As a business owner in Hungary, keeping your company compliant while maintaining a healthy cash flow is always a top priority. When running a Hungarian LLC (Kft.), you will frequently encounter two major corporate taxes: corporate income tax (CIT) and local business tax (LBT).
To prevent companies from facing huge tax payables at the end of the year, the Hungarian tax system operates on an advance payment system.
Here is a straightforward breakdown of how CIT and LBT advances work, when they are due, and how they are calculated.
1. Corporate income tax (CIT) advances – Társasági adó (TAO) előleg
Corporate income tax in Hungary is a flat 9% on your taxable profit – one of the most competitive rates in Europe.
How is it calculated?
Your tax advances are determined by your previous year’s tax liability.
- If your previous year’s CIT was under 20 million HUF, you pay advances quarterly basis.
- If your previous year’s CIT exceeded 20 million HUF, you must pay advances monthly basis.
When are the deadlines?
- Monthly payers: Due by the 20th day of each month.
- Quarterly payers: Due by the 20th day of the month following the quarter (20 April, 20 July, 20 October, and 20 December).
(Hungarian Tax Authority site for reference: https://nav.gov.hu/ado/tarsasagi)
Note: Newly established companies in their first fiscal year do not have to pay CIT advances, as they don't have a historical baseline yet, but from the 2nd year of operation, all companies have to pay CIT advances.
2. Local business tax (LBT) advances – Helyi iparűzési adó (HIPA) előleg
Local business tax is paid to the local municipality where your company is registered or has a branch/site. The rate varies by location but is capped at a maximum of 2% of your adjusted net revenue.
How is it calculated?
Unlike CIT, LBT advances are paid twice a year (semi-annually). The municipality calculates these advances based on your last finalized annual tax return. The total annual advance is split into two instalments.
When are the deadlines?
- First instalment: Due by 15. March
- Second instalment: Due by 15. September
Summary table for quick reference
| Tax advance type | Frequency | Due dates |
| CIT (TAO) < 20M HUF tax liability | Quarterly | 20th of Apr, Jul, Oct, Dec |
| CIT (TAO) > 20M HUF tax liability | Monthly | 20th of every month |
| LBT (HIPA) | Semi-annually | 15th March & 15th September |
The ProacTeam takeaway: What if your business volume changes?
The advance system assumes your current year will look similar to your last year concerning to revenue and profit. But what if your revenue significantly drops or increases?
- If your business slows down: we can submit a modification request to the tax authority to lower your advance payments, saving your company crucial liquidity.
- The spring reconciliation: Every year by May 31, your final tax return is filed. If your actual tax for the year is higher than the advances you paid, you pay the difference. If you overpaid, you could request a refund or credit it toward future taxes.
At ProacTeam Hungary, we handle all the tracking, calculations, and reminders for you, ensuring your company stays perfectly compliant while you focus on growing your business. Navigating Hungarian taxes is simple if you have the right accounting partner by your side. Reach out to ProacTeam Hungary today for a quote, and you will experience how stress-free your corporate accounting can truly be with us.
