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The Difficulties of Taxing in Hungary When You Have a Small Business

Starting up a business goes along with a lot of puzzles, attention, success, or even pitfalls, and making it difficult to adjust between them - especially when you're working on the company's ups and downs.

Taxation of small businesses can greatly facilitate the administrative side of the business start-up, but there are several disadvantages that do not make it worthwhile to become a small- business-taxpayer in Hungary.

  • Simplicity is only visible to domestic partners, subject to tax-exempt status: small-business taxation is a good solution for businesses that deal with domestic sales. In the case of a foreign partner, we can no longer qualify as tax-exempt in our subject-matter, so we need to make VAT returns every month when we invoice or accept an invoice for a foreign partner. In that case, it is advisable to consult a tax consultant!
  • The tax paid is fairly small: In 2018 the tax base of the taxpayer is HUF 94,400, while the higher amount of HUF 75,000 is paid, the basis of the calculation of the benefits is raised to HUF 158,400.
  • It is important to pay attention to the partners: it is important to pay attention to the fact that up to 50 percent of small-business taxpayer's income comes from one partner, otherwise suspicious employment may be suspected.
  • If certain conditions are met, reporting to the tax authority: In case your income exceeds 1 million forints, you have a reporting obligation and your partner for the tax authority.

In case of tax debts, small-business taxpayer status is canceled and can not be re-elected for two years: the rule is strict, however, in the event of a tax liability. If the small business taxpayer's debt exceeds 100,000 forints by the end of the year, the entrepreneur will not only fall away from the favorable tax cycle but will not be able to go there for two years.

So, for whom one of the above lists may be similar, they should not choose the small business taxation solution. In addition to all the difficulties mentioned above, it is worth adding that it is always worthwhile to trust an accountant or tax adviser since the current regulation imposes a great deal of smaller and bigger obligations on the enterprise.


Jun 6th, 2018

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