Tax-Free Share Bonuses for Startups in Budapest, Hungary

Published: December 01 2023

Budapest, Hungary has introduced a new regulation that allows tax-free share bonuses for startups. This regulation applies to unlisted micro and small companies that meet specific criteria.

Under the new regulation, startups in Budapest, Hungary are eligible for tax exemptions on share purchases. To be considered a startup, a company must be unlisted, have been operating for no more than five years, have not paid dividends, and have not been created through mergers or splits. In order to maintain their tax-free status, shares and options must be held by executives or employees for a minimum of three years.

When the tax-free shares are eventually sold, they will be subject to capital gains tax instead of labor tax. This is a favorable tax rate compared to the labor tax rate.

The implementation of tax-free share bonuses for startups in Budapest provides several benefits. It incentivizes startups by allowing them to offer share bonuses to executives and employees without imposing additional tax obligations. This can help attract and retain talent in the startup sector and promote growth and innovation.

The introduction of tax-free share bonuses for startups in Budapest, Hungary is a positive development for the local startup ecosystem. This regulation offers tax exemptions on share purchases and encourages the long-term commitment of executives and employees to their companies. It is expected to stimulate the growth and success of startups in the region.

What is the new tax regulation for share bonuses in Hungary? The new tax regulation in Hungary states that options on share purchases for startups will be exempt from tax obligations.

What qualifies a company as a startup under the new tax regulation? Under the new tax regulation, unlisted micro and small companies that have been operating for no more than five years, have not yet paid dividends, and were not created through mergers or splits, are considered "startups".

How long must shares and options be held to retain their tax-free status? In order to retain their tax-free status, shares and options must remain with the executives or employees for at least three years.

How will the sale of these tax-free shares be taxed in Hungary? The sale of these tax-free shares will be taxed as capital gains, which is considerably less than the labor tax.

Who can benefit from the tax-free share bonuses in Hungary? Micro and small companies that meet the requirements for being considered startups can benefit from the tax-free share bonuses. Executives and employees of these startups will also benefit from this tax exemption.