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Tax Guide

Financial Year – 1 January – 31 December
Currency – Hungarian forint (HUF)

Corporate Tax Summary

Residence – A company is resident in Hungary if it is incorporated in Hungary or its principal place of business management is in Hungary. Foreign businesses, as well as non-resident entities whose head office is located abroad, shall be deemed taxpayers if they carry out business operations at their branches in Hungary, provided that they are not considered resident taxpayers due to the location of their head office, or if they obtain any income through the transfer or withdrawal of a participating interest in a company with real estate holdings.

Basis of Taxation – Resident companies are taxed on worldwide income. A non-resident company generally pays taxes only on income derived from business operations performed in their Hungarian branches. The tax rates and treatment are the same for companies and branches of foreign companies.

Reference
Corporate Income Tax Rate 9%
Branch Tax Rate 9%
Withholding Tax Rate:
Dividends – Franked 0% No WHT is applied in Hungary.
Dividends – Unfranked 0%
Dividends – Conduit Foreign Income 0%
Interest
Royalties from Intellectual Property
Fund Payments from Managed Investment Trusts
Branch Remittance Tax
Net Operating Losses (Years)
Carry Back
Carry Forward For 5 years up to 50% of the profit before tax of the relevant financial year.

Individual Tax Summary

Residence – An individual has Hungarian tax residence if he/she:

  1. Is domiciled in Hungary
  2. Has a permanent home exclusively in Hungary
  3. Has the centre of his/her vital interest (the closest personal and economical relationships) in Hungary
  4. Where residence cannot be determined based on the permanent home and the centre of vital interests, the person is tax resident in Hungary if he/she has a habitual abode in Hungary. An EEA (European Economic Area) citizen will be regarded as a Hungarian tax resident if he/she is present in Hungary for a total of at least 183 days during a calendar year.

Basis of Taxation – Hungarian resident individuals pay tax on worldwide income, while foreign resident individuals are taxable only on Hungarian source income.

Filing Status – A self-assessment regime applies, and individuals are required to file their own returns. Employees with online registration receive a return draft from the tax authority which is considered to be a filed return if the person accepts it or does not make any corrections within a defined period. Spouses are treated as separate taxpayers.

Personal Income Tax Rates

Taxable Income Tax Payable – Residents Tax Payable – Non Residents
Unlimited 15%

Goods and Services Tax (GST)

Rate 27% (18%/5%)
Taxable Transactions
  1. Domestic supply of goods and services
  2. Intra-Community acquisition of goods (the supplier is a taxable person established in another Member State of the European Union)
  3. Imports

The general VAT rate is 27%. Reduced rates of 18% and 5% are applied to the supply of different products (e.g. meat, dairy products, cereal products, medicines, books) and services (e.g. internet access services, catering services, provision of accommodation).

Registration Taxable persons are obliged to register with the tax authority prior to the commencement of pursuing their business activities on the territory of Hungary. Foreign companies may register only for VAT purposes without the need to form a resident company, but for non-EU countries it is necessary to appoint a fiscal representative. There is no threshold for the registration of non-resident traders, except for distance selling to private individuals.
Filing and Payment Monthly, quarterly, or annual filing and payment may be required, depending on the amount of the tax liability.

Other Taxes Payable

Tax Reference
Payroll Tax Employers must pay social tax at a rate of 15.5% and a vocational training contribution at a rate of 1.5% on the employee’s wage.
Stamp Duty Various stamp duties must be paid under different administrative and court procedures.
The transfer of real estate properties or shares in companies holding Hungarian real estate is subject to transfer tax, payable by the purchaser. A 4% tax rate is applicable up to a market value of HUF 1 billion, whereas a tax rate of 2% is applicable to the part exceeding that amount. The tax payment liability is capped at HUF 200 million per acquired real estate property.
Transfer tax is also levied on the transfer of motor vehicles, certain gifts and on inheritance (in specific cases).
Land Tax Municipalities may levy land tax and building tax.

1. Excise Tax
In line with EU directives. Taxable products: energy products, alcohol products, tobacco products.

2. Motor Vehicle Tax
Motor vehicle tax is payable by the operator or by the owner. Tax liability begins at the date of entry into service. The tax rate depends on the year of manufacture and the power of passenger cars. In the case of non-passenger cars, it varies based on the weight (kerb and payload weight) and the type of suspension of lorries, road tractors, buses and caravans. The tax varies between HUF 140 and HUF 345/KW for passenger cars, and HUF 850/100 kg and HUF 1380/100kg for buses, tractors, and lorries.

3. Company Car Tax
Company car tax is payable on passenger cars (including passenger cars leased under financial lease arrangements) and on cars not owned by a private individual or cars in relation to which the private individual recognises costs, expenditures or depreciation. The tax depends on the power and emission class of the passenger car and amounts to between HUF 7,700 and HUF 44,000/month.

4. Tourism Contribution
A tourism contribution must be paid for the supply of food and locally prepared non-alcoholic beverages in restauranta and for the supply of commercial accommodation services. The tax rate is 4%.

5. Public Health Tax
The purpose of the law is to tax unhealthy foods (soft drinks, salted snacks, alcoholic beverages, etc.) for the financing of public health programmes and promoting health conscious nutrition. The tax rates depend on the product categories.

6. Environmental Product Fee
The purpose of the environmental tax is to finance the elimination/prevention of environmental hazards caused during the production, distribution and use of taxable products (tyres, battery, packaging material). Tax is payable on certain activities related to taxable products and the rates varies depending on the nature of the activity.

7. Sectorial Taxes
7.1. Tax for the Financial Sector
Tax is payable by financial institutions (banks, financial enterprises). The tax payable by banks is 0.15% of the modified balance sheet total up to HUF 50 billion and 0.2% above HUF 50 billion. The tax payable by financial enterprises is 6.5% of the net result on interest and fees.

7.2. Tax for Energy Suppliers
Energy suppliers, public service providers and the Hungarian energy supplying permanent establishments of foreign entities are subject to energy suppliers‘ income tax. The tax base is the adjusted pre-tax profit and the tax rate is 31% of the positive tax base.

7.3. Telecommunication Tax
Telecommunication service providers are subject to tax. In the case of individuals, the rate is HUF 2 per minute on phone calls and per message (SMS, MMS), with a monthly maximum of HUF 700. In the case of corporations, the tax rate is HUF 3 per minute on phone calls and per message, with a maximum of HUF 5,000 per phone number.

7.4. Tax on the Retail Sector
The tax rate is 0.1% on annual net sales higher than HUF 500 million and up to HUF 30 billion; 0.4% on sales exceeding HUF 30 billion and up to HUF 100 billion; and 2.5% on sales exceeding HUF 100 billion.

7.5. Insurance Tax
Insurance services are taxable in the case of damage insurance, property and accident insurance and the compulsory insurance of motor vehicles if the risk arises in Hungary. The tax rate varies depending on the type of insurance service.

Last updated: 01.09.2020

Contact us:

Senior partner, Attorney-at-law in Hungary
Dr. György Zalavári
Senior partner, Attorney-at-law
+36 1 439 1166