Hungarian Tax Laws and Regulations
Hungarian Tax Laws
Hungary benefits from a highly skilled and educated workforce, with a strong focus on technology and science. The country also benefits from the lowest corporate tax rates in Europe, as well as excellent infrastructure, and a variety of governmental and municipal incentives.
We have made it our goal to keep track of the latest changes in the tax policies to always ensure complete compliance. To keep you informed and updated too we created this guide which includes the basic facts regarding tax regulations in Hungary.
Overview of Taxes in Hungary
- Individual Income Tax: 15%
- VAT: 27%
- Corporate Income Tax: 9%
- Social Security Contributions: 18.5% (Employee), 17% (Employer)
Hungary Individual Tax – Single, Married
An individual’s liability to pay income tax is determined by their residency status as well as the source of their income. Both residents and non-residents are taxed on their income – residents are taxed on worldwide income, whilst non-residents are only taxed on income received from Hungarian sources.
Two types of income are considered in Hungary:
- Income to be taxed together: income from employment, self-employment, and other income
- Income to be taxed separately: benefits, capital gains, income from private businesses, and income from rental properties.
Individual income that is derived from employment activity which is performed in Hungary is considered as domestic-source income, even if it is paid from abroad. In these cases, income tax is still due.
The current tax return system is based on self-assessment – individuals can file tax returns themselves or review draft tax returns prepared for them by the tax authorities via the online tax authority platform known as Client Gate (or eSZJA) and can amend, as necessary.
If you do not have access to the personal platform, however, you can ask for your Income Tax Declaration Draft via post and SMS. However, it is mandatory to register for a Tax Identification Number.
The Personal Income Tax (PIT) in Hungary is a flat rate of 15% on taxable gross income. Besides that, individuals are subject to pay social security contributions, which amounts to 18.5% of their gross income. Both income tax and social security contributions are withheld by employers and paid to the National Taxes and Customs Administration (NAV) monthly. Employers must pay by the 12th day of the following month.
Individuals with income that is not subject to withholding should make quarterly income tax advances, which applies for employment income that is not Hungarian-sourced. In this case, payers are required to make reports on total payments to the tax authority, which include benefits and expenses paid or reimbursed.
Tax Returns are due by the 20th of May of the following tax year. Taxable income and liabilities should be determined and declared in Hungarian forints, in which there are specific rules to determine the forint exchange rate with other currencies.
In the case of married couples, both individuals are to be taxed separately.
Non-residents in Hungary are taxed on Hungarian-sourced income – if the company is the payer, they must withhold the income tax advances. In other cases, it is the obligation of the individual, and must be declared in an annual tax return. Payments on tax advances must be made by the 12th day of the following month.