Hungary is an independent, democratic, constitutional state located in Central Europe. The country has been in continuous existence since 895, with the foundation of the Principality of Hungary. Hungary is an OECD high-income economy and ranks highly on the Human Development Index.

Hungary joined the European Union (EU) in 2004 and the Schengen Area in 2007. Due to its strategic location, the country is an important industrial transit hub between Western and Eastern Europe.

The EU is a political and economic union of 28 member states that are located primarily in Europe. It has an area of 4,475,757 km2 and an estimated population of about 513 million. The EU has developed an internal single market through a standardised system of laws that apply in all member states. EU policies aim to ensure the free movement of people, goods, services and capital within the internal market. For travel within the Schengen Area, passport controls have been abolished. Within the EU, the rule of law prevails, which safeguards citizens’ rights against the state.

Hungary is a member of numerous international organizations, including the United Nations, NATO, WTO, World Bank, OECD, and the Asian Infrastructure Investment Bank.

Access to EU markets, highly skilled and educated work-force, and sound infrastructure have led numerous multinational companies to locate facilities here, both in manufacturing and services.

The main strengths of Hungary are its low employment costs, good IT and communication infrastructure, low legal risk and the profile of its capital city Budapest, which plays a crucial role in the Hungarian economy. It is by far the largest city and is the political, administrative, financial and cultural hub of the country.


The Hungarian legal system is based on the German-Austrian legal system, and has a statue-based civil and criminal law system. The main sources of law are: EU law, international law, the constitution, acts issued by the parliament, governmental and ministerial decrees.

Hungary recognizes and is bound by the rules and regulations of the law of the European Union as well as international law, and harmonizes the internal laws and statutes of the country.

Hungary is a signatory to a number of international conventions which provide for investment protection, most notably ICSID and MIGA.

Hungary is also a signatory of numerous bilateral asset protection treaties (APT), further enhancing the favorable investment climate.


The Hungarian taxation system provides a secure legal framework for the conduct of business. Currently, the following significant taxes and levies are imposed in Hungary: corporate income tax, value added tax, personal income tax.

Corporate Income Tax

If a company is tax resident in Hungary, it is taxed on its worldwide income. The taxable income of both resident and non-resident corporate taxpayers is based on pre-tax profits, calculated in the profit-and-loss statement prepared in accordance with the accounting rules, with a number of corrections for the differences in deductive and non-deductible items recognized by accounting and tax law.

The corporate income tax rate is 9% flat rate.

In Hungary, there is no withholding tax on dividend, royalties and interest payments made between corporate entities from a Hungarian source.

Dividends paid by corporate entities are not subject to withholding tax, irrespective of the residence of the corporate recipient. Except for dividends received from controlled foreign companies, dividends received are tax base decreasing items. Due to the company participation exemption regime, the capital gain deriving from registered company participation is not subject to tax after a one year holding period.

In addition, Hungary has a vast network of bilateral tax treaties on double taxation avoidance, which may decrease the effective tax rate to zero.

Value added tax (VAT)

The general rate of VAT is 27% applied to most products and services. The VAT rate of 18% is applied to basic food products and the provisions of accommodation, while the VAT rate of 5% is applied to pharmaceuticals and certain medical equipment, aids for the blind, books and newspapers.

Personal income tax

The tax payable on personal income is 15 per cent of the tax base.

For Hungarian tax resident private individuals, tax on all income has to be paid. For non-Hungarian tax resident individuals, tax has to be paid only on the income received from Hungary. In respect of the income of Hungarian resident private individuals, the tax paid in a foreign country on such income is to be deducted from the tax payable in Hungary.

In addition, Hungary has a vast network of bilateral tax treaties on double taxation avoidance, which may decrease the effective tax rate to zero.