Companies that carry out their activities in the area of a given local government must pay local business tax to the local tax authority.

The base of the local business tax is the net sales revenues less the purchase value of the goods sold, material costs, the value of intermediated services and the value of subcontractors’ performance. This means that, among other things, the following may not be deducted from the revenues: staff costs, services used, depreciation and financial expenditures. A stricter measure applies to large companies, according to which in the case of domestic revenues exceeding HUF 500 million, only 70 to 85% (depending on the size of the enterprise) of the deductible items (with the exception of material costs) can be taken into account.

The rate of local business tax is subject to the decision of the specific local government, but may not exceed 2%.

Companies that carry out taxable activities in the territory of more than one local governments simultaneously, distribute their tax base among the local governments concerned, using the calculation methods determined by law (based on the asset ratio and/or the staff costs ratio).

Activities that last no longer than one month (e.g. building and fitting by a foreign company) are exempt from local business tax, while temporary activities that last no longer than six months in the tax year incur a daily flat-rate tax (maximum HUF 5000/day).

The local government may levy

• a building tax on buildings for housing or other purposes in its area, the maximum amount of which is HUF 1,100/m2/year or 1.8%/year of the market value and
• a land tax on land in its area, the maximum amount of which is HUF 200/m2/year or 1.5%/year of the market value.

The owners of public utility lines pay a public utility tax of HUF 125 per metre (the owners of telecommunications lines are granted an allowance depending on the length of the lines).