• Small business tax

Small business tax

Small business tax (KIVA)

The KIVA option is likely to be worthwhile for businesses where the size of the payroll exceeds the profit

of the business or where the owners reinvest a significant part of the profit. And in the longer term, this

tax treatment is particularly beneficial for businesses that want to grow.

The conditions for opting for small business taxation are that, in the tax year preceding the tax year in

which the KIVA is subject, the enterprise:

  • Its average statistical headcount, including affiliates, is not expected to exceed 50;
  • The revenue calculated with the data of affiliated companies is not expected to exceed HUF 3 billion,
  • Its balance sheet total is expected to not exceed HUF 3 billion.
  • The balance sheet date of the financial year is 31 December (cannot be a different financial year),
  • The net financing costs do not exceed HUF 939 810 000.

Tax liability ceases for the following reasons, among others:

  • If the revenue threshold of HUF 6 billion is exceeded on the first day of the quarter, the day before
  • the excess is exceeded,
  • The day before the date of the commencement of the winding-up, liquidation or compulsory winding-up
  • proceedings,
  • the day before the merger or division of the taxpayer,
  • On the last day of the month in which the number of employees changes, if the increase in the
  • number of employees has caused the taxpayer's average statistical headcount to exceed 100.

The following businesses can opt for the small business tax:

  • Individual company
  • Public limited company
  • Limited liability company
  • Limited liability company
  • Private limited company
  • Cooperative and housing cooperative
  • Forest Ownership Association
  • Executive Office
  • Law office and notary's office
  • Office of the Patent Attorney
  • Foreign entrepreneur
  • Foreign person with a domestic place of business

The KIVA replaces the following taxes:

  • Corporation tax (TAO),
  • Social contribution tax (SZOCHO)

The tax base is, as a general rule (with some adjustments):

the amount of staff-related payments and approved dividends,

which may be reduced by dividends received and net capital inflow,

but at least the amount of the personal payments (minimum taxable amount).

Small business tax rate: from 1 January 2022, 10 %

Nice deadline for returns and payments:

  • The small business tax base and the tax must be determined each tax year and must be declared and
  • paid by 31 May of the year following the tax year.
  • Taxpayers are required to establish, declare and pay tax advances during the year on a quarterly
  • basis, by the 20th day of the month following the quarter in question.

The main advantages of KIVA are:

  • The tax rate on wages (10%) is significantly lower than the rate of the social contribution tax levied (13%),
  • Most of the employment-related benefits in the social contribution tax (labour market entrants, women entering the labour market with 3 or more children, people with a reduced work capacity, unskilled and agricultural workers, researchers and R&D) can also be claimed in the small business tax by reducing the personal payments,
  • Profits reinvested in the business are not taxable, only the profits withdrawn from the business
  • (dividends) are taxable,

If the investments require raising capital (or keeping the dividends received in the company),

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