larger companies, with revenues above that level, pay 19 percent.

As of January, these brackets will be replaced with a single 9 percent rate, the lowest of its kind in the European Union.

When comparing the Hungarian tax to its Central European counterparts, the difference seems remarkable. In Czech Republic and Poland the corporate profit tax is 19 percent, while in Slovakia it is as much as 22 percent. In Slovenia the same kind of tax is 17 percent, while in Romania it is 16 percent.

Currently the corporate profit tax is the lowest in the EU in Bulgaria at 10 percent, but it still one percent higher than the Hungarian rate.

The Hungarian cut will boost the big companies in particular. According to origo.hu, there are 800-900 companies in Hungary that paid 19 percent corporate profit tax in 2016. As a result of the new flat rate, they could save 132 billion HUF in 2017 and 140 billion HUF in 2018.

At the same time smaller companies could save together 20-20 billions HUF in the next two fiscal years due to the one percent cut in their corporate profit tax rate.