The state social insurance provides the following benefits, allowances, and pensions to employees:
Everyone working in Hungary is subject to social insurance. Both employers and employees make social security contributions.
During maternity leave or long-term sick leave, those rates and limits do not apply and are as follows:
|Gross salary||Confinement pregnancy leave||Child care fee, sick pay leaves||Employment parallel with retirement|
|Social Security contributions percentage||18.5 %||0 %||10 %||0 %|
|Lower limit for the payment of contributions||minimum wage 30%||N/A||N/A||N/A|
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:
There are two types of pension funds:
Health insurance is mandatory by law and covers the following individuals:
The funds are raised from the health insurance contributions, transferred by and for all insured persons, and are spent for compensations of individuals with insurance cases (i.e., Illness) on an equal basis.
Health Insurance benefits include the following:
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 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 SS Disbursement Agency reimburses all the payments when it receives the monthly social security tax return. In addition, every five years, the SS Disbursement Agency visits the employer’s office and conducts an audit of the social security payment calculation.
Employees make 18.5% of social security contributions for a minimum of 30% of their income.
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, minus the mandatory insurance contributions withheld by the employer and tax reliefs for individuals with reduced working capacity and for personal contributions for voluntary insurance, when the amounts are deductible by the employer.
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:
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:
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, and the mediated 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:
VAT is calculated on the value of the services provided and the products sold. The rate could be 0%, 5%, 18%, or 27%. While 27% is the usual rate applied, notable examples include insurance (0%), books and newspapers (5%), 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.