Taxation in Hungary

Taxation in Hungary is collected by both national and local governments. In 2017, tax money made up 38.4% of the country’s total money. The biggest sources of tax money come from income tax, Social security, corporate tax, and the value added tax, all of which are collected by the national government. Local taxes only make up 5% of the total, which is much less than the average in the European Union.

Hungary uses a simple system for income tax. Most people pay a flat rate of 15% on their earnings. There are also extra amounts taken out for Social security and by employers, making the total amount taken about 46.5%. Families can get help through a special allowance called a family allowance (Hungarian: családi adókedvezmény), which depends on how many children they have.

Starting in 2025, young people under the age of 25 will not have to pay income tax, which could save them up to HUF 1,146,000 each year. Mothers under 30 will also get this benefit. Mothers who have raised at least four children for 12 years will never have to pay income tax again. Recently, the government announced that mothers with two or three children will also get this lifetime exemption.

The value added tax in Hungary is 27%, which is the highest in the European Union. Some items, like medicines and many foods, have a lower rate of 5%. Other things, such as internet services, restaurant meals, and hotel stays, have a reduced rate of 18%.

In 2017, Hungary made business taxes simpler by setting a single rate of 9% for companies — the lowest in the European Union. Profits shared as dividends do not get taxed unless they come from certain foreign companies. Gains from selling assets are taxed at a flat rate of 15%.

Taxation in Hungary (2017), Source: Deloitte.
Corporate income tax rate	9%
Branch tax rate	9%
Minimum tax	Applied to 2% of adjusted gross profit
Capital gains tax rate	9%
Tax basis	Worldwide income
Participation exemption	Yes
Loss relief	Carryforward: Indefinite, but limitations apply Carryback: Generally not available
Double taxation relief	Yes
Tax consolidation	For VAT purposes
Transfer pricing rules	Yes
Thin capitalization rules	Yes (ratio 3:1)
Controlled foreign corp. rules	Yes
Tax year	Calendar year, but different fiscal year may be elected
Advance payment of tax	Monthly/quarterly
Return due date	Last day of the fifth month following of the end of the fiscal year
Withholding tax	Dividends: 0% Interest: 0% Royalties: 0% Branch remittance tax: 0%
Social security contributions	13% of gross wages for the employer (from 2022)
Capital tax	No
Building tax/land tax	May apply at municipal level
Real estate transfer tax	4% up to a value of HUF 1bn (€3.3 million) and 2% on the excess, capped at HUF 200 million (€0.65 million)
Local business tax	maximum 2% of net sales revenue
Innovation contribution	0.3%
Financial transaction tax	0.3% of transferred amount maximum HUF 6000 (€20)
VAT	27% (standard), 18%, 5%
Hungary quick tax facts for Individuals (2017), Source: Deloitte.
Income tax rate	15%
Capital gains tax rate	15%
Tax basis	Worldwide income
Double taxation relief	Yes
Tax year	Calendar year
Return due date	20 May (Tax authority prepares it electronically to everyone automatically)
Withholding tax	Dividends: 15% Interest: 15% Royalties: 15%
Healthcare contribution	14% or 22% on some income maximum annual HUF 450 000 (€1460)
Social security contributions	18.5% of gross wages for the employee
Net wealth tax	No
Inheritance and gift tax	9% or 18%
Real estate tax	May apply at municipal level
VAT	27% (standard), 18%, 5%

History

After the Ottoman conquest of central parts of Hungary, the most common tax was a special tax on Christians. Later, under Austro-Hungarian rule, taxes were mostly collected by Austria. However, Hungary gained more control over its finances after the Austro-Hungarian Compromise of 1867. In 1988, reforms were made to create a new tax system that included personal income tax, corporate income tax, and value added tax.

History

Related articles