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Taxation in Hungary

Taxation in Hungary

Updated on Friday 30th October 2015

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Taxation in Hungary is levied on personal or corporate income and it has progressive rates. The country harmonized its tax system with the EU directives, making it more convenient for foreign investors to adapt to the tax system. Foreign direct investment is welcomed in the country and entrepreneurs can open a new company in Hungary or choose to establish branches of foreign-owned companies. 
 
The experts at our Hungarian law firm can provide you with complete tax compliance services and additional ones like tax minimization. 
 

Corporate taxes in Hungary

Hungary imposes a corporate tax on all companies incorporated in the country. A company is considered a tax resident in Hungary if it is registered in the country or if its main place of management is in the country (even if the company is based abroad). Resident legal entities are taxed on their worldwide income and non-resident companies only on their income produced in Hungary. The corporate income tax in Hungary is 10% up to 500 million HUF and 19% on larger amounts.
 
Other business taxes in Hungary include the real property tax, the transfer tax, gift tax, local business tax (maximum 2%) and social security contributions. Withholding taxes on dividends, interest or royalties are applicable under certain circumstances.
 
Hungary has a standard value added tax rate of 27% but lower rates of 18% and 5% are applicable to certain goods and services. VAT is levied on the supply of goods and services as well as on imports in Hungary.
 
The tax year in Hungary usually has a 12 months period, and is generally the calendar year, although it can be shorter in certain cases. The corporate income tax is evaluated on an annual basis. Hungary has signed treaties with numerous countries in order to avoid double taxation.
 

Personal taxation in Hungary

Hungarian residents must pay personal income tax on their worldwide income. Foreign individuals who are also Hungarian residents must also pay personal income tax on their income produced in the country. An individual is considered a tax resident in Hungary in each of the situations below:
 
- he is a Hungarian citizen;
- has a permanent home in Hungary and nowhere else;
- his/her vital interests are located in Hungary;
- the habitual abode is in Hungary (Hungary is the country where he/she spends the most time);
- he/she spends at least 183 days in Hungary during one calendar year (applicable for EEA citizens).
 
The personal income tax rate is 16%. The same rate applies to dividend income and bank interest. Employees in Hungary are also required to pay social security contributions of 18.5%. Individuals in Hungary must file the tax returns on a self-assessment basis. Penalties apply for underpayment or late payment.
 
If you want to open a business in Hungary and need more information about the Hungarian tax system, please contact our lawyers in Hungary. We provide a wide range of legal services for foreign investors so feel free to tell us what you need.
 
 

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