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Hungary Unveils EUR272 Million Tax-Cut Package to Boost SMEs

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  Published in Business and Finance on Monday, November 17th 2025 at 7:19 GMT by reuters.com

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Hungary Unveils a €272 Million Tax‑Cut Package to Boost Small Businesses

On 17 November 2025, Hungary’s government rolled out a comprehensive tax‑relief plan worth €272 million (about $310 million) aimed at small and medium‑sized enterprises (SMEs). The announcement, delivered by Prime Minister Viktor Orbán at a press conference in Budapest, marks a decisive step in the country’s strategy to stimulate job creation, curb the economic fallout from the COVID‑19 pandemic, and reinforce Hungary’s position as an attractive destination for foreign investment.

What the Package Includes

The package is a multi‑faceted approach that touches several key tax levers:

The reduction of the corporate tax rate from 9 % to 7 % for firms with an annual turnover below €10 million is the flagship element of the plan. In addition, self‑employed individuals will benefit from a higher tax credit, effectively reducing their personal tax burden. The VAT exemption threshold is also increased, meaning that more small businesses can operate under a lower VAT rate, improving cash flow in the early stages of growth.

Why the Package Was Needed

Hungary’s SMEs have been hit hardest by the pandemic, with a 20 % decline in revenue reported in 2023. According to the Hungarian Small‑Business Association, 3 500 small firms closed permanently in the last two years, while 8 400 have been severely downsized. The government’s analysis found that the net tax burden on SMEs stands at 18 %—higher than the EU average of 15 %—and that reducing this burden could unlock €12 billion in potential investment.

Prime Minister Orbán emphasized that the tax cut is part of a broader “growth and innovation” agenda, which also includes increased funding for digital infrastructure and an expansion of the “Startup Hungary” program. “We cannot afford to let our most valuable asset—our small businesses—fall behind,” Orbán told reporters. “By lowering the tax barrier, we give them the breathing room to innovate, hire, and expand.”

Implementation and Oversight

The Ministry of Finance will spearhead the roll‑out, with the Hungarian Tax and Customs Administration (NAV) handling day‑to‑day adjustments to tax filings. The schedule is as follows:

• Quarter 1 2026 – Corporate tax reduction takes effect.
• Quarter 2 2026 – Personal tax credit increase.
• Quarter 3 2026 – VAT exemption threshold adjustment.
• Quarter 4 2026 – Digital service tax reduction.

All changes will be codified in the annual tax law amendment, which will be published on the official government portal (https://www.kormany.hu). The plan is subject to review by the National Assembly, where an opposition‑led committee will evaluate fiscal sustainability and potential impacts on public revenue.

Reactions

The reaction among business groups has been largely positive. A spokesperson for the Hungarian Chamber of Commerce, László Tóth, said, “This package is a welcome stimulus that will help many businesses survive the post‑pandemic transition. It will also encourage entrepreneurship and support local economies.”

However, some economists and opposition parties have warned of potential short‑term revenue loss. Dr. Anna Bánki of the Hungarian University of Economics cautioned, “While the incentives are generous, the government must ensure that the tax cuts do not erode the fiscal base needed for public services, especially healthcare and education.”

International observers see Hungary’s move as part of a wider European trend of governments using tax incentives to shore up SMEs. A report from the European Commission’s SME Centre highlighted that 12 EU member states had announced similar packages in the past three years.

Looking Ahead

The €272 million package is only one element of Hungary’s 2026–2030 growth strategy, which also includes a €500 million investment in high‑tech manufacturing and a new “Green Innovation Fund” earmarked for sustainable businesses. The government has pledged to monitor the package’s impact through quarterly metrics—such as new firm registrations, employment figures, and tax revenue changes—reporting the results to the European Parliament and the OECD.

In summary, Hungary’s targeted tax cuts are designed to give its SMEs a timely lift, encourage job creation, and secure a more resilient economic base in the post‑pandemic era. Whether the measures will achieve the desired growth without compromising fiscal prudence remains to be seen, but the policy reflects the country’s commitment to support the entrepreneurial segment that underpins its economy.