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.
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.