Hungarian Tax System Changes from 2026

Comprehensive Guide for Entrepreneurs, SMEs and Corporate Taxpayers

As Hungary enters the 2026 fiscal year, businesses will face one of the most substantive shifts in the tax environment in recent years. A combination of higher thresholds, simplified procedures, digital reporting mandates, and broadened eligibility for alternative tax regimes signal a clear move toward easing administrative burdens and expanding the competitive landscape for companies operating in Hungary.

This expert analysis summarises the major tax law changes affecting companies, sole proprietors, branch operations, and multinational groups from 1 January 2026, and highlights key considerations for strategic planning.

1. VAT Reforms: Higher Exemption Threshold and Expanded Data Reporting

Increased VAT Exemption Threshold

Among the most impactful developments for entrepreneurs and micro-businesses is the increase of the VAT exemption threshold (alanyi adómentesség). Between 2026 and 2028, the limit will rise in three stages:

• 2026: HUF 20 million
• 2027: HUF 22 million
• 2028: HUF 24 million

Businesses whose annual taxable domestic revenue remains below these thresholds may elect to remain VAT-exempt. This is expected to substantially widen the population of eligible entities and reduce administrative obligations for small service providers, retail operators, freelancers, and new market entrants.

Practical implications include:

• No need to register for VAT if turnover remains below the limit
• Fewer filing obligations and lower compliance costs
• More straightforward cash-flow management
• Businesses must monitor turnover carefully to avoid threshold breaches mid-year

Importantly, voluntary VAT registration remains available, which may be relevant for companies with significant input VAT or cross-border transactions.

New VAT Reporting Requirements from Mid-2026

From July 2026, all VAT-registered taxpayers will face expanded data reporting requirements. Under the new regime, M-reports and VAT summary filings must not only reflect VAT collected on sales, but also VAT deducted on purchases. This enables enhanced reconciliation and closer monitoring by NAV.

The reporting burden and technology expectation placed on accounting systems will increase, particularly for medium-sized enterprises and firms with supply chain complexity. Businesses should ensure that accounting software and reporting workflows are upgraded well before mid-year implementation.

2. Flat-Rate Taxation Enhancements

Flat-rate taxation remains a popular regime for sole proprietors and small businesses due to administrative simplicity and predictable calculation. For 2026, two key reforms improve the attractiveness of this tax option.

Higher Standard Expense Ratios

The general flat-rate expense deduction increases as follows:

• 2026: 45 percent
• 2027: 50 percent

This means that a larger proportion of revenue is deemed to cover expenses, thereby reducing taxable income under the Personal Income Tax (PIT) framework. The effective marginal tax burden for qualifying taxpayers will decrease accordingly.

Social Contribution Base Relief for Sole Proprietors

The mandatory contribution calculation for full-time sole proprietors will be aligned with 100 percent of the minimum wage (instead of 112.5 percent). While the minimum wage itself increases, the structural adjustment still offers relief relative to the previous required calculation base. This reduction strongly benefits micro-entrepreneurs with modest income levels.

These changes jointly lower the tax and contribution burden for tens of thousands of individuals and should prompt eligible sole proprietors to evaluate whether flat-rate taxation remains optimal in light of projected 2026 income.

3. Corporate Income Tax and Advance Payment Rules

Increased Advance Tax Payment Threshold

Companies with annual corporate tax liability below HUF 20 million will transition from monthly tax advance filings to quarterly obligations. Previously, the threshold requiring monthly advances was approximately HUF 5 million.

This change delivers three advantages:

• Reduced administrative frequency and filing burden
• Better short-term cash retention for businesses
• Greater predictability in liquidity management across the fiscal year

While larger taxpayers remain subject to monthly advances, the revised threshold materially assists SMEs during growth or investment phases.

4. Transfer Pricing Reform and New Documentation Standards

Multinational enterprises, foreign-owned subsidiaries, and domestic groups engaging in related-party transactions must prepare for a revised transfer pricing (TP) regulatory environment. A new decree is expected to take effect from 2026, replacing the 2017 framework.

Key Changes in Transfer Pricing Requirements

• Documentation triggers increase from HUF 100 million to HUF 150 million of annual related-party transaction volume.
• Low value-adding intra-group services may benefit from simplified reporting requirements if they meet certain operational criteria (routine functions, low risk, low mark-up).
• Transaction value ceilings for Master File exemptions are increasing. Companies with consolidated related-party transaction volumes below HUF 500 million may not be required to prepare full Master File documentation.
• Acceptable TP documentation languages narrow to Hungarian and English, eliminating flexibility previously available under certain circumstances.

These changes collectively reduce administrative burden for smaller groups while maintaining documentation discipline for higher-volume structures.

Practical Considerations

Even where documentation may be partially exempt, businesses must retain evidence of arm’s length pricing and should evaluate whether transactional changes, benchmarking support, and internal policy updates are required. Non-compliance penalties for TP remain stringent, and audit frequency in this area continues to rise.

5. Personal Income Tax Adjustments and Family Incentives

While personal income tax (PIT) rates remain stable, several adjustments indirectly influence business environments.

Key developments include:

• Expanded family tax allowances for households with two or more children.
• Child-related tax credit structures phased in over multiple tax years.
• Interaction between employee benefits and personal exemptions requiring employer HR recalculation.

These adjustments boost net disposable income for working families, supporting domestic consumption, a positive driver particularly for B2C sectors.

6. KIVA (Small Business Tax) Expands in Scope

The KIVA regime continues to distinguish itself as an attractive corporate tax alternative for businesses prioritising employment and reinvestment. Recent reforms greatly expand eligibility:

• Entry threshold increases to HUF 6 billion revenue (previously HUF 3 billion).
• Enterprise headcount cap increases to 100 employees.
• Taxpayers may remain under KIVA until reaching HUF 12 billion in revenue or 200 employees, enabling substantial growth within the regime.

Businesses seeking to optimise payroll-heavy cost structures should carefully model KIVA entry. Importantly, companies wishing to switch into KIVA must file elections by 31 December preceding the tax year of entry.

7. Continued Digitalisation and NAV-Led Reporting

One of the overarching themes of 2026 tax reform is digital integration.

Key milestones include:

• Mandatory digital reporting of manually issued receipts via daily RT data uploads.
• Continued expansion of e-invoice and e-reporting systems enabling transaction-level monitoring.
• A multi-year roadmap where NAV assumes a larger role in preparing draft tax returns and reducing taxpayer-initiated filings.

For SMEs and mid-cap organisations, investment in compliant accounting systems, ERP integrations, and automated transaction capture becomes increasingly critical.

8. Sector-Specific and Indirect Tax Adjustments

Advertisement Tax Reinstatement

The suspended advertisement tax regime is scheduled to resume from 1 July 2026. Tax applies to publishers and platforms disseminating advertisements to a Hungarian audience and may also affect advertisers purchasing domestic placements.

Digital agencies, content platforms, and multinational advertisers should evaluate the potential tax cost, eligibility for deductions, and cross-border rules governing ad placement.

Excise Duties and Indexed Taxes

Although initially planned for January, certain excise tax indexation (alcohol, fuel, tobacco) is postponed to mid-2026, reflecting inflation and European compliance requirements. Fleet-using businesses should also anticipate annual vehicle tax recalibration.

9. Strategic Preparation for 2026

Businesses that prepare proactively will extract the greatest benefit from new opportunities while mitigating risk. Recommended actions include:

Tax Strategy

• Model VAT exemption viability and potential impact on B2B clients
• Evaluate flat-rate versus traditional PIT regimes
• Assess eligibility and advantage for KIVA election

Operational Compliance

• Upgrade accounting and invoicing systems for reporting-heavy obligations
• Prepare supply-chain data analytics for July 2026 VAT changes
• Review holiday schedules and accounting capacity ahead of submission deadlines

International Structure Planning

• Adjust transfer pricing master and local file policies
• Reassess intercompany service agreements
• Ensure proper documentation and benchmarking for related-party transactions

Conclusion

The 2026 Hungarian tax reforms are designed to support small and medium-sized enterprises, simplify compliance, modernise administrative processes, and enhance competitiveness across a broad economic spectrum. While benefits are significant, transition requires foresight, system readiness, and professional support. Companies that evaluate their structures promptly will be positioned to leverage new allowances and avoid compliance pitfalls.

How FirmaX Hungary Can Help

FirmaX Hungary advises international and domestic clients through:

• VAT registration, filing and audit support
• Strategic tax planning for SME and corporate groups
• Transfer pricing documentation and policy development
• Payroll and contribution optimization
• KIVA assessment and onboarding
• Digital reporting compliance and implementation support
• Day-to-day accounting and NAV representation

For tailored guidance based on your company’s structure and future plans, contact our advisory team for a confidential consultation.