Local business tax (HIPA)
The most permanent tax in the local tax system is the local business tax.
Local business tax is payable by any entrepreneur who has his/her registered office or place of business in the municipality and carries out all or part of his/her business activity there.
Taxable business activity: the activity of the entrepreneur carried out in such a capacity with a view to earning profits or income.
The derivation of the tax base for business activity:
+ Net income
- Purchase value of goods sold and mediated services
- Subcontracting services
- Material cost
- Accounted direct costs of basic research, applied research, and experimental development
= TAX base
If the business has establishments in more than one municipality, it must apportion the business tax base between the municipalities in accordance with the law.
Limit on the deductibility of the purchase value of goods sold and services supplied:
|
Net revenue bands |
Deductible amount |
|
0 - HUF 500 million or less |
net sales 100% |
|
HUF 500 million - not exceeding HUF 20 billion |
net revenue 85% |
|
Not exceeding HUF 20 billion - HUF 80 billion |
75% of net sales |
|
in excess of HUF 80 billion |
70% of net turnover |
Tax rate:
The maximum tax rate is 2% of the tax base, from which municipalities may decide to derogate. The Hungarian State Treasury keeps a register of all local taxes introduced by local authorities, which can be found here,
Deadlines for declarations and payments:
Local business tax advances are payable twice a year, by 15 March and 15 September of the tax year. The deadline for filing the local business tax return and paying the tax is 31 May of the year following the tax year.
Simplified Business Tax (IPA)
- From 01.01.2023, small entrepreneurs will have the option to opt for a new simplified tax base, subject to an annual income not exceeding HUF 25 000 000.
- Depending on the amount of revenue for the tax year, the business tax will be differentiated in bands as follows:
| Income limits | Tax base | Tax ( max 2%) |
| 0 < 12 000 000 Ft | 2 500 000 Ft | 50 000 Ft |
| 12 000 000 < 18 000 000 Ft | 6 000 000 Ft | 120 000 Ft |
| 18 000 000 < 25 000 000 Ft | 8 500 000 Ft | 170 000 Ft |
Simplification:
- A tax return is only required if there is a difference from the previous year's income band
- Tax liability arises once a year!
The rules of the election:
- It is optional for a full tax year, and the entrepreneur's decision to opt out remains valid until it is withdrawn.
- The tax payable is assessed separately for the head office and for each of its establishments, with no different method per establishment. For low-income entrepreneurs with establishments in several municipalities, it may not be worthwhile to opt for this option.
Rules on termination:
- If the entrepreneur does not wish to continue using the itemised tax base method, he/she can make a declaration to this effect until the submission of the tax return (31.05.05), but at the same time must fulfil his/her obligation for the whole tax year on the basis of another method!
You cannot use this method for the tax year concerned and the following tax year because the income threshold has been exceeded.