Taxation in Hungary, Hungary Business Income and Rates - Allo' Expat Hungary
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Taxation in Hungary

Corporate Tax

Main rate: 16%

Resident companies are taxed on worldwide income; non-resident companies are taxed only on Hungarian-source income. Taxpayers are treated as resident for tax purposes if they are created under Hungarian law or if they are managed or controlled in Hungary. Tax is charged at a flat rate of 16%, with a surtax of 4%, which was introduced in 2006, giving rise to an effective rate of 20%.

Individual Tax

Progressive rates to 38%

Resident individuals pay tax on worldwide income; non-resident individuals pay tax only on Hungarian-source income. A Hungarian national (and a foreign national with a Hungarian settlement permit) is regarded as resident for tax purposes. Other persons may be regarded as resident if their permanent home, centre of vital interests or habitual abode is in Hungary. The personal income tax system consists of two brackets of 18% and 36%; the higher rate applies at an annual income level of HUF 1.7 million. Individuals are also subject to the 4% solidarity surtax from January 1st 2007.

Capital Gains

Generally taxed as income

Gains from the sale of business assets are treated as ordinary business income. Under a participation exemption introduced from January 1st 2007, capital gains realised on the sale of Hungarian and foreign participations are exempt from corporate income tax and the solidarity surtax, provided certain conditions are satisfied.

Capital gains of individuals from the sale of immovable property are taxed at 25%. Tax exemptions exist for gains used to finance the purchase of a new home and for gains derived after the property has been held for 15 years. Gains from the sale of securities are taxed at 20% where the securities are listed on certain stock exchanges.

Indirect Tax

Standard rate: 20% ; Lower rates: 5%

Value-added tax (VAT) applies to most transactions at a rate of 20%. The 5% rate applies to textbooks and certain medical materials and supplies. Financial services, health and education services and leases of dwellings are exempt.

Registration for VAT is compulsory for businesses.

Tax Administration and Compliance

Tax year: Corporations: accounting year ; Individuals: calendar year

Although the tax year is the calendar year, companies may elect to use a tax year that corresponds to their accounting year. Companies make monthly or quarterly advance payments of tax. Annual corporate tax returns must be filed by May 31st following the tax year (or within 150 days of the end of the company’s tax year if this is different from the calendar year). Quarterly prepayments (monthly for large taxpayers) are due based on the liability for the previous year. The final tax liability is payable with the tax return.

Employment income of individuals employed by a Hungarian company is taxed by withholding. If the individual’s compensation is paid by a foreign (non-Hungarian) entity and the compensation is not paid through a Hungarian entity, tax withholding is operated in the form of quarterly advance tax payments due from the individual.

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