Hungary’s 2026 Business Tax Changes. Hungary approves a broad tax reform package

Photo: Wikimedia

In late 2025, the Hungarian Parliament adopted a comprehensive tax reform package set to take effect from 2026. The changes are designed to reduce administrative burdens, support self-employed entrepreneurs and strengthen the competitiveness of small and medium-sized enterprises. According to government estimates, more than 230,000 businesses will be affected as the reform reshapes key elements of the tax system.

Higher VAT exemption threshold

A central feature of the reform is the gradual increase of the VAT exemption threshold. From 2026, businesses with annual turnover below HUF 20 million will be able to remain outside the VAT system, with further increases planned in subsequent years. This measure provides meaningful relief for micro-enterprises and freelancers by extending access to simplified compliance and reducing cash-flow pressure.

Lower tax base for self-employed entrepreneurs

Self-employed taxpayers will benefit from a higher standard expense ratio under the flat-rate regime, reducing the portion of income subject to tax. In parallel, the social contribution base will be simplified, moving to 100% of income instead of the previously increased calculation base. These changes improve predictability and transparency for a large segment of Hungary’s entrepreneurial workforce.

Expanded access to the KIVA regime

Eligibility for Hungary’s KIVA small business tax regime is being significantly extended. Higher thresholds for revenue, balance sheet totals and employee numbers will allow more companies to opt into or remain within KIVA as they grow. The reform is intended to ease the tax burden on expanding SMEs and support job creation.

Green tax incentives and energy investment

The new rules introduce substantial tax incentives for environmentally focused investments, including clean technologies and environmental remediation. Corporate taxpayers making qualifying investments can significantly reduce their tax base, subject to overall limits. At the same time, targeted tax benefits remain in place for energy distribution operators investing in infrastructure, underlining Hungary’s strategic focus on energy resilience.

Retail tax relief and delayed excise increases

While retail tax rates remain unchanged, higher turnover thresholds reduce the effective tax burden on retailers and allow for retroactive adjustments for 2025. Additionally, the planned increase in fuel excise duties has been postponed to mid-2026, temporarily easing cost pressures across supply chains that rely on transportation.

Simpler reporting and reduced compliance

From 2026, fewer companies will be required to make monthly corporate tax advance payments, as the relevant thresholds are raised substantially. Micro-enterprises will gain broader access to simplified reporting, while self-employed individuals will benefit from less frequent social contribution reporting and improved data sharing between tax and health authorities.

Expected economic impact in 2026

The Hungarian government estimates that the reform will reduce the overall tax burden on businesses by HUF 80–90 billion annually. Officials argue that the fiscal impact will remain manageable relative to total budget revenues, while delivering tangible benefits for business growth and compliance efficiency.

According to International Investment experts, Hungary’s 2026 tax reform strengthens the country’s position as a business-friendly jurisdiction by easing compliance for SMEs and self-employed entrepreneurs while encouraging long-term, sustainable investment.