In recent years Hungary has become known for a single line: it has the lowest corporate income tax in the entire European Union. Nine per cent sounds like a strong argument, and for many entrepreneurs it is the first thing they hear about the country. Czechia, by contrast, taxes company profit at 21% — more than double on paper. If the decision came down to a single number, the debate would end here.

But expansion is not about one rate. A company also pays VAT, deals with registered capital, wages, the currency it invoices in, and the degree of certainty with which it can plan years ahead. It is precisely on these points that the order often reverses. This short comparison is not tax advice — it is more an overview of what to weigh when choosing between the two countries.

Taxes — the lower rate is not the whole story

Hungary's corporate income tax is a flat 9%, and it really is the lowest statutory rate in the EU. Czech corporate income tax is 21% (this rate has applied since 2024). On a profit of one million, a gap of twelve percentage points is tangible — on the bare number Hungary looks clearly cheaper, and for a firm that is simply maximising profit from an established operation, that can be decisive.

The picture changes with VAT, though. Hungary has a standard VAT rate of 27% — the highest in the whole Union — while Czech standard VAT is 21%. For a company that sells to end customers or buys a lot on the domestic market, this difference feeds into both prices and cash flow. On top of Hungary's profit tax there is also a local business tax levied by municipalities — so the effective tax burden is not just the headline nine per cent.

Setting up — how much you need at the start

A big practical difference is the registered capital. A Czech s.r.o. can be founded under the Business Corporations Act (Act No. 90/2012 Coll.) with registered capital of as little as one koruna, so the barrier to entry is token and the real costs are mainly the notary, fees and a registered seat. Its Hungarian counterpart, the Kft, requires registered capital of three million forint (on the order of EUR 7,000–8,000), part of which must be paid up before registration. For a small firm, or a founder simply testing the market, that is a tangible difference right at the start.

The setup itself is manageable in both countries, and most steps can be handled remotely these days. In Czechia a company needs a registered seat — a specific address with the property owner's consent — an entry in the Commercial Register and, as a rule, a data box; we set out the procedure for a foreign founder in the piece on setting up a Czech s.r.o. as a foreigner. Similar principles (seat, register, managing director) apply in Hungary too; what differs is mainly the detail and the language of official dealings.

What decides in practice

Behind the numbers lies a wider picture. Czechia benefits from a stable industrial base, strong purchasing power and a location from which Germany, Poland and Slovakia are all within easy reach; costs and wages are higher than in Hungary, but the market is more mature too. Hungary attracts with its low profit tax and lower costs, but on the other hand works with the forint, whose exchange rate tends to be more volatile — which complicates planning for a company that counts in euros. Why foreign companies choose the Czech market in the first place is something we explored in the article on why foreign entrepreneurs choose Czechia.

There is no universal "better". For a company maximising net profit from an operation that is already running, Hungary's nine per cent may decide it. For a company building a credible European presence, serving end customers or wanting to plan calmly, what matters is stability, lower VAT and token registered capital — and there the balance tips towards Czechia.

Choosing the country and the legal form has its tax and legal specifics — STEINIGER | law firm can help with the comparison, setting up a Czech s.r.o. as a foreigner and preparing the documents.

Conclusion

Hungary vs Czechia is not a contest over a single number. Hungary leads with the lowest corporate income tax in the EU (9%), while Czechia answers with lower VAT (21% against 27%), token registered capital for an s.r.o. from a single koruna and a more stable environment for long-term planning. Anyone expanding should place entry costs, currency and market maturity next to the tax rate. And if the choice falls on Czechia, the first practical step is a reliable registered seat — comfortably in a carefully managed house for just thirty companies — and order in the documents.

Frequently asked questions

Does Hungary really have the lowest corporate income tax in the EU?

Yes. Hungary's corporate income tax is 9%, and it is the lowest statutory rate in the entire European Union. Czech corporate income tax, for comparison, is 21% and has applied since 2024. You do, however, have to account for other taxes as well — mainly VAT and the local business tax — so the effective burden is not just the headline nine per cent.

Why would anyone choose Czechia when its profit tax is higher?

Because the profit tax rate is only one item. Czechia has lower standard VAT (21% against Hungary's 27%), far lower registered capital for an s.r.o. (from one koruna against three million forint for a Kft) and a more stable environment, including its currency. For a company that serves end customers or wants to plan for the long term, these factors can outweigh the lower profit tax.

How much money do you need to set up a company in each country?

In Czechia the registered capital of an s.r.o. starts by law at a single koruna, so the barrier to entry is token and the real costs are mainly the notary, fees and a registered seat. In Hungary a Kft requires registered capital of three million forint (on the order of EUR 7,000–8,000), part of which must be paid up before registration. The difference is most tangible for small firms that are only just entering the market.