Global Tax Alert | 14 December 2016

Hungary adopts single-digit tax rate from 1 January 2017

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On 12 December 2016, the Hungarian Parliament approved the amendment of the corporate income tax legislation through which the statutory corporate income tax rate will be reduced to a flat 9%, the lowest rate among the 28 member states of the European Union. The new tax rate will be effective from 1 January 2017. It is a significant change from the current progressive tax system whereby the first HUF500 million (approximately US$1.8 million) of taxable income is taxed at 10% while the excess is taxed at 19%.

With the adoption of the single-digit tax rate, Hungary has expressed its commitment to provide a favorable investment and tax environment for small and medium enterprises as well as multinationals with intentions to invest in the region, whether through shared service centers, manufacturing or other operations, or supportive functions such as financing, logistics or asset leasing. This development is likely to increase Hungary’s attractiveness from both an international tax and investment structuring perspective at a time where many traditional structuring alternatives face scrutiny by local governments as well as international legislative and executive authorities.

For additional information with respect to this Alert, please contact the following:

Ernst & Young LLP, Eastern European Business Group, New York, NY
  • Miklos Santa
    +1 212 773 1395
    miklos.santa@ey.com
Ernst & Young LLP, Eastern European Business Group, San Jose, CA
  • Gabor Toth
    +1 408 947 5477
    gabor.toth@ey.com
Ernst & Young LLP, EMEIA Financial Services Desk, Central and Eastern Europe, New York, NY
  • Ferencz Farkas
    +1 212 773 6107
    ferencz.farkas1@ey.com

EYG no. 04377-161Gbl