Hungary vs Italy: Corporate Tax Comparison 2026
In recent years, a growing number of Italian and European entrepreneurs have chosen to incorporate a company in Hungary, attracted by one of the most competitive tax systems in Europe. But what are the concrete tax advantages of Hungary compared to Italy? In this guide, we break down the key differences with up-to-date figures and practical insights for anyone considering this option.
1. Corporate Income Tax: 9% vs 24%
The most immediate comparison concerns the corporate tax rate:
- Italy: IRES corporate tax at 24% on taxable income, plus IRAP (generally 3.9%), bringing the total effective rate above 27%.
- Hungary: flat rate of 9% on net company profit — the lowest in the entire European Union.
On a profit of €100,000, the difference amounts to approximately €15,000–18,000 less in taxes per year. Over the medium to long term, this advantage translates into significant resources available for reinvestment.
2. No IRAP and Lower Local Tax Burden
In Italy, in addition to IRES, companies pay IRAP (Regional Tax on Productive Activities), which is levied on net production value regardless of profit. Hungary has no equivalent tax, further reducing the overall fiscal burden for businesses operating there.
3. Dividend Withholding Tax: EU Exemptions Available
Profit distribution is a fiscally critical moment. Here is the comparison:
- Italy: dividends paid to individual shareholders are subject to a 26% withholding tax.
- Hungary: in many cases, thanks to the EU Parent-Subsidiary Directive and bilateral tax treaties, no withholding tax applies on dividends distributed to shareholders resident in other EU countries.
This makes the Hungarian structure particularly efficient for holding companies and international corporate groups.
4. Simplified Tax Regimes: KATA and KIVA
Hungary offers simplified regimes for small businesses:
- KIVA (Small Business Tax): a substitute tax at 10% on a simplified basis, replacing corporate income tax and employer social contributions. Ideal for companies with employees.
- KATA: a flat-rate regime for freelancers and micro-businesses, with a very low fixed monthly tax (subject to restrictions for non-residents).
In Italy, the flat-rate regime is capped at €85,000 in revenue and is not available to limited liability companies.
5. VAT: High Rate but Recoverable
Hungary's standard VAT rate is 27%, the highest in the EU. However, for intra-EU B2B transactions, VAT is generally not applicable or fully recoverable, making this aspect neutral for most businesses operating with European business clients.
6. Italy-Hungary Double Taxation Treaty: How It Works
Italy and Hungary have signed a Convention against Double Taxation that governs the taxation of income, dividends, interest, and royalties between the two countries. This treaty is essential for correctly structuring your corporate setup and avoiding being taxed twice on the same income.
7. Economic Substance: The Non-Negotiable Requirement
It is important to emphasize that Hungarian tax advantages are legitimate only if the company has genuine economic substance in Hungary: an operational registered office, a local director, and real business activity. Without these elements, there is a risk of tax residency challenges from the Italian Revenue Agency.
Start Ungheria supports its clients in building a solid, compliant corporate structure that can withstand any tax audit.
Conclusion: Is It Really Worth Opening a Company in Hungary?
For many Italian entrepreneurs operating internationally, the answer is yes — provided it is done correctly, with the support of experienced professionals. The tax savings are real and significant, but they must be built on solid foundations and in full compliance with EU and Italian regulations.
Contact Start Ungheria for a free consultation and find out whether the Hungarian structure is right for your specific situation.
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