Contracting in Hungary
Expert contracting solutions for Hungary, a vibrant Central European economy offering competitive tax rates and business-friendly environment.
Contracting in Hungary with City Traders
Official Language
Hungarian
Major Business Cities
Budapest, Debrecen, Győr, Szeged
Currency
Hungarian Forint (HUF)
Tax Year
January to December
Key Industries
Automotive, IT, Shared Services, Manufacturing
Corporate Tax Rate
9% (lowest in EU)
Introduction
Hungary is a landlocked country located in Central Europe, bordered by Austria, Slovakia, Ukraine, Romania, Serbia, Croatia, and Slovenia. With a strategic location at the crossroads of European trade routes, Hungary serves as an important link between Western and Eastern Europe.
Since joining the European Union in 2004, Hungary has developed into a significant economic player in the region. The country has attracted substantial foreign direct investment, particularly in the automotive, electronics, information technology, and shared service center sectors. Major international companies like Audi, Mercedes-Benz, IBM, Microsoft, and numerous others have established significant operations in the country.
Budapest, the capital and largest city, is the country's political, cultural, commercial, and industrial center. Other important economic centers include Debrecen, Győr, Miskolc, and Szeged. While Hungarian is the official language and can be challenging for foreigners to learn, English is widely spoken in business environments, particularly in Budapest and at international companies.
For contractors, Hungary offers several attractive features including a competitive corporate tax rate of 9% (the lowest in the European Union), a highly skilled workforce, excellent infrastructure, and a central location. The country has also implemented various incentive programs to attract businesses and entrepreneurs.
Registry/Registration
The requirements for establishing yourself as a contractor in Hungary vary based on your nationality and the business structure you choose.
For EU/EEA/Swiss Citizens:
EU/EEA and Swiss citizens benefit from the free movement rights within the EU. You can live and work in Hungary without a work permit, but for stays exceeding 90 days, you need to register with the immigration authorities and obtain a registration certificate (regisztrációs igazolás). You'll also need to register your address with the local government office.
For Non-EU/EEA/Swiss Citizens:
Non-EU/EEA nationals need a residence permit to live and work in Hungary. The most common types for contractors are:
- Residence permit for the pursuit of gainful activity: For self-employed individuals
- EU Blue Card: For highly qualified professionals with job offers (if employed rather than self-employed)
- Residence permit for the operation of a business: For those establishing or running a company
These permits typically require proof of sufficient financial resources, accommodation in Hungary, and health insurance coverage.
Business Registration:
For self-employed individuals (egyéni vállalkozó), the registration process involves:
- Registration with the Registry Court or the local government office (online registration is available through the Webes Ügysegéd portal)
- Obtaining a tax identification number from the National Tax and Customs Administration (NAV)
- Registering for social security with the relevant authorities
- Obtaining any necessary business licenses for specific activities
For limited liability companies (Kft.), the process is more complex and typically requires the assistance of a lawyer. Key steps include:
- Drafting and notarizing company articles
- Opening a bank account and depositing the minimum capital
- Registration with the Court of Registration
- Obtaining a tax number and VAT registration if applicable
- Registering with the local municipality
VAT registration is mandatory if your annual turnover exceeds HUF 12 million (approximately €32,000). Below this threshold, you can choose whether to register for VAT or remain exempt.
Income Tax
Hungary offers a relatively straightforward tax system with some unique features that can be advantageous for contractors depending on their business structure.
Personal Income Tax Rate (2024):
Flat rate of 15%
Note: Hungary has a flat personal income tax rate (SZJA) of 15% on all types of income, including employment, self-employment, and capital gains.
Corporate Income Tax Rate (2024):
Flat rate of 9%
Note: Hungary boasts the lowest corporate income tax rate in the European Union at 9%.
Tax Options for Self-Employed Contractors:
Self-employed individuals (egyéni vállalkozó) have several taxation options:
- Standard taxation: Income is subject to the 15% personal income tax plus social security contributions.
- Flat-rate expense accounting: Instead of tracking actual expenses, you can deduct a flat 40% of revenue as expenses, with the remaining 60% subject to personal income tax and contributions.
- Simplified entrepreneurial tax (KATA): Following reforms in 2022, this simplified tax regime is now primarily available for self-employed individuals providing services to individuals (not businesses). For eligible entrepreneurs, the tax is HUF 50,000 per month (HUF 25,000 for part-time entrepreneurs), covering income tax, social contributions, and corporate tax. Strict eligibility criteria apply, including restrictions on business-to-business services.
- Itemized tax for small businesses (KIVA): A simplified tax that replaces the corporate income tax, social contribution tax, and vocational training contribution. The rate is 10% of the tax base (cash-flow adjusted profit plus personnel costs).
Tax Implications by Business Structure:
- Self-employed (egyéni vállalkozó): Income is taxed at the 15% personal income tax rate, with various expense deduction options available. Subject to full social security contributions.
- Limited Company (Kft.): Company profits are taxed at the 9% corporate income tax rate. Dividends distributed to individuals are subject to a 15% dividend tax. Salary payments to owners/directors are subject to the 15% personal income tax plus social security contributions.
Tax Residency:
You're considered a tax resident in Hungary if:
- You have Hungarian citizenship (with exceptions for dual citizens)
- You stay in Hungary for more than 183 days in a calendar year
- You have a permanent home or center of vital interests in Hungary
Tax residents are taxed on their worldwide income, while non-residents are taxed only on income derived from Hungary. Hungary has a wide network of double taxation treaties to prevent being taxed twice on the same income when working internationally.
Social Security
Hungary has a comprehensive social security system that covers healthcare, pensions, and other social benefits. All contractors operating in Hungary must contribute to the social security system, though the rates and structure depend on your business setup.
For Self-Employed Individuals (egyéni vállalkozó):
Self-employed contractors pay the following social security contributions (as of 2024):
- Social Contribution Tax: 13% of gross income
- Social Security Contribution: 18.5% of gross income, covering:
- Pension contribution (10%)
- Health insurance contribution (7%)
- Labor market contribution (1.5%)
The minimum contribution base is the minimum wage (approximately HUF 232,000 per month in 2024), meaning you must pay contributions on at least this amount even if your actual income is lower. The maximum contribution base applies only to the pension component and is approximately HUF 7,110,000 monthly.
For Limited Company Directors/Owners:
If you operate through a limited company (Kft.) and draw a salary, the contribution structure includes:
- Employee Contributions: 18.5% of gross salary, broken down as above
- Employer Contributions: Social Contribution Tax of 13% of gross salary paid by the company
Dividend income is not subject to social security contributions, making a combined salary-dividend strategy potentially advantageous from a contribution perspective.
Under the KATA Tax System:
Contractors using the KATA simplified tax system who pay the full amount (HUF 50,000 monthly) are considered fully insured, with the tax payment covering all social security obligations. Those paying the reduced amount (HUF 25,000) receive limited social security coverage.
Healthcare Services:
Paying social security contributions entitles you to access Hungary's public healthcare system. Services include primary care, hospital treatment, and emergency care. Private healthcare is also available and relatively affordable compared to Western European standards.
EU Coordination Rules:
For contractors from EU/EEA countries working temporarily in Hungary, EU social security coordination rules (Regulation 883/2004) may allow you to remain in your home country's social security system and avoid double contributions. This requires obtaining an A1 certificate from your home country's authorities.
Business Structures
Contractors in Hungary typically choose between two main business structures, each with distinct advantages and regulatory requirements:
Self-employed (Egyéni vállalkozó)
The simplest business form with minimal setup requirements and costs. Registration can be completed online within 1-2 business days. Offers simplified accounting options and potential access to flat-rate expense deductions. However, it comes with unlimited personal liability for business debts and higher social security contribution rates. Suitable for smaller-scale contracts and individual service providers.
Limited Liability Company (Kft.)
Provides liability protection, separating personal and business assets. Requires minimum capital of HUF 3 million, though this can be contributed over time. Setup costs are higher (approximately HUF 100,000-150,000) and formation takes 5-10 business days. Benefits from the low 9% corporate tax rate and allows for tax optimization through salary-dividend combinations. More suitable for larger contracts, higher income levels, and contractors concerned about liability.
Less common alternatives include:
- Limited Partnership (Bt.): Involves at least one general partner with unlimited liability and one limited partner with liability limited to their contribution. Less commonly used by individual contractors.
- Branch Office: A non-independent unit of a foreign company. May be suitable for contractors who already have a company abroad.
Choosing the Right Structure:
When deciding between self-employed status and a limited company, consider:
- Income Level: Higher incomes (generally above HUF 15-20 million annually) may benefit more from the Kft. structure due to tax optimization possibilities.
- Liability Protection: If your contracts involve significant risk or potential liability, a Kft. offers better protection for personal assets.
- Administrative Complexity: Self-employed status offers simpler administration and lower compliance costs.
- Client Perception: Some international clients may prefer to work with limited companies rather than individual contractors.
- Tax System Access: If you qualify for the KATA simplified tax system and it aligns with your business model (primarily serving individuals, not businesses), self-employed status may be preferable.
Hungarian authorities have been increasingly scrutinizing contractor arrangements to identify "hidden employment" relationships. To maintain genuine self-employed or company contractor status, ensure your arrangements demonstrate independence through factors like working for multiple clients, using your own equipment, and controlling your own work schedule and methods.
Banking in Hungary
Opening a bank account in Hungary is essential for contractors, particularly for receiving payments and handling tax obligations. The process is relatively straightforward but may vary between banks.
Opening a Business Account:
For self-employed individuals (egyéni vállalkozó), the required documents typically include:
- Personal identification (passport or ID card)
- Proof of address (utility bill or rental agreement)
- Registration certificate for self-employed status
- Tax identification number
- Address registration card
For limited companies (Kft.), additional documents are required:
- Company registration documents (including articles of association)
- Company tax number
- Company registration certificate (less than 30 days old)
- Specimen signatures of authorized signatories
Major Hungarian Banks:
- OTP Bank: The largest Hungarian bank with an extensive network of branches and ATMs.
- K&H Bank: Owned by KBC Group, offers comprehensive services for businesses and entrepreneurs.
- Erste Bank: Part of Erste Group, provides a range of services tailored to businesses of various sizes.
- Raiffeisen Bank: Well-established international bank with strong business banking services.
- Digital Banks: Options like Revolut Business, Wise Business, and local digital banks are gaining popularity.
Banking Costs and Considerations:
Business account maintenance fees typically range from HUF 3,000-10,000 per month, depending on the bank and services included. Many banks offer package deals for entrepreneurs and small businesses.
While Hungarian is the primary language used in banking, many banks in Budapest and other major cities offer services in English, particularly for business clients. Online banking platforms are generally available in English, making day-to-day account management accessible for non-Hungarian speakers.
Hungary uses its own currency, the Hungarian Forint (HUF), despite being an EU member. This means contractors dealing with international clients may need to manage currency conversion. Many banks offer multi-currency accounts or foreign currency accounts (typically in EUR and USD) to help manage this aspect.
The Hungarian banking system is well-developed, with instant domestic transfers, contactless payment options, and modern mobile banking applications. However, transaction fees can be higher than in some Western European countries, so it's worth comparing fee structures when selecting a bank.
City Traders and Contracting in Hungary
At City Traders, we provide comprehensive support for contractors establishing and operating businesses in Hungary. Our team includes Hungarian market specialists who understand the local regulatory environment and business practices.
Our services are designed to help you navigate Hungary's business environment efficiently, particularly addressing the language barriers that can make administrative processes challenging for non-Hungarian speakers. We provide bilingual support, ensuring all official documentation is properly prepared and filed.
Whether you're looking to establish as a self-employed contractor, set up a limited company, or optimize your existing business structure, City Traders can provide the expert guidance and practical support you need to focus on your core business while we handle the compliance requirements.
Hungary vs Other Contracting Markets
Compare key aspects of contracting in Hungary with other popular international markets. See how Hungary compares in terms of taxation, business setup speed, and operating environment.
Quick Contracting Markets Comparison
See how Hungary compares to other popular contracting destinations
| Metric | Hungary | United Kingdom | Germany | Netherlands |
|---|---|---|---|---|
Corporate Tax Rate Standard corporate tax rate for businesses | N/A | 25% | 15% + 5.5% solidarity | 15-25.8% |
Fast Company Setup Ability to establish a business entity quickly | N/A | |||
Self-Employed Structure Availability of sole trader/self-employed status | N/A | |||
Umbrella Company Option Availability of umbrella company services | N/A | |||
VAT/Sales Tax Rate Standard VAT or sales tax rate | N/A | 20% | 19% | 21% |
English Business Environment Ease of doing business in English | N/A |
Data updated: April 2025
View full comparisonRequirements Checklist
- Register with local government office (for self-employed)
- Tax registration with NAV (tax authority)
- Social security registration
- VAT registration (if turnover exceeds 12M HUF)
- Business license for specific activities
- Residence permit (for non-EU/EEA citizens)
- Address registration
- Hungarian bank account (for business activities)
Need Assistance?
Our Hungary contracting experts can provide personalized guidance for your specific situation.
Get Expert AdviceFrequently Asked Questions
What is KATA tax and who can use it?
The KATA (Small Business Tax) is a simplified tax regime that was reformed in 2022. Now it's mainly available to self-employed individuals who provide services exclusively to individuals (not businesses). The current annual KATA tax is HUF 50,000 per month (HUF 25,000 for part-time entrepreneurs), covering income tax, social contributions, and corporate tax. Strict eligibility criteria apply, including income limits and restrictions on business clients.
Do I need to speak Hungarian to work in Hungary?
While Hungarian is the official language and is essential for dealing with government offices and regulatory paperwork, English is widely spoken in business environments, especially in Budapest and in multinational companies. For official procedures, it's advisable to have a Hungarian-speaking accountant or business advisor to help navigate the administrative requirements.
What's the difference between self-employed status and setting up a company in Hungary?
As a self-employed individual (egyéni vállalkozó), you have simpler administration and potential access to favorable tax regimes like flat-rate expense accounting, but face unlimited personal liability. A limited liability company (Kft.) offers better protection for personal assets, more professional image, potential tax advantages for higher incomes, but requires higher setup costs (minimum capital of HUF 3 million) and more complex administration.
How does the Hungarian tax system work for foreign contractors?
Tax residency in Hungary is established if you stay for more than 183 days in a calendar year, have a permanent home there, or your center of vital interests is in Hungary. Tax residents pay taxes on worldwide income, while non-residents pay taxes only on Hungarian-source income. Hungary has an extensive network of double taxation treaties to prevent being taxed twice on the same income.