Taxes in Hungary

Everyone working in Hungary is subject to social insurance. Both employers and employees make social security contributions.

The state social insurance provides the following benefits, allowances, and pensions to employees:

• temporary working incapacity
• temporarily reduced working capacity
• disability
• motherhood
• unemployment
• old age
• death

The employer pays the social security contributions for employees to the National Tax and Customs Office (NAV) by the 12th day of the month following the month in which the work was performed.

Pensions for labour activity are as follows:

• Pension for insurance for the length of service and old age
• Pension for surviving relatives (Survivor’s pension)

There are two types of pension funds:

• Mandatory state pension fund: 10% of the gross remuneration of the employee
• Additional voluntary pension insurance: available to anyone older than 16 (Employees can make contributions at their own expense or the employer’s as part of a social benefits package plan. The amount of the contribution, the regularity of the payment, and the period depend on the insured person’s choice.)

Health insurance is mandatory by law and covers the following individuals:

• Hungarian citizens
• Hungarian citizens with dual citizenship permanently living in Hungary
• Foreigners who are allowed long-term or permanent residence in Hungary, have a Social Security number, and pay (1) the contributions based on their income or (2) the monthly Social Security contribution fee
• International students accepted into a Hungarian university

The funds are raised from the health insurance contributions, transferred by and for all insured persons, and are spent for compensation of individuals with insurance cases (i.e., Illness) on an equal basis.

Health Insurance benefits include the following:

• health service
• cash benefits (pregnancy confinement leave, child care fee, sick pay, adoption fee)
• accident benefits (accident health benefit, accident sickness benefit)
• benefits for a person with an altered working capacity (disability benefits, rehabilitation benefits)

An employee may be entitled to the above cash benefits upon paying the social security contribution of 18.5% and meeting other eligibility conditions specified by law. However, the employer must contribute to sickness benefits in the form of a sickness contribution equal to one-third of the sickness benefits established and paid.

Health insurance benefits are normally determined and paid by the Social Security (SS) Disbursement Agency. Still, the employer is obliged to take over these tasks in certain cases. Every employer who employs at least one hundred full-time employees is obliged to take care of the social security task by setting up a social security payment unit. That unit deals with registration, establishment, provision of information, and disbursement. The employer pays these benefits, but the Social Security Disbursement Agency reimburses all the payments when it receives the monthly Social Security tax return.

Employees make 18.5% of social security contributions for a 30% of the minimum wage.

Employers determine, pay, and declare the tax on income from employment by the 12th of each month.

The rate is 15% of the monthly taxable base, which is equal to the taxable income accrued for the respective month. Employee social security contributions withheld by the employer are not deductible from the taxable base. However, tax reliefs for individuals with reduced working capacity and other statutory personal tax allowances may be taken into account when determining the amount of tax payable.

The annual tax base for employment income is determined as the taxable income, reduced by the mandatory insurance contributions and obligatory social security contributions paid abroad.

Residents are taxed for income from the country and abroad, while foreign individuals are taxed only for income from Hungary. Residents are those with a permanent address in Hungary or who reside in the country for more than 183 days every 12 months, regardless of their citizenship.

The employer must recalculate the annual tax by January 31 and send the Annual Tax Certificate (called M30 form) by January 31 each year.

The following reliefs apply:

• Retired status: Retired employees who continue working are subject to the standard 15% personal income tax rate. However, they are generally exempt from employee social security contributions.
• First marriage tax benefit: Married couples receive a monthly HUF 33,335 relief entitlement.
• Tax benefit for those under the age of 25: Employees under the age of 25 are entitled to a personal income tax allowance that exempts them from paying the 15% PIT on employment income up to a statutory monthly ceiling. The allowance is applied automatically by the employer during payroll, subject to eligibility conditions.
• Personal tax benefit: Severely disabled individuals are entitled to a tax relief of one-third of the minimum wage, which corresponds to HUF 107,600 (EUR 283.96).
• Children tax benefits:
  • HUF 133,340 (EUR 351.89) if there is one dependent child
  • HUF 266,660 (EUR 703.72) per child if there are two dependent children
  • HUF 440,000 (EUR 1,161.16) per child if there are three or more dependent children
  • Having four children or more, the mother does not have to pay any PIT

Corporate income tax is 9%.

Companies must file and pay their income tax by May 31 of the following year.

Advance payments are due as follows:

• monthly advance payments if the amount of the previous year’s annual tax liability exceeds HUF 5,000,000
• quarterly advance payments if the amount of the previous year’s annual corporate income tax liability does not exceed HUF 5,000,000

Local business tax is calculated by taking net sales and subtracting the cost of goods sold, the material costs, and the mediated services. The rate varies by municipality and is between 0% and 2% (e.g., Budapest is 2%). The deadline for declaration filing and the tax obligation settlement is May 31 of the following business year.

Advance payments are due on March 15 and September 15.

Innovation contribution is based on the net sales reduced by the cost of goods sold, the material costs,the mediated services, and the subcontractor services. The tax rate is 0.3%. The deadline for declaration filing and the tax obligation settlement is May 31 of the following business year. Advances are paid quarterly.

Companies may need to pay various other taxes, depending on activities and assets. Common taxes include the following:

• Social contribution tax
• Property tax, depending on the property area in square meters and the municipality
• Land tax, which is similar to property tax
• Company car tax — a statutory monthly fix tax paid quarterly and determined by the environmental classification and performance of the vehicle
• Vehicle tax — a tax paid in two yearly instalments and based on the performance and age of the vehicle
• Environmental product fee — a tax payable on the type (wood, metal, plastic), packaging materials (paper, plastic, metal), and product parts (e.g., a battery) of the products imported into Hungary (first time) and based on their weight.

VAT is calculated on the value of the services provided and the products sold. The rate may be 0%, 5%, 18%, or 27%. While 27% is the standard rate applied, notable examples include insurance services (VAT-exempt), books and newspapers (5%), and restaurant services (18%). Tax return must be filed, and the tax must be paid on a monthly/quarterly/annual basis, depending on the amount of the reclaimable/payable VAT.