Hungary's tax authority, the Nemzeti Adó- és Vámhivatal (National Tax and Customs Administration), has introduced tightened reporting obligations for foreign entities operating in or receiving income from Hungary. The changes took effect from the 2025 tax year, with the first compliance deadline falling in the first half of 2026. Foreign businesses that have not yet assessed their exposure risk penalties and the loss of preferential treatment under applicable tax treaties.
Hungary's updated tax legislation now requires foreign entities with a állandó telephely (permanent establishment) in Hungary. Alternatively. Those earning Hungarian-source income above defined thresholds, to file enhanced periodic disclosures with the National Tax and Customs Administration. Corporate income tax and withholding tax positions must be reported in greater detail than previously required. Entities subject to a tax treaty with Hungary must separately document their treaty eligibility for each reporting period.
This alert explains which business categories are affected, the applicable thresholds, the compliance deadline, and the immediate steps that international companies should take now.
What has changed and when it takes effect
Hungary's tax legislation has been amended to align domestic reporting rules more closely with OECD transparency standards and EU directives on administrative cooperation. The revised rules apply from the 2025 tax year. Annual filings covering 2025 activity are due by May 31, 2026 for most foreign entities, though entities with a non-calendar fiscal year face an adjusted deadline calculated from their year-end.
The key changes are as follows. First, the scope of enhanced disclosure has expanded. Entities that previously filed simplified returns may now be required to submit full substantive reporting. Second, withholding tax exemptions claimed under a tax treaty must be supported by contemporaneous documentation filed at the point of payment – not retrospectively. Third, foreign entities must now separately disclose whether their Hungarian activities constitute a permanent establishment under domestic tax rules, regardless of any treaty position they assert.
A further change concerns tax residency certificates. Hungary now requires certificates to be issued within 12 months of the date of payment for any withholding tax exemption to apply. Certificates issued outside that window are no longer accepted as sufficient documentation by the National Tax and Customs Administration.
For detailed guidance on Hungary's broader tax obligations for cross-border businesses, see our overview of tax law services in Hungary.
Which entities are affected and the threshold criteria
The new requirements apply to a wide range of foreign entities. The following categories face the most immediate compliance obligations.
- Foreign companies earning Hungarian-source income above a defined annual threshold through dividends, royalties, interest, or service fees subject to withholding tax.
- Non-resident entities operating through a branch, representative office, or any arrangement that may qualify as a permanent establishment under Hungarian tax legislation.
- Foreign holding structures receiving income from Hungarian subsidiaries where a reduced withholding tax rate is claimed under a tax treaty.
- EU and non-EU entities that have registered for Hungarian value-added tax but have not previously been assessed for corporate income tax exposure.
- Digital service providers with a significant digital presence in Hungary, even where no physical office exists.
The threshold for mandatory enhanced reporting is set by reference to gross Hungarian-source income in the prior tax year. Entities below the threshold may still be required to file a simplified disclosure confirming their position. Entities above it must provide a full breakdown of income categories, treaty positions claimed, and withholding tax calculations.
Foreign entities that rely on a tax treaty position to reduce or eliminate Hungarian withholding tax must now affirmatively demonstrate tax residency in the treaty partner state. The burden of proof has shifted: the Hungarian tax authority will no longer accept a passive claim. Active documentation is required before each payment, not on audit.
Corporate income tax exposure is a separate question from withholding tax. A foreign entity may have no withholding tax obligation yet still trigger a corporate income tax filing requirement if its Hungarian activities cross the permanent establishment threshold under domestic law. These two analyses must be conducted independently.
To assess whether your entity's Hungarian activities also give rise to corporate governance or registration obligations, consult our team on corporate law matters in Hungary.
To receive an expert assessment of your entity's exposure under the new Hungarian tax reporting rules, contact us at info@ferrazwhitmore.com.
Immediate actions for international companies
The window for orderly compliance is short. The following steps should be initiated without delay.
- Map Hungarian income streams. Identify all payments from Hungarian counterparties in 2025, including dividends, royalties, interest, and service fees. Determine whether any have been subject to withholding tax and at what rate.
- Review permanent establishment exposure. Assess whether your entity's activities in Hungary – including the use of dependent agents, regular presence of employees, or server infrastructure – cross the permanent establishment threshold under Hungarian tax legislation.
- Verify tax residency certificate validity. Confirm that any certificate used to support a tax treaty claim was issued within the 12-month window now required by the National Tax and Customs Administration. Obtain updated certificates where necessary.
- Audit treaty positions claimed in 2025. For each withholding tax exemption or reduced rate applied during the 2025 year, confirm that contemporaneous documentation exists and meets the new substantive requirements.
- Engage local filing support before March 2026. Hungarian tax filings require submission in Hungarian and compliance with specific formatting standards. Engage qualified local support early to avoid processing delays that could result in late-filing penalties.
Entities that discover a gap between their actual filing position and their legal obligations should consider a voluntary disclosure to the National Tax and Customs Administration. Voluntary disclosure typically attracts reduced penalties compared with deficiencies identified on audit. The window for voluntary action closes once an audit notice is issued.
For a parallel alert covering similar enhanced reporting measures introduced in another EU jurisdiction, see our update on new tax reporting requirements in Portugal.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our tax law practice covers corporate income tax structuring, withholding tax compliance, tax treaty analysis, and permanent establishment assessments across European and international markets. We work with multinational companies, institutional investors, and in-house legal teams operating across civil law and common law systems. As a law firm with deep experience in Hungary and across the EU, we support foreign entities in meeting their Hungarian tax residency and reporting obligations efficiently. Our attorneys have advised on cross-border tax matters before the Hungarian tax authority and in connection with EU administrative cooperation procedures. To discuss your compliance position under the new Hungarian rules, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.