The most important thing about the tax policy of Hungary - for individuals and legal entities

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Income tax

Corporation tax

Corporate tax (on profit) is levied from companies-residents of Hungary, including JSCs, LLCs, law firms, public funds and universities, as well as non-resident companies with a share of profits in business associations that own real estate in the country in the amount of 75% of the book value of its assets.

In assessing the tax base, in accordance with Law LXXXI 1996, consideration is given to, inter alia, losses, appropriations, depreciation, intangible assets, dividends, royalties, research and development costs, investment in sports development, sponsorship in the film industry and theatrical arts as well as fines. The corporate tax rate is 10% on the tax base up to HUF 500 million plus 19% on the rest of the tax base (from the amount exceeding this threshold).

Tax incentives are provided for companies:

  • investing at least 1 billion HUF in projects created or operating in the jurisdiction of local governments;
  • providing a wide range of Internet services;
  • investing 100 million HUF and more in the production of film and video products;
  • creating new jobs;
  • supporting the following sports: football, handball, basketball, water polo and hockey.

Small Business Taxes (KIVA)

Companies with an average headcount of less than 25 people, with a turnover of up to HUF 500 million and a total balance sheet of no more than HUF 500 million, are taxed at a rate of 16%.

The minimum tax base cannot be less than the amount of payments to staff. This tax is paid monthly if the amount paid in the previous year exceeded 1 million HUF, or quarterly otherwise.

Simplified System (EVA)

This taxation system is appropriate for enterprises, the expected annual turnover of which does not exceed 30 million HUF, and the annual gross income is 30 million HUF, while the taxpayer should not own shares of other legal entities. The tax rate is 37% and it usually replaces VAT, corporate, income and dividends.

Income tax (personal income tax)

All income of resident taxpayers is subject to this type of tax. As for non-residents, only those incomes that were received on the territory of Hungary, as well as taxable on the basis of international agreements, are taxed. It should be clarified here that a resident is:

  • any Hungarian citizen, except for persons with dual citizenship, without a place of residence or place of stay in Hungary;
  • citizens of the EEC member states residing in Hungary for more than 183 days a year;
  • citizens of third countries with a residence permit;
  • persons with a place of residence only in Hungary.

The tax base consists of the totality of income from independent and other activities, as well as from the sale of real estate, interest, dividends, long-term investments and other income. It is calculated either by keeping records of expenses, or by using an expense ratio of 10%. The personal income tax rate is 16%.

For families with a child, a tax credit of HUF 62,500 per child applies and HUF 206,250 for three or more children. These funds are not taken into account when collecting personal income tax, and can also be deducted from the amount of health insurance or pension contribution. A foreign resident individual can take advantage of such a loan if he is not entitled to the same or a similar loan elsewhere in the same period, and also if 75% of his total income is subject to taxation in Hungary.

Private entrepreneurs are required to pay income tax and tax on dividends. The tax base is the difference between the total amount of income and expenses. The entrepreneur's income tax is 10% of the tax base up to 500 million and 19% of the rest of the tax base. The entrepreneur is also required to pay 16% tax on dividends.

Payroll tax

Tax on gross wages is paid by the employer (social security - 27%; professional contributions - 1.5%) and the employee (personal income tax - 16%; pension contributions - 10%; social insurance - 7%; employment - 1.5%) ...

VAT

VAT payers are legal entities or organizations engaged in entrepreneurial activity, regardless of location, purpose or result. If a taxpayer is not registered in Hungary and carries out activities subject to VAT in that country, he must register and obtain a tax number.

The general tax rate is 27%. In addition, Law CXXVII of 2007 sets two lower rates:

  • 5% - for medical services and medical equipment, books (including electronic), magazines, and some services;
  • 18% - for milk and dairy products, corn, flour and some commercial services.

Some types of goods and services are not subject to VAT, including - cars and their maintenance, internal combustion engines, residential real estate, food.

As a rule, taxpayers are required to file their tax return every quarter, except in certain otherwise specified cases (monthly or annually).

If the VAT payer is registered in another EU member state and supplies goods to a Hungarian company or individual in an amount exceeding EUR 35,000 per year, then such delivery is taxed, and the amount is converted at the rate of the National Bank of Hungary, which was valid at the time of Hungary's accession to the EU (i.e. EUR 35000 is equivalent to 8826650.4 HUF).

Local and building taxes

Local tax is levied on all entrepreneurs whose offices and branches are registered within the jurisdiction of a particular municipality, and its maximum rate is 2%. The tax base is calculated as a deduction from net sales income.

The maximum rate of construction tax for the year is 1100 HUF per 1 m 2

Temporary business activities (for example, construction and installation work) that an entrepreneur who does not have a registered office undertake for 30 to 181 days is subject to local tax, the maximum amount of which is HUF 5,000 per day.

The building tax is paid by the owner of the building, regardless of whether it is used for residential purposes. The maximum tax rate for the year is 1100 HUF per 1 m2 or a maximum of 3.6% of the market value of the real estate. It is paid on March 15 and September 15.

Car taxes (transport)

There are several taxes related to motor vehicles.

Companies pay tax on company cars (if their owners are not individuals), regardless of their use for personal purposes. Depending on the power and environmental class of the car, the monthly tax amount ranges from 7700 to 44000 HUF.

Car tax is paid by the owners of vehicles with Hungarian numbers, and the amount depends on the year of manufacture, weight and power of the car. The tax ranges from 140 to 345 HUF per 1 kilowatt of power for passenger cars.

Registration tax is charged on vehicles registered in Hungary. It is payable on import, purchase in EU countries and vehicle modification. The amount of tax for light vehicles ranges from 0 to 4.8 million HUF, depending on the year of manufacture, environmental class and technical characteristics (except for hybrid and electric vehicles, for which the standard registration tax is 76,000 HUF).

The property

Income from the sale of immovable property is taxed at a rate of 16%. The amount is determined by the individual on his annual tax return and is payable by the date indicated for filing it.

Residential fund

If an individual sells a residential house or apartment, then depending on the time of ownership (from the moment of purchase to the moment of sale), taxable income is reduced as follows: tax is charged in zero (year of acquisition) and in the first year - by 100% of the amount of income; in the second year - 90% of income; in the third - 60%, in the fourth - 30% and in the fifth - 0% of income.

For example, if an individual sells a residential building purchased in 2009 or earlier in 2014, no tax is charged.

Non-residential fund

Holiday homes, office premises, garages and other non-residential real estate have different parameters of lowering the tax base than residential real estate, depending on the time it is owned by the person making the sale. So, if an object is resold within the first five years (2010-2015), then the entire amount of income from the sale is taxed in full, then every year it is reduced by 10% and is not subject to taxation by the fifteenth year. For example, if an individual sells a holiday home purchased in 1999 in 2014, no tax will be charged.

Another example: in 2014, a private person sells a holiday home for HUF 20 million, which was acquired in 2000 for HUF 12 million. In the 6 months before the sale, the holiday home was renovated for 2.4 million HUF, which is more than 5% of the proceeds and therefore can be considered an investment, therefore, this reduces the tax base. The total costs associated with the transfer of the property and the payment of invoices amounted to HUF 0.6 million. Thus, taking into account the costs, the amount is reduced and amounts to HUF million: 20 - 12 - 2.4 - 0.6 = 15. In addition, 90% can be deducted from the estimated amount, taking into account the holding period: 5 - 4.5 = 0.5. Thus, the taxable profit is “only” 500 thousand, and the tax is 80 thousand HUF.

All numerical values ​​and calculated data correspond to the tax legislation of Hungary at the end of 2014 - beginning of 2015 according to the information on the website of the National Tax and Customs Administration of Hungary at nav.gov.hu. Please check the current information using the original source, as the legal framework is being updated.

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