The Bill seeks to lower business taxes and boost competitiveness through reforms, including VAT incentives and exemptions that encourage strategic investments in sustainability and clean technologies.
The Hungarian National Assembly is reviewing Bill T/13110, which aims to reduce the tax burden on businesses by introducing a range of changes to tax rules and thresholds.
This legislative package, titled “Measures to Reduce the Tax Burden on Businesses,” aims significantly to enhance the competitiveness and lower the tax burden of Hungarian enterprises.
The proposed reforms touch upon several key areas of enterprise taxation, including corporate incentives and exemptions related to value-added tax (VAT), with a clear emphasis on promoting strategic investments in sustainability and clean technologies.
The key measures are as follows:
Higher flat tax cost ratio for entrepreneurs
Individual entrepreneurs under the flat tax regime would see their cost ratio increase from 40% to 45% in 2026 and further to 50% in 2027, allowing them to deduct more expenses from taxable income.
Incentives for clean technology and environmental projects
A significant new development tax credit is being established for investments that secure clean technologies manufacturing capacity. This is explicitly linked to supporting the “Clean Industry Agreement” framework (CISAF Communication C/2025/3602). The bill expands the development tax allowance to encourage clean technology investments.
- In Budapest, the tax credit may not exceed 15% of the eligible investment costs.
- In locations outside Budapest, the rate is significantly higher, up to 35% of the eligible investment costs.
Tax allowances for environmental initiatives include:
- 100% of eligible costs for projects addressing ecological damage or restoring degraded ecosystems.
- 70% of the eligible expenses for biodiversity protection and climate adaptation initiatives.
Changes to advance tax payments
The threshold for monthly or quarterly advance tax payments would rise from HUF 5 million to HUF 20 million, and the deadline for the last quarterly payment would shift to the 20th day of the third month of the quarter.
This change applies for the first time to tax advances calculated based on the 2025 tax year’s payable tax, provided that the tax declaration is due after 31 December 2025.
Expanded small business (KIVA) regime
Eligibility for the KIVA small business tax regime is set to expand, with the entry thresholds increasing to a maximum of 100 employees, up from 50, and HUF 6 billion in revenue, up from HUF 3 billion.
The exit thresholds will also rise, allowing businesses to remain in the regime until they reach a maximum of 200 employees and HUF 12 billion in revenue.
Higher VAT and micro-enterprise thresholds
As a key measure to reduce administrative burdens for small and medium-sized enterprises (SMEs), the annual revenue threshold for a taxpayer to opt for subjective VAT exemption is set to increase in three distinct steps over the coming years.
The VAT exemption thresholds will increase gradually, rising to HUF 20 million in 2026, HUF 22 million in 2027, and reaching HUF 24 million from 2028 onwards.
At the same time, the simplified reporting thresholds for micro-enterprises will also be raised, with the balance sheet total set at HUF 180 million and the annual net sales limit at HUF 360 million.
Retail tax bracket adjustments
For 2025, retail tax brackets will increase retroactively. The lower bracket will rise from HUF 500 million to HUF 1 billion, the second bracket from HUF 30 billion to HUF 50 billion, and the third bracket from HUF 100 billion to HUF 150 billion.
If approved, most measures will take effect from 2026.
