The investment opportunities in Hungary are quickly putting the country on the map for foreign investors. While the potential is massive, it’s important to understand how taxes in Hungary work for you to know where you stand and what you are liable for.
In this guide you will learn about:
Overview of the Hungarian Tax System
The tax system in Hungary is not based on immigration status but is rather dependent on residency status. Tax residents of Hungary are liable for taxes on worldwide income.
Who pays tax in Hungary?
In order to be considered a tax resident of Hungary you must spend at least 183 days in Hungary within a calendar year. If you want to avoid kicking in Hungarian residency status you cannot spend more than 182 days in Hungary within a calendar year, this can be in one visit or cumulative over the year.
Hungarian tax authorities may also consider you a tax resident if you have a:
- Permanent home: You have a permanent home in Hungary
- Center of vital interests: If most of your key connections, such as family or financial ties, are in Hungary, you might be considered a tax resident even if you don’t meet the 183-day requirement.
Income Tax in Hungary
The personal income tax rate in Hungary is set at a flat 15% of taxable gross income. This is applied to various income types, including:
- Wages/salary
- Interest
- Dividends
The Hungary income tax for foreigners will be the same if you are considered a Hungary tax resident. This can include:
- Remaining in Hungary for more than 183 days in a year
- Having a permanent residence in Hungary
- Bein deemed to have key connections in the country
Hungary income tax exemptions
Tax residents may be eligible for a Hungary income tax exemption if they meet the requirements. Here are some exemptions that fall under the personal income tax act in Hungary:
- Interest income from Government bonds: Certain government bond interests may be exempt from personal income tax.
- Dividends from Hungarian companies: Dividend income obtained from Hungarian businesses are generally exempt from personal income tax if the shares have been held for over a year.
- Work-related costs: There are certain work-related reimbursements and allowances that are not liable for income tax.
- Pensions: Pensions, whether private or from the Hungarian government are generally exempt from paying income tax.
- Agricultural subsidies: Income from agricultural activities that are supported by the Hungarian government may be exempt from tax.
- Workers under 25: If you’re under 25 in Hungary, you can claim a tax-free allowance on your income up to HUF 559,100 per month (the gross national average income as of July 2023). Any income above this limit is taxed at the standard 15% rate.
- Mothers under 30: Mothers aged 25–30 can claim a tax allowance of up to HUF 83,865 per month in 2024. This applies from the 91st day of pregnancy or when adopting a child.
- Family tax allowance: The family tax allowance in 2024 is HUF 66,670 per month for one child, HUF 133,330 for two children, and HUF 220,000 for three or more children. This amount is deducted from the taxpayer’s taxable income. Additionally, mothers raising at least four children are exempt from paying personal income tax.
Important to note: Income tax exemptions in Hungary are dependent on certain regulations, so it’s important to consult with a tax specialist to ensure you are avoiding over taxation or not missing out on any tax savings.
Corporate Tax in Hungary
The Hungary corporate tax rate is set at a flat 9%, one of the lowest corporate tax rates in the European Union.
Plus, Hungary dividends tax earned from companies are also subject to corporate tax exemptions, as long as they are not received from a Controlled Foreign Company (CFC).
Important to note: Some Hungarian companies may also need to pay local business taxes, which can be up to 2% of the new sales revenue, depending on which municipality the business is within.
Hungary Social Security Contributions
Both employers and employees are required to contribute to the Hungary social security system, here are the various rates:
Employee | 18.5% |
Employer | 13% |
The social contribution tax in Hungary goes towards tax revenue, including health insurance and labor market contributions and pension contributions.
Capital Gains Tax in Hungary
Capital gains tax in Hungary from the sale of immovable and movable property are both taxed at a set 15%. This can be from items such as:
- Personal assets (jewelry, art, vehicles etc.)
- Real estate
- Livestock
- Financial assets (bonds and shares)
- Business assets (Inventory, tools, machinery)
Certain items, like real estate, may be exempt from capital gains tax if the estate is held for longer than five years. This is important to note for those looking to obtain the Hungary Golden Visa, where one of the most popular investment options includes obtaining real estate.
Read our Hungary Golden Visa Guide
Inheritance Tax in Hungary
Hungary imposes an inheritance tax on the transfer of property upon death. The standard inheritance tax rate is 18% of the net value of the inheritance received.
There is also a reduced rate for residential property. A preferential rate of 9% applies specifically to the acquisition of residential property.
All individuals, regardless of residency status, are liable to pay inheritance tax on property located in Hungary. Hungarian nationals (those with a Hungary passport) and non-Hungarian nationals living in Hungary are also liable for inheritance tax on movable property situated abroad, unless it has been taxed abroad.
There are certain exemptions that may apply to reduce or eliminate inheritance tax, including:
- Movable property: The first 300,000 HUF (€725) of movable property per beneficiary is exempt from tax, with certain exceptions, including vehicles.
- Direct relatives: Property inherited by the deceased’s spouse, children, or parents is exempt from inheritance tax, regardless of the amount.
- Step and foster relatives: Inherited property from step or foster parents or children is exempt up to 20 million HUF (€48,361).
Cryptocurrency Tax in Hungary
In Hungary, cryptocurrency is treated as a form of property for tax purposes, which means that transactions involving cryptocurrencies are subject to capital gains tax.
Profits from the sale or exchange of cryptocurrencies are subject to a 15% capital gains tax. This applies to any gains realized when selling or trading cryptocurrencies.
Sales Tax in Hungary (Value Added Tax - VAT)
The standard Hungary VAT rate stands at 27%. It is one of the highest VAT rates in Europe and covers goods and services, including:
- Professional services
- Clothing
- Electronics
- Household goods
Reduced VAT rate
There are some instances where a reduced VAT rate applies. Here are some items that qualify for the reduced VAT rate in Hungary:
Item | VAT rate |
Basic food items | 18% |
Some hotel accommodations | 18% |
Books | 5% |
Medicine | 5% |
Livestock | 5% |
Medical equipment | 5% |
VAT exemptions in Hungary
There are certain items that are exempt from paying VAT in Hungary or are zero rated, these include:
- Healthcare services
- Educational services
- Exports outside the EU
- Financial services
Hungary Double Tax Treaties
Hungary has established double tax treaties (DTTs) with several key countries, which help prevent double taxation and provide tax relief for residents and businesses engaged in international activities.
Hungary has a DTT with most EU member states, including Germany, France, and Italy and non-EU Countries such as:
- Canada
- Australia
- Japan
- South Africa
- Thailand
- Turkey
- Mexico
- Brazil
- India
Important to note: Hungary does not have a tax treaty with the USA anymore.
How to Pay Taxes in Hungary
Here is a step-by-step guide on how to pay taxes in Hungary:
- Step one: Register with the competent tax authority: Businesses and individuals need to obtain a tax identification number from the Hungarian National Tax and Customs Administration (NTCA). Registration for individuals is generally automatic when starting work.
- Step two: Maintain accurate records throughout the year: It’s vital for individuals and businesses to maintain and keep records to submit with their tax returns each year.
- Step three: File taxes: Individuals with additional income over their annual salary must manually complete their tax returns. Businesses are required to fill monthly, quarterly, and annual VAT returns over the annual corporate income tax.
- Step four: Pay tax: Businesses and individuals can pay taxes in Hungary through NTCA bank account, the online payment platform, or in cash at NTCA offices.
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Frequently Asked Questions About Taxes in Hungary
What is the tax in Hungary on salary?
Personal income tax in Hungary is set at 15%. There are also local taxes like social security contributions which come to 18.5% for employees.
How much tax will I pay in Hungary?
How much tax you pay in Hungary depends on whether you are a tax resident. Tax residents must pay personal income tax on their worldwide income. Non-residents, including those spending less than 183 days in Hungary, are taxed only on Hungarian-sourced income, unless a double tax treaty applies, which may reduce or eliminate their tax liability in Hungary.
Does Hungary have a wealth tax?
No, Hungary does not have a wealth tax. Individuals are not taxed on their total net worth or accumulated assets. Instead, the tax system focuses on income taxes, VAT, and other specific taxes such as property tax and corporate tax.
How are salaries taxed in Hungary for expats and residents?
Residents of Hungary are taxed on their worldwide income, including salaries earned abroad. Expats who are non-residents are only taxed on their Hungarian-sourced income. If they spend less than 183 days in Hungary and are employed by a foreign entity, they may not be subject to Hungarian tax.
What tools are available for calculating income tax in Hungary?
The most accurate way to calculate your income tax in Hungary is to work with a tax specialist. But if you look online, you may find a reliable Hungary tax calculator. But it’s important to remember that these don’t often allow you to personalize the inputs which can drastically change how much tax you pay each year.
What is the current sales tax (VAT) rate in Hungary?
The VAT rate in Hungary in 2024 is 27%. There are some items that qualify for a reduced VAT rate, this includes items like books and medicine. Some services also have a zero-sales tax rate, including education and healthcare.
Are there any exemptions to VAT (sales tax) in Hungary?
Yes, services that are exempt from VAT in Hungary include healthcare services, education, financial services, and exports outside the EU.
What is Hungary's corporate tax rate in 2024?
The corporate tax rate in Hungary in 2024 is 9%, the lowest in the European Union.
What income tax exemptions are available in Hungary for 2024?
In Hungary, the income tax exemptions for 2024 include:
- Young workers under 25 can apply for a tax-free allowance up to HUF 559,100 per month.
- Mothers aged 25–30 who give birth or adopt after December 31, 2022, can reduce their taxable income by up to HUF 83,865 per month.
- The family tax allowance provides tax relief based on the number of children: HUF 66,670 for one child, HUF 133,330 for two, and HUF 220,000 for three or more.
- Mothers raising at least four children are exempt from personal income tax on certain types of income.
Do foreigners pay tax in Hungary?
Foreigners are only liable for tax if they are considered tax residents (spending more than 183 days in a calendar year in the country). Tax residency may also apply if the government deems you a tax resident because of your ties to the country or you own a permanent residence.
