Taxes in Hungary for individuals
and companies

The income tax for individuals in Hungary is fixed at 15%. Other EU countries usually use progressive scales; for instance, in Portugal, the scale ranges from 14.5 to 48%. Individual taxpayers additionally pay social security contributions: 18.5% of the gross monthly salary or profit.

April 5, 2024
Reading Time: 10 min

Who is required to pay taxes in Hungary?

All Hungarian residents are considered taxpayers: it doesn’t matter whether they have an official residence permit or citizenship status. Foreigners who earn income in Hungary also must pay taxes.  

Taxpayers must register with the National Tax and Customs Administration (NTCA) or Nemzeti Adó- és Vámhivatal. There, they receive a Tax Identification Number or TIN. A TIN can not be obtained remotely.

Residents of Hungary pay tax on all income, including that received outside the country. Taxpayers do not have to have a residence permit or citizenship, but they must meet at least one of the following conditions:

  • live in Hungary for at least 183 days within a calendar year;
  • have a permanent or temporary address of residence registered in the country;
  • demonstrate close economic and personal relations with Hungary, not other countries. 

Hungarian citizens are considered tax residents by default per the law on personal income tax.

International taxes and taxes for foreigners in Hungary 

Foreigners earning income in Hungary but not living there are considered non-resident taxpayers. They are taxed only on income earned from a source in Hungary. For example, a non-resident foreigner who receives dividends from a Hungarian company pays income tax to NTCA.

Hungary-sourced income can also be taxed as a worldwide income in the foreigner’s country of origin. However, if that country has a double tax treaty with Hungary, that income may be:

  • only taxed in the foreigner's country of origin;
  • or taxed in Hungary but credited to the country of origin.

Hungary has signed double taxation treaties with over 90 countries, including European Union states, Benelux states, India, China, Hong Kong, Singapore, South Africa, and UAE. Hungary's updated list of double taxation treaties is published on the official NTCA website.

Enterprises registered as a Hungarian company pay corporate income tax, or CIT. Non-Hungarian countries that still engage in business are taxed on income earned in Hungary. A foreign company can register a legal entity or a branch in Hungary, which will also be taxed on Hungarian source income. 

Personal income tax (SZJA) in Hungary for individuals

Income tax for individuals is fixed at 15% for Hungary residents and non-residents. There is no wealth or luxury tax in Hungary.

Personal income tax in Hungary is paid on various sources of earnings, including:

  • wages and bonuses;
  • remunerations for company executives;
  • remunerations for the Board of Directors;
  • dividends, interest on deposits and profits of investment funds; 
  • out-of-business property cost, for example, from the price of a car that was re-registered from the company to an individual;
  • gains realised from the sale of movable assets like shares;
  • non-monetary benefits or gifts from employers, such as vouchers, certificates, or electronic devices.

Private entrepreneur, self-employed entrepreneur, and real estate transfer-derived income in Hungary is taxed separately from personal income tax.   

Exceptions for individual taxpayers in Hungary include several types of income. They include child benefits, foreign scholarships for Hungarian citizens abroad, certain insurance payouts, and state and non-state pensions. Mothers with four or more children are also exempt from income tax.

Also exempt are companies that transfer their shares or a portion of their registered capital to an employee under a motivation program with a value of up to 1 million HUF, or approximately €2,500.

Companies can subtract the dividend tax paid in the country of their registry from the foreign dividends tax paid in Hungary. If their country of registry does not have a double  taxation treaty with Hungary, companies pay at least 5% foreign dividends tax.

Social security contributions in Hungary are paid by: 

  • employees, at 18.5% of the gross monthly salary;
  • employers, at 13% of the gross monthly salary.

These contributions go towards benefits, pensions, and allowances, insuring employees from working incapacity or disability.  

Foreign individuals are included in the social security system: after two years of living in Hungary, they must start making social security contributions. 

If a taxpayer's yearly income surpasses 24 times the minimum wage, HUF 266,800 per month, social insurance contributions aren't only deducted from their salary. In such instances, the taxpayer pays 15.5% of dividends, interest from deposits, and income from withdrawing property from their business.

Declaring and paying taxes in Hungary is a taxpayer's responsibility. Employers withhold taxes and social contributions from the gross monthly salary — they add income tax to the budget and report to the tax service on their employees' behalf. 

The paying organisation withholds taxes on dividends, income from investment funds, and interest on deposits. Individuals can leave them out of income reports. However, foreign dividends and other types of foreign income must be included in income reports. 

The tax year in Hungary is the same as the calendar year. The annual filing process is as follows: 

  1. The draft tax return is sent to each taxpayer by NTCA from March 15th of the year, which comes after the tax year.
  2. Individuals carefully review and, if necessary, correct their draft tax returns.
  3. Individuals file their tax returns by May 20th of the year that comes after the tax year. 

All relevant documents can be received and submitted electronically via the e-SZJA portal, which taxpayers can access from the NTCA website. Alternatively, taxpayers can receive and submit their documents via postal service.

Personal income tax and wages in Hungary
General wage structure in Hungary. Employees under 25 are exempt from the 15% income tax

Tax refunds, benefits, and allowances in Hungary

Personal income tax and Value-added tax (VAT) can be refunded by the NTCA. Refunding is based on specific conditions, such as overpayments, deductions, and allowances. Tax refunds are processed within 30 days after the receipt of the tax return, as well as the approval and submission of the amended draft return.

Family tax allowance is available for parents raising financially dependent children. The amount depends on the number of children:

  • for 1 child — HUF 66,670 per month;
  • for 2 children — HUF 133,330 per month;
  • for three or more children — HUF 220,000 per month.

Savings in tax would be 15% of the allowance amount. Families with children save HUF 10,000, or approximately €15 each month.

An allowance for the severely disabled or chronically ill is available for families who raise such children, regardless of age. The monthly rate is HUF 66,670 per dependent child, which results in saving HUF 10,000, or approximately €15 each month.

Mothers who have raised 4 or more children can apply for a NÉTAK benefit in addition to their family tax allowance. NÉTAK exempts such mothers from the 15% personal income tax on most types of income, including salaries, entrepreneurial withdrawals, severance pay, sick pay, and childcare allowance. 

Young mothers aged 25 to 30 who birthed or adopted a child after December 31, 2022, are also relieved from personal income tax in Hungary. The maximum amount of tax relief is HUF 83,865, or approximately €210 per month. 

First-marriage allowance is available for newlyweds for up to 24 months if at least one spouse has never been married before. The allowance rate is HUF 33,335, which helps save HUF 5,000, or approximately €13 a month.

The allowance for young people under 25 is based on Hungary's gross national average income. Their approximate monthly savings in tax amount to 15% of HUF 576,600, or around €217.

Self-employed and private entrepreneur taxes in Hungary

Taxation encompasses personal income tax, social security contributions, and local business tax for self-employed individuals and private entrepreneurs.

Regions in Hungary independently set their local business tax rates. These taxes, known as IPA (Individual Partnership Agreement) or HIPA (Hungarian Investment Promotion Agency) taxes, vary between 0% and 2%. For instance, Budapest’s rate is 2%, which represents the maximum allowed.

Different tax regimes determine tax rates and methods of calculation in Hungary. Self-employed and private entrepreneur taxpayers can choose from three available tax regimes.

The regular tax regime for the self-employed in Hungary includes paying:

  • 9% — corporate tax;
  • 15% — business income or dividends tax;
  • 18.5% — social security tax;
  • 13% — social contribution tax;
  • up to 2% — local business tax.

Revenue accounting can be detailed or simplified. Detailed accounting means keeping track of actual expenses using primary documents such as invoices and bills. On the other hand, simplified accounting assumes that expenses are a set percentage of revenue; there is no need to document them.

The flat-rate tax regime is designed for annual revenue under HUF 27.84 million, or approximately €69.784. For retail, the limit is HUF 139.2 million or approximately €348.800. 

Note that these limits are set at 10 and 50 times the Hungarian yearly minimum wage and, therefore, can increase in the future. 

Under the flat-rate taxation scheme, 60% of revenue is considered income for tax purposes. These 60% are subjected to the following taxes:

  • 15% — personal income tax;
  • 18.5% — social security contribution;
  • 13% — social contribution tax;
  • up to 2% — local business tax. 

The first HUF 1.392 million profit is exempt from annual personal income tax​. No VAT is levied if the annual revenue exceeds HUF 12 million, or around €30,130.

KATA is a tax regime aimed at small taxpayers, primarily the self-employed. To qualify, they must:

  1. Receive revenue of no more than HUF 18 million, or around €47,000 per year.
  2. Provide services and sell goods only to private clients, not to companies.
  3. Have self-employment as their primary occupation. For example, students can't choose KATA.

Under KATA, taxpayers pay a fixed monthly tax of HUF 50,000, or around €127, regardless of their income. They also pay local business tax of up to 2% but no separate contributions to the social insurance fund and social tax. If the annual HUF 18 million revenue limit is exceeded, an extra 40% of the sum above the limit must be added to HUF 50,000.  

White card holders in Hungary, or digital nomads, pay taxes if staying in the country for at least 183 days within a calendar year. The obligations depend on the form of employment. For instance, the self-employed digital nomads can choose one of the tax regimes, such as the regular, the flat rate, or KATA, and be taxed accordingly. Employed nomads and their employers pay social contributions. 

Property taxes in Hungary

Buyers pay a transfer of ownership tax when purchasing a property or land plot in Hungary. The rate ranges between 2% and 4%, but not more than HUF 200 million, or approximately €520,000.

The 4% transfer tax rate is applied to transactions under HUF 1 billion, or €2.6 million. The 2% rate is applied to transactions over HUF 1 billion, or €2.6 million. 

If a buyer sells their primary place of residence and buys a new one within 3 years, the tax is charged on the value difference between the two properties. If the property sold was more expensive than the property purchased, the transfer of ownership tax is not levied. 

Exempt from the transfer of ownership tax are:

  • transactions between direct relatives or spouses;
  • land plot purchases if the owner builds a house on it within 4 years.

In some cases, buyers are given a discount on the transfer of ownership tax, for example, when buying a first home or a new building.

A foreigner can get a Hungary residence permit by buying residential property for €500,000 or more. The permit is issued for 10 years and can be extended for 10 more years.

Properties for a residence permit in Hungary

The real estate tax in Hungary is usually not levied. However, certain municipalities impose it on their properties — such as Lake Hévíz and Lake Balaton areas. 

Sellers of real estate pay the capital gains tax. The rate is 15% on the difference between the sale and purchase price if the seller has owned the property for less than 5 years. Other expenses include repairs, expansion, and fees paid to lawyers, notaries, appraisers and real estate experts. 

Taxable profit is reduced depending on the period of ownership of real estate: 

  • by 10% if the ownership lasted for 2 years;
  • by 40% — if 3 years;
  • by 70% — if 4 years;
  • exempt from payment — if 5 years.

On average, residential property prices in Hungary have been rising by 14% a year.

Other taxes that individuals pay in Hungary

Gift and inheritance taxes are 18%, except for residential property, which is 9%. 

No tax is levied on the inheritance of the linear relatives, spouses, and siblings, including the relationship based on adoption. If the heir is the decedent's stepchild, foster child, or step-parent, HUF 20 million of their inherited share's value is exempt from the inheritance tax.

When receiving a motor vehicle as a gift or inheritance, the recipient pays the acquisition of a motor vehicle tax, double.

Car purchase tax, or a vehicle registration tax, is paid by the owner. The tax applies to new and used vehicles and depends on the vehicle's age and engine capacity in hp, which are converted to kW in the documents. 

The tax range is between HUF 408 and 1,156 per hp:

  • highest rate is levied on 0—3 year vehicles with 160 hp;
  • lowest is levied on 8-year vehicles or older with 40 hp or less. 

For example, the buyer of a new car with a capacity of 150 hp will pay HUF 82,500, or €215,4 as a tax. 

Trailer purchases are taxed HUF 9,000, or €23.51 if weighing under 2,500 kg, and HUF 22,000 if heavier. 

Passenger car tax in Hungary is paid annually by owners. The rate depends on the year of making and the vehicle's performance. The range is between HUF 140, or €0,5 and HUF 469, or €1,22 per hp. The lowest rate is for cars under 3 years of age, and the highest — for cars over 16.

Exempt from the motor vehicle tax are tractors and other agricultural machinery, work machines, slow vehicles with a maximum speed under 25 km/hr, four-wheel motorcycles, and vehicles for export.

Corporate taxes in Hungary

The income tax for corporations in Hungary is 9%, which is the lowest rate in the EU. Hungarian companies pay tax on all profits, including worldwide. Foreign companies pay tax only on profits received on the territory of Hungary or from Hungarian companies and individuals.

Dividends received domestically are not taxed. 

Incentives. Certain types of investments are eligible for development tax incentives, including investments of HUF 100 million or more in:

  • equipment for zoogenic food production;
  • environmental protection projects;
  • film and video production;
  • research and experimental development projects;
  • projects started after issuing stock market quoted shares.

Development tax incentives may also be granted for projects implemented and operated in a free entrepreneurship zone. Medium-sized enterprises may be eligible if the present value of the investment surpasses HUF 100 million, and small-sized enterprises — if it surpasses HUF 50 million.

Projects aimed at job creation can also get development tax incentives. The minimum investment is undisclosed.

Sponsors of spectator sports in Hungary are also exempt from income tax if the said sports are football, handball, basketball, water polo, ice hockey, or volleyball.

Advance payments of corporate income tax in Hungary are paid either on a monthly or quarterly basis. The frequency depends on the previous year's annual tax liability: 

  • monthly — if the liability exceeds HUF 5 million, or approximately €12,320;
  • quarterly — if the liability is under HUF 5,000,000.

Income tax returns for corporations must be submitted by May 31st of the following year. The final payment, calculated on the tax return, is due by May 31st for the previous year.

Other corporate taxes in Hungary include local business tax of up to 2%, social tax of 13%, and consumption taxes.

Hungary corporate and business taxes
Budapest’s newest business district, BudaPart. Budapest has several business districts, both modern and incorporated into classic architecture

Consumption taxes in Hungary

VAT in Hungary is 27%, but reduced rates apply for some categories: 18% — for certain food products, such as milk and bread, and 5% — for certain medicines, medical equipment, books and magazines, for example.

Companies with a turnover of less than HUF 12 million per year are exempt from VAT registration. If revenue exceeds this threshold, VAT registration and payment are required.

If a Hungarian company sells goods and services to another VAT-registered business domestically or in the EU, VAT is not added to the sales price. Instead, the buyer handles 

VAT payment through the reverse charge mechanism. However, if the buyer is an individual consumer or non-VAT registered entity, the selling company must include and pay VAT to the tax authorities.

KIVA: the special tax regime for smaller enterprises in Hungary 

KIVA is aimed at small and medium-sized businesses in Hungary. It can be used as an income and social tax alternative. The regime simplifies reporting and reduces costs. 

To be eligible for the KIVA regime, companies must meet three conditions:

  1. Fewer than 50 employees.
  2. Turnover under HUF 3 billion, or approximately €7.8 million annually.
  3. Balance sheet under HUF 3 billion annually.

If a company grows but wishes to remain under KIVA, the turnover and balance sheet thresholds can increase to HUF 6 billion, or approximately €15.7 million annually. 

Businesses under KIVA are subjected to a 10% tax rate paid on dividends and employee salaries. If dividends are reinvested in the business rather than paid out, they are not taxed.

Additionally, companies using this regime pay municipal business tax, which can be up to 2% of profits or calculated from the KIVA tax base, with a 20% increase.

In summary: taxes in Hungary

  1. The income tax rate is fixed at 15%.
  2. Social security contributions are mandatory. They are levied at 18.5% of the gross monthly salary or business profit.   
  3. Property purchase requires paying the 4% transfer tax rate if the transaction is under HUF 1 billion, or €2.6 million. The tax is reduced to 2% if the transaction exceeds that sum. A foreign buyer can get a Hungary residence permit by investing €500,000+ in local real estate.
  4. The corporate income tax rate is fixed at 9%, the lowest in the EU. 
  5. Social tax paid by employers is 13% of the gross monthly salary.
  6. VAT is 27%, but for certain product categories, including medical products, milk, and bread, it can be 8% or 5%.

Frequently Asked Questions

Who is considered a tax resident in Hungary?

Anyone, including foreigners, becomes a tax resident in Hungary if meeting one of the following conditions:

  1. Spending at least 183 a year in the country.
  2. Demonstrating close personal or economic ties to the country. 
  3. Having a registered place of residence in Hungary only. 

Foreigners who live outside Hungary but receive income from the country, such as remote workers, still must pay relevant taxes to the Hungary government. 

Do foreigners pay taxes in Hungary?

Yes, foreigners residing in Hungary pay taxes on domestic and foreign-source income if considered residents for tax purposes.

What is the income tax rate in Hungary?

The personal income tax in Hungary is fixed at 15%. Taxed are wages, bonuses, gifts from companies, dividends, and property sale profits. Hungary also provides several types of income tax deductions.

Which European countries have the lowest taxes?

Hungary has one of the lowest taxes in the European Union. For instance, its corporate income tax rate is 9%, and its personal tax rate is 15%. For perspective, the average among all OECD countries is 21.3% and 42.8% respectively. 

Are there any taxes for Americans in Hungary?

An American citizen becomes a tax resident in Hungary if they spend at least 183 days in the country within a given tax year or if their centre of vital interests is in Hungary. Therefore, taxes for Americans in Hungary may include a 15% personal income tax on their worldwide income if they are considered tax residents in Hungary. 

Other potential taxes include VAT on purchases, capital gains tax on the sale of property or investments, and social security contributions, depending on their employment situation. 

Note that the US and Hungary no longer have a double taxation agreement. Thus, Americans in Hungary may face double taxation, impacting income sources like wages and dividends. This could also impact American companies’ tax liabilities in both countries.

Do I need to pay taxes if I have dual citizenship in the US and Hungary?

Dual citizens of the US and Hungary are subject to tax laws in both countries. The US taxes its citizens on their worldwide income regardless of where they reside, while Hungary taxes its residents on their worldwide income. Additionally, the US and Hungary do not have a taxation treaty. 

Thus, US citizens residing or doing business in Hungary are taxed per local law. However, this also means eligibility for favourable Hungarian tax regimes, benefits, and allowances.

How much tax do I pay in Hungary?

Individuals in Hungary pay the 15% personal income tax. Additionally, 18.5% of their gross monthly wage is transferred to the social security fund. Their employers pay 13% social tax, which is also based on the gross monthly wage. 

Companies in Hungary pay 9% corporate income tax and up to 2% local business tax. VAT is 27%, 18%, or 5%, based on the category of goods and services.

The gift and inheritance tax rate in Hungary ranges between 0% and 18%, mainly depending on the relationships with the recipients. 

Hungary has no annual real estate tax, but real estate buyers pay the transfer tax of 4%. When buying a motor vehicle, new owners pay the registration tax between HUF 408 and 1,156 per hp. Passenger car owners pay an annual tax ranging between HUF 140.5 and 469 per hp.

What is the VAT rate in Hungary?

General VAT in Hungary is 27%, but reduced rates apply to some categories: 18% for food products like milk and bread and 5% for certain categories like medicine, medical equipment, books and magazines.

Companies with a turnover of less than HUF 12 million per year are exempt from VAT registration.

Companies in Hungary do not pay VAT on goods and services delivered to another VAT-registered company in Hungary or the EU. 

Are there any taxes for Americans in Hungary?

An American citizen becomes a tax resident in Hungary if they spend at least 183 days in the country within a given tax year or if their centre of vital interests is in Hungary. Therefore, taxes for Americans in Hungary may include a 15% personal income tax on their worldwide income if they are considered tax residents in Hungary. 

Other potential taxes include VAT on purchases, capital gains tax on the sale of property or investments, and social security contributions, depending on their employment situation. 

Note that the US and Hungary no longer have a double taxation agreement. Thus, Americans in Hungary may face double taxation, impacting income sources like wages and dividends. This could also impact American companies’ tax liabilities in both countries.

Do I need to pay taxes if I have dual citizenship in the US and Hungary?

Dual citizens of the US and Hungary are subject to tax laws in both countries. The US taxes its citizens on their worldwide income regardless of where they reside, while Hungary taxes its residents on their worldwide income. Additionally, the US and Hungary do not have a taxation treaty. 

Thus, US citizens residing or doing business in Hungary are taxed per local law. However, this also means eligibility for favourable Hungarian tax regimes, benefits, and allowances.

What is the flat tax rate in Hungary?

Personal income tax, which is levied at a flat rate of 15%.

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Zlata Erlach, Investment Programs Expert
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