Local Business Tax in Hungary (HIPA) 2026: the 2% Foreign Owners Forget to Budget
Hungary’s headline tax number is 9% corporate income tax — the lowest in the EU, and the reason most foreign founders look at Hungary in the first place. The number that catches them out arrives six months later, from a completely different authority: the local business tax (helyi iparűzési adó, “HIPA”), up to 2% of revenue rather than profit, payable to the municipality where the company has its registered seat.
Two things make it uncomfortable. First, it is not a profit tax — a loss-making company still pays it. Second, wages are not deductible from its base, which means a service company with high payroll and low materials pays HIPA on almost its entire turnover. The next date on the calendar is 15 September 2026, when the second advance instalment falls due.
Who pays, and to whom
Any business carrying on a permanent business activity in a Hungarian municipality is liable there — a Kft., a Bt., a Zrt., a branch of a foreign company, or a sole trader. Liability follows two things:
- your registered seat (székhely), and
- any site (telephely) you maintain — a shop, workshop, office or warehouse.
HIPA is not administered by NAV as a beneficiary: the money goes to the municipality. Since the returns were centralised, however, you file the return through NAV — on the 26HIPAK form, available both in NAV’s ONYA online application and in the ÁNYK desktop program — and NAV forwards it to the relevant municipality. Payment still goes to the municipality’s own account.
One consequence foreign owners underestimate: if your seat is provided by a registered office service, the municipality of that address is your HIPA municipality. Where you actually work from is irrelevant if it creates no telephely.
The rate: “up to 2%”, and what that means in practice
The Local Taxes Act caps the rate at 2% of the tax base. Each municipality sets its own rate within that cap, and a minority set no local business tax at all. In Budapest the rate is 2% across the whole capital, and the large regional cities are generally at or near the cap too.
So for planning purposes: assume 2% unless you have specifically checked the decree of the municipality where your seat sits. Do check, though — the difference between a 2% municipality and a 1.6% one on HUF 100 million of base is HUF 400,000 a year, permanently.
The base: revenue minus a short, specific list
This is the part that behaves nothing like corporate tax. The HIPA base starts from net sales revenue and allows only a closed list of deductions:
- cost of goods sold (ELÁBÉ)
- value of mediated services (közvetített szolgáltatás)
- subcontractor performance (alvállalkozói teljesítmény)
- direct material costs (anyagköltség)
- direct cost of basic research, applied research and experimental development
Notice what is not on the list: salaries, social contributions, rent, accounting fees, software subscriptions, marketing, depreciation, interest. None of them reduce the HIPA base.
For companies with net sales revenue above HUF 500 million, the deduction of ELÁBÉ and mediated services is additionally capped on a sliding scale — a rule aimed at trading structures. Most foreign-owned SMEs sit well below that threshold and can deduct in full.
Worked example: why service companies feel it most
Two Hungarian Kft.s, each with HUF 60,000,000 of revenue and each making a HUF 6,000,000 profit. Both are in a 2% municipality.
| Trading company | Consulting company | |
|---|---|---|
| Revenue | 60,000,000 | 60,000,000 |
| Cost of goods sold / materials | 38,000,000 | 1,500,000 |
| Salaries and contributions | 8,000,000 | 40,000,000 |
| Other costs | 8,000,000 | 12,500,000 |
| HIPA base | 22,000,000 | 58,500,000 |
| HIPA at 2% | 440,000 | 1,170,000 |
| Corporate tax at 9% on profit | 540,000 | 540,000 |
Same revenue, same profit — and the consulting company pays more than twice as much local business tax as it pays corporate tax. If you are building a services, software or agency business in Hungary, HIPA, not the 9%, is the number to model. Our breakdown of Hungary’s 9% corporate tax covers the other side of the equation.
The small-business shortcut: fixed bands
If your annual revenue stays under HUF 25,000,000, you can elect a simplified tax base and forget the calculation entirely. Instead of computing deductions, you use a fixed statutory base for your revenue band:
| Annual revenue | Fixed tax base | Tax at 2% |
|---|---|---|
| up to HUF 12,000,000 | HUF 2,500,000 | HUF 50,000 |
| HUF 12–18,000,000 | HUF 6,000,000 | HUF 120,000 |
| HUF 18–25,000,000 | HUF 8,500,000 | HUF 170,000 |
Retail-only sole traders on the flat-rate (átalányadó) regime get a much higher ceiling — HUF 120,000,000 — for the same mechanism.
The band regime is administratively lighter in two further ways: as a rule you pay once a year rather than in advances, and as long as you stay inside your chosen band you generally do not have to file a return at all. The trade-off is that band taxpayers cannot claim local exemptions, allowances or reliefs. For a new foreign-owned Kft. expecting modest first-year revenue, this is usually the right election — and it must be declared, so raise it with your accountant before the first return, not after.
The calendar: two advances and one return
| Date | What is due |
|---|---|
| 15 March | first advance instalment |
| 15 September | second advance instalment |
| 31 May (following year) | annual return (26HIPAK) and settlement of the difference |
Advances are based on the previous year’s tax, so a growing company always underpays during the year and settles the gap on 31 May. Budget for it: a company that doubles its revenue in 2026 will pay 2026-sized advances on a 2025-sized calculation, and then face a real cash outflow the following spring.
Taxpayers using the simplified bands are outside the advance system — they have the single 31 May deadline.
If your accounting year is a calendar year, that 31 May return is filed alongside your other year-end obligations; see our guide to accounting requirements for a Hungarian company for the full annual cycle.
Registration, and the thing to check in your first month
HIPA registration is a separate act from your NAV tax number. Where a change affecting your local tax liability is not automatically forwarded to the municipality by the company court, you must report it directly to the municipal tax authority within 15 days. A new site in a second municipality is exactly such a change — and it is the most common omission we see in foreign-owned groups that open a warehouse or a second office mid-year.
If you operate in more than one municipality, the tax base is apportioned between them under a statutory method (based on payroll, on the net book value of assets, or a combination). Two municipalities means two returns and two payment accounts, not one.
How HIPA interacts with everything else
- It is a deductible expense for corporate tax. HIPA paid reduces your pre-tax profit, so its effective cost is roughly 91% of the nominal amount once the 9% corporate tax saving is counted.
- It is a turnover-type local tax, not an income tax. For that reason it generally falls outside the taxes covered by Hungary’s double tax treaties, so a credit in your home country cannot be assumed — check your own position with a local adviser before modelling it.
- Innovation contribution rides on the same base. Medium and large companies pay a 0.3% innovation contribution calculated on the HIPA base; qualifying small and micro enterprises are exempt.
- The 2026 summer tax package did not touch it. The package abolished the separate települési adó from 1 January 2027, which caused some confusion in the press — HIPA is a different tax and stays exactly as it is.
FAQ
How much is local business tax in Hungary? Up to 2% of the tax base. The municipality sets the rate; Budapest and most larger cities apply the 2% maximum.
Is it charged on profit or revenue? On revenue, less a closed list of deductions (goods sold, mediated services, subcontractors, materials, R&D). Wages and overheads are not deductible.
Do I pay it if the company makes a loss? Yes. HIPA is not a profit tax, so a loss-making company with revenue still owes it.
When is it due in 2026? Advance instalments on 15 March and 15 September; the annual return (26HIPAK) and the balancing payment by 31 May of the following year.
Can a small company avoid the calculation? Yes — under HUF 25 million of annual revenue you can elect a fixed statutory base of HUF 2.5m, 6m or 8.5m depending on your band, which at 2% means HUF 50,000, 120,000 or 170,000 a year.
Does my registered office address affect it? Yes. Your seat determines the municipality — and therefore the rate — so it is worth checking the local decree before you fix an address.
Updated: 2026-08-12 · Tax year 2026. Rates are set by municipal decree and vary, so always verify the rate for your own seat and sites. The deductibility of specific cost items, the apportionment method between municipalities and the availability of the simplified band regime depend on your facts — confirm your position with a Hungarian accountant before filing.
Setting up in Hungary and want the local business tax modelled properly before you pick an address? See our Hungarian company formation service, or get in touch — we will price the first year including HIPA, not just the incorporation.