Year-End Planning: Why Now Is the Right Time to Consider Switching to KIVA

The end of the year is not only a time for reviewing business performance but also an ideal opportunity for strategic tax planning. For many smaller businesses, it is worth asking whether their current tax regime remains the most advantageous option, or whether it is time to switch to the Small Business Tax (KIVA).

Year-End Transition: The Best Time to Assess the Benefits of KIVA

Although KIVA can be chosen at any point during the year, a year-end transition is often the most practical solution. Aligning the change of tax regime with the closing of the financial year helps avoid unnecessary administrative burdens and duplicate closing procedures.

Which Companies Can Benefit Most from KIVA?

KIVA may be particularly advantageous for businesses where payroll-related expenses represent a significant share of costs compared to profits. It can also be an attractive option for companies that reinvest their earnings into growth, development projects, or new investments rather than distributing profits.

One of the key advantages of KIVA is that it replaces both corporate income tax and social contribution tax, while also simplifying the local business tax administration process. Because employment-related costs and business profits are taxed under a single regime, KIVA can create a more favourable environment for workforce expansion and salary increases.

The tax experts at LeitnerLeitner can help determine whether KIVA is the right choice for your business and provide support throughout the entire transition process, from preliminary calculations to completing all necessary administrative steps.

Key Facts About KIVA

The current KIVA tax rate is 10%.

The tax base primarily consists of personnel expenses and the balance of capital and dividend transactions, adjusted by certain items prescribed by law.

Eligibility Criteria

A company may opt for KIVA if, among other conditions:

• the total number of employees, including those of affiliated companies, does not exceed 100;
• consolidated revenue and total assets remain below HUF 6 billion;
• the company follows a calendar-year taxation period;
• its tax number has not been legally revoked by the tax authority during the previous two calendar years;
• it does not own a controlled foreign company.

What Should Businesses Consider Before Switching?

KIVA status becomes effective on the first day of the month following the submission of the registration. The transition also marks the beginning of a new financial year, meaning that the previous period must be formally closed, financial statements must be prepared, and the relevant tax returns must be filed.

Therefore, companies wishing to fall under KIVA taxation from 1 January 2026 must submit the necessary notification by December 2025. Careful timing can significantly reduce administrative workload and simplify year-end closing procedures.

The Right Choice Depends on Your Business

While KIVA can generate substantial tax savings, it is not the optimal solution for every company. A well-informed decision requires a detailed assessment of the company's profitability, payroll costs, ownership objectives, and future investment plans.

Now is the time to assess whether switching to KIVA would benefit your business!

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