Why Is This Relevant Now?
The year-end financial closing is crucial not only from an accounting perspective but also for tax decisions. The 10% KIVA rate remains an attractive alternative to corporate tax (TAO), but the conditions for remaining eligible are strict, and automatic termination can result in a significant additional tax burden, which requires advance preparation.
Exiting KIVA: When Is Taxpayer Status Automatically Terminated?
KIVA taxpayer status is automatically terminated if the company:
- has annual revenue exceeding HUF 6 billion, or
- has an average annual statistical headcount exceeding 100 employees.
Important: When assessing exit conditions, connected companies’ data is not considered. This differs from entry conditions, where the HUF 3 billion revenue and 50-employee limits are assessed on a consolidated basis.
Connected Companies: Relevant at Entry, Not at Exit
When choosing KIVA, the revenue and headcount of connected companies are included in the entry conditions. This is especially important for foreign-owned companies, where the Hungarian subsidiary may meet the requirements on its own, but not at the group level.
The NAV (Hungarian Tax Authority) may retrospectively examine whether the entry conditions were truly met. If not, taxpayer status may be revoked retroactively, and the company will fall under corporate tax. In such cases, not only corporate tax but also other taxes replaced by KIVA (e.g., social contribution tax – SZOCHO) must be paid retroactively.
Foreign-Owned Companies: Opportunities and Limitations
KIVA is available to foreign-owned companies, but:
- Branch offices cannot choose KIVA.
- The declaration must be submitted to NAV electronically.
- Companies starting operations mid-year may declare their choice of KIVA at the time of incorporation or registration with NAV.
Other Reasons for Termination
KIVA taxpayer status is also terminated if:
- the taxpayer has tax debt exceeding HUF 1 million under enforcement;
- NAV imposes a fine for failure to issue invoices, receipts, or for employing undeclared workers;
- the taxpayer has a controlled foreign company.
Important Note: If the taxpayer settles the debt before the decision becomes final, NAV may revoke the termination decision. The termination date marks the end of a separate fiscal year, and an extraordinary KIVA tax return must be submitted. After termination, KIVA cannot be reselected for 24 months.
What Can You Do Now?
KIVA’s benefits remain only if the conditions are met. Therefore, at year-end, it is advisable to:
- check revenue and headcount data;
- review the impact of connected companies on entry conditions;
- prepare for the financial consequences of switching to TAO.
We Help You Decide
Our accounting office and tax advisory team can help you navigate the KIVA regulations.
FAQ: Quick Questions About KIVA for Company Managers
To start 2026 securely, here are the key points summarized:
| Question | Answer (Advisor Summary) |
|---|---|
| What is the biggest financial risk? | If taxpayer status is terminated, the company falls under TAO. Taxes replaced by KIVA (e.g., SZOCHO) must also be paid. This can result in a significant, unplanned tax burden. |
| What’s the difference between the HUF 3 billion and HUF 6 billion thresholds? | The HUF 3 billion revenue limit applies at entry, and includes connected parties’ revenue. The HUF 6 billion threshold is for exit, and connected parties’ revenue is not considered. |
| What happens if I have to exit due to a connected company? | If it turns out that entry conditions were not met due to connected companies, NAV may retroactively terminate taxpayer status. Only a precise year-end audit can mitigate this risk. |
| How long can’t I reselect KIVA after exiting? | In case of automatic termination (e.g., exceeding HUF 6 billion revenue or HUF 1 million tax debt), the company cannot reselect KIVA for 24 months. |
