Friday, November 18, 2016

New 9% Corporate Tax Rate

Hooray for Hungary!  They are trying to be competitive and attract businesses  When countries start to compete for our business like corporation do, the citizens will be the winners.

But I wish they would address their burdensome VAT.  Ireland will soon have the higher corporate tax rate of 12.5%, but because they allow exporting companies to be exempt from VAT, it is very attractive and I'm tempted to move there for that reason.

Friday, November 11, 2016


The VAT is a terribly burdensome administrative 'activity.'  When I buy things, I pay VAT and then I request a refund.  I get back 100% of the tax after 2-3 month.  So, the government gets free use of my money and it cost me lots of time and energy to pay and recover, not to mention the extra cash flow burden (27%).   It is a significant cost to a small business.  Ireland is better and allows companies to be exempt from the VAT if they export 75% of their goods. (which I do).  So, any politician that starts talking about a VAT in the US should be lynched.

The other strange issue with VAT is that if I buy material from companies inside Hungary and take delivery inside Hungary, I pay this burdensome tax and take a cashflow hit, but if I were to move my business to a location outside Hungary, and continue to buy material from Hungarian suppliers, I don't have to pay the tax, even to the other country.  I must report it to the other country, but there is nothing to pay.

So, the VAT is creating the incentive for me to relocate my operation outside Hungary, but to buy from suppliers in Hungary.  I guess most EU countries are the same.  There is an incentive to buy materials from a different country than were the materials are delivered.  Weird.

Choosing Suppliers

Finding suppliers and getting quotes has been difficult.  We manufacture products and need suppliers of mechanical, electrical and plastic components from a dozen or more suppliers.  For selecting our key suppliers I made 2 new rules:

1) The president must speak English well, and
2) The company must not be so large that I do not deal directly with the President.

If the company is too large, we are not an important customer.  So I'm looking for suppliers with 10-100 employees.  I think my chances of finding the supplier I need will improve if they are in or near Budapest, since there is a better chance of finding strong English speakers.