Hungary's 9% Flat Tax: A Complete Guide for Italian Entrepreneurs (2026)

Hungary applies a flat corporate income tax rate of 9% on company profits — the lowest in the entire European Union. For Italian entrepreneurs accustomed to a 24% IRES (plus IRAP and contributions), the differential is significant and can lead to tangible savings if the structure is set up correctly.

In this guide, you'll find everything you need to know about the Hungarian flat tax: how it works, whether it's legal for Italian residents, how much you can save, and how to properly structure your tax position.

What is the 9% Hungarian flat tax?

The Hungarian flat tax is a fixed corporate tax rate of 9% on the profits of limited liability companies, in force since 2017. It applies to KFTs (Korlátolt Felelősségű Társaság) — the Hungarian equivalent of an Italian SRL — and has transformed Budapest into one of the most competitive centers for European entrepreneurs seeking legal and EU-compliant tax optimization.

Hungarian Flat Tax vs. Italy: direct comparison

Want to delve deeper into the corporate structure? Read our guide on how to open a KFT in Hungary.

The KATA regime: flat tax for freelancers

In addition to corporate taxation, Hungary offers the KATA regime (Kisadózók Tételes Adója), a simplified flat-rate taxation for self-employed individuals and small sole proprietorships. In 2026, the KATA regime provides for:

• Fixed monthly tax of 50,000 HUF (approximately 125 EUR)
• Applicable up to an annual turnover of 18 million HUF (approximately 45,000 EUR)
• Exemption from VAT, separate social security contributions, and other taxes
• Ideal for freelancers, consultants, and professionals with diverse clients

⚠️ Attention: The KATA regime has undergone significant restrictions since 2023. It is no longer applicable to those who primarily invoice a single client. Always verify the updated situation with a specialized consultant.

Is the Hungarian flat tax legal for Italian residents?

Yes, but with precise conditions. The legitimacy of the structure depends on three fundamental factors:

1. Effective tax residency in Hungary

To be taxed in Hungary and not in Italy, it is necessary to transfer your tax residency to Hungary. This requires:

• Registration with AIRE (Anagrafe Italiani Residenti all'Estero - Registry of Italians Residing Abroad)
• Actual domicile in Hungary (rental agreement or property ownership)
• Predominant physical presence in the country (over 183 days/year)
• Center of vital interests moved to Hungary

2. Economic substance of the KFT

The Hungarian company must have real economic substance: an actual operating office, concrete activity carried out in Hungary, a present administrator, and proper accounting documentation.

3. CFC Rules (Controlled Foreign Corporation)

The ATAD directive and Italian CFC rules may apply if the Hungarian company is controlled by a tax resident in Italy and does not have sufficient economic substance. In this case, the KFT's income could be attributed to the Italian partner and taxed in Italy.

Italy-Hungary Double Taxation Convention

Italy and Hungary have signed a Double Taxation Convention (in force since 1980, updated). The convention establishes:

• Corporate income is taxed in the country of residence of the company
• Dividends distributed to the Italian partner are subject to Hungarian withholding tax (max 10%) and then taxed in Italy with a tax credit
• Capital gains from the sale of shares follow specific rules

How much can you actually save with the Hungarian flat tax?

Practical example with a corporate profit of 100,000 EUR:

Note: simplified calculation for illustrative purposes. Actual savings depend on the specific structure, tax residency, and other individual factors.

OECD and Pillar Two Updates: what changes in 2026?

The OECD initiative on Pillar Two (Global Minimum Tax at 15%) applies exclusively to multinational groups with consolidated revenues exceeding 750 million EUR. For SMEs and individual professionals, the Hungarian flat tax of 9% remains fully applicable and stable in 2026.

Frequently asked questions about the Hungarian flat tax

Can I benefit from the Hungarian flat tax without transferring my residency to Hungary?

Only partially. Without Hungarian tax residency, dividends distributed to the Italian partner will be taxed in Italy. The optimal structure involves transferring tax residency.

Is the Hungarian flat tax at risk with new EU regulations?

No, for SMEs. OECD Pillar Two only applies to groups with over 750 million EUR in revenue. The 9% flat tax for small and medium-sized KFTs is stable and compliant with EU law.

Do I have to pay social security contributions in Hungary?

Yes, but the Hungarian social security system provides significantly lower contributions compared to the Italian INPS. The total rate is approximately 18.5% on the administrator's income.

What is the difference between the Hungarian flat tax and the Italian "regime forfettario"?

The Italian "regime forfettario" (flat-rate regime) provides for a 15% rate (5% for the first 5 years) with a turnover limit of 85,000 EUR. The Hungarian flat tax of 9% has no turnover limits and applies to corporate profits, not turnover. For high volumes, the Hungarian KFT is structurally more advantageous.

How to properly structure your tax position

Every situation is different. Before proceeding, a personalized tax due diligence is essential to analyze your current tax residency, type of activity, turnover volume, and medium-to-long-term goals.

Contact us for a free consultation and we will evaluate together if and how the Hungarian flat tax can be advantageous for your specific situation. Or learn more by reading our guide on how to open a KFT in Hungary step-by-step.