KIVA in Hungary 2026: When the 10% Small Business Tax Beats the 9% Corporate Tax
Foreign founders come to Hungary for the 9% corporate tax — the lowest headline rate in the EU. What most of them never hear about is the alternative regime that can be cheaper still: KIVA, the small business tax. It charges a flat 10%, but in exchange it wipes out both the 9% corporate tax and the 13% social contribution employers pay on wages. If your Hungarian Kft. has staff on the payroll and reinvests its profit, KIVA usually costs less than TAO — often by seven figures in forint terms.
From 1 January 2026 the entry limits doubled: up to 100 employees and up to HUF 6 billion in both revenue and balance sheet total. That change put KIVA within reach of essentially every foreign-owned SME in Hungary.
What KIVA replaces — and what it does not
KIVA (kisvállalati adó) replaces exactly two charges:
- corporate income tax (TAO), 9%, and
- social contribution tax (szocho), 13%, the employer’s charge on gross wages.
It does not replace:
| Still payable under KIVA | Note |
|---|---|
| Employee PIT (15%) and social security contribution (18.5%) | Withheld from the employee’s gross salary — unchanged |
| VAT | A separate tax entirely, standard rate 27% |
| Local business tax (HIPA) | But a simplified base is available — see below |
| Company car tax, duties, other levies | Unchanged |
So KIVA is not a “simplified everything” regime. It is a swap: instead of paying 13% on payroll plus 9% on profit, you pay 10% on payroll plus distributions.
The tax base — this is where the decision is made
The base is the balance of approved dividends and capital transactions, adjusted by a handful of items, increased by personal payments — and it can never be lower than those personal payments (the minimum base).
Two consequences drive every KIVA decision:
- Reinvested profit is not taxed. Money that stays in the company — spent on equipment, stock, or simply retained — never enters the base. A growing company effectively defers company-level tax on its growth.
- An approved dividend does enter the base. Distribute heavily and the 10% starts biting on money that TAO would have taxed at 9% once and then left alone.
Minimum base for the owner-manager. If a member (társas vállalkozó) draws less than the minimum, 100% of the minimum wage counts as a personal payment. From 1 January 2026 the old 112.5% rule is gone — a direct saving for one-person companies. For 2026 the minimum wage is HUF 322,800/month, and HUF 373,200/month (the guaranteed wage minimum) where the main activity requires at least secondary-level qualification.
Worked example: payroll-heavy Kft.
A services Kft. with five employees and a working owner. Annual gross payroll subject to contributions: HUF 30,000,000. Profit before tax (after wages and their charges): HUF 6,000,000. No dividend — profit stays in the company.
| Item | Under TAO | Under KIVA |
|---|---|---|
| Social contribution on wages (13%) | 3,900,000 HUF | — |
| Profit tax | 9% × 6,000,000 = 540,000 HUF | — |
| KIVA (10% of payroll) | — | 3,000,000 HUF |
| Company-level tax total | 4,440,000 HUF | 3,000,000 HUF |
KIVA saves HUF 1,440,000 a year here. Now add distributions:
| Dividend approved | KIVA (10%) | TAO + szocho | Cheaper |
|---|---|---|---|
| 0 | 3,000,000 HUF | 4,440,000 HUF | KIVA by 1,440,000 |
| 8,000,000 HUF | 3,800,000 HUF | 4,440,000 HUF | KIVA by 640,000 |
| ~14,400,000 HUF | ~4,440,000 HUF | 4,440,000 HUF | break-even |
| 20,000,000 HUF | 5,000,000 HUF | 4,440,000 HUF | TAO by 560,000 |
In this company the crossover sits near HUF 14.4 million of annual dividend. Above it, stay in TAO. Note that the shareholder’s own taxes — 15% PIT and 13% social contribution up to the annual cap — are identical either way, so they do not change the choice; see taking profit out of a Hungarian company for that side of the calculation.
The rule of thumb foreign owners can carry away: high payroll + reinvestment → KIVA. Little payroll + large regular dividends → the 9% TAO. If you want the full employer cost picture behind the payroll number, our employer costs in Hungary guide breaks down the gross-to-total-cost math.
Who can elect KIVA in 2026
| Condition | 2026 limit |
|---|---|
| Average statistical headcount in the previous tax year (with related parties) | max 100 persons |
| Revenue in the previous tax year (with related parties) | max HUF 6 billion |
| Balance sheet total in the previous tax year | max HUF 6 billion |
| Balance sheet date | 31 December (calendar tax year) |
| Tax number | not finally cancelled by NAV in the previous two calendar years |
| Controlled foreign company | none |
| Enforceable net tax debt on the day of notification | max HUF 1,000,000 |
Eligible forms include the Kft., Zrt. (private), Bt., Kkt., single-member company, co-operatives, law and notary offices, and a foreign entrepreneur or foreign person with a Hungarian place of management — so a foreign-owned Hungarian Kft. qualifies on form.
How to switch — and when it starts
KIVA is one of the few Hungarian regimes you can join at any point in the year.
- File the election electronically on form ‘T201 / ‘T201T.
- Your KIVA status begins on the first day of the month following the notification. Notify in September, and you are a KIVA taxpayer from 1 October.
- You may withdraw the notification within 30 days on the same form; miss that window and it stands.
- A separate business year starts on day one of KIVA status. The day before is a balance sheet date: you must prepare, file and publish annual accounts for the closing period. Budget for this — it is a real cost of switching mid-year.
- Leaving TAO means filing the ‘71 return under the rules for termination without succession: by 31 May for a 1 January switch, otherwise by the last day of the fifth month after the month of the switch.
- You stop declaring corporate tax advances, and NAV deletes previously declared advances from your tax account automatically.
Filing and advances under KIVA
- Advances are quarterly, due by the 20th day of the month following the quarter. The advance is 10% of that quarter’s personal payments plus approved dividends.
- The annual return is filed on the ‘KIVA form by 31 May of the following year. Overpaid advances are reclaimed in that return.
A bonus most advisers forget: local business tax
A KIVA taxpayer may calculate the local business tax (HIPA) base as the KIVA base increased by 20% (Htv. § 39/B). For a payroll-heavy company this is often simpler and more predictable than the general net-revenue-based calculation — and it removes most of the year-end guesswork. Whether it is cheaper depends on your revenue-to-payroll ratio; our local business tax guide explains the general base and the up-to-2% municipal rate.
Leaving KIVA: the exits to plan for
You can leave voluntarily by notifying NAV between 1 and 20 December, with effect from the last day of that tax year. That is a strict deadline with no remedy for missing it.
Status also ends automatically if, among other triggers:
- headcount exceeds 200 persons, or revenue exceeds HUF 12 billion (both doubled for 2026; related-party data is not counted for the revenue test);
- NAV imposes a final default penalty for failure to issue invoices or receipts, employing undeclared workers, or trading goods of unverified origin;
- enforceable net tax debt exceeds HUF 1,000,000 on the last day of the calendar year;
- liquidation, voluntary dissolution, forced cancellation, merger or demerger begins.
Two consequences to price in before you elect: KIVA generally cannot be re-elected for 24 months after it ends, and on the way back to TAO you must compute the transition difference (áttérési különbözet) — value generated during the KIVA period that bore neither KIVA nor corporate tax, which is then taxed under its own rules.
FAQ
What is the KIVA rate in 2026? A flat 10% of the KIVA base.
How big can my company be? Up to 100 employees and HUF 6 billion in revenue and balance sheet total on entry; you drop out above 200 employees or HUF 12 billion in revenue.
Can a foreign-owned Kft. use KIVA? Yes. Eligibility depends on legal form and size, not on the residence of the owners.
Can I switch mid-year? Yes — status starts on the first day of the month after you notify NAV. Remember the closing accounts for the period before the switch.
Does KIVA reduce my employees’ taxes? No. Employee PIT and social security are unchanged; KIVA only replaces the employer’s 13% social contribution and the 9% corporate tax.
When is KIVA the wrong choice? When payroll is small, or when the owners take large dividends every year — those distributions are taxed at 10% inside the KIVA base.
Updated: 2026-09-01 · Tax year 2026. General information, not a substitute for a calculation on your own figures — the KIVA-versus-TAO comparison depends on your payroll, planned distributions and investment schedule.
Want the comparison run on your numbers? Ask us for a side-by-side calculation before you file the election — the switch takes effect from the first day of the following month, so timing matters.