Taxation in Hungary
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 | 22% of gross wages for the employer (20% from 2018) | ||
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.[1] | |||
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% |
Taxation in Hungary is levied by both federal and local governments. Tax revenue in Hungary stood at 39.3% of GDP.[2] The most important revenue sources include the income tax, Social security, corporate tax and the value added tax, which are all applied on the federal level. Among the total tax income the ratio of local taxes is solely 5% while the EU average is 30%.[3]
Income tax in Hungary is levied at a flat rate of 15%.[4] A tax allowance is given through a family allowance (családi adókedvezmény), which is equal to the allowance multiplied by the number of “beneficiary dependent children”. For the first children the allowance is HUF 66,670, while the second dependent children the allowance is HUF 100,000, in case of 3 or more children the allowance is HUF 220,000 per beneficiary dependent child.[5] The amount of tax allowance can be split between spouses or life partners.
The rate of value added tax in Hungary is 27% as standard rate, the highest in Europe, since 1 of January, 2012.[6] There is a reduced rate of 5 percent for the sale of most medicines and some food products. A reduced rate of 18 percent is applicable to internet connections, restaurants and catering, dairy and bakery products and hotel services and admission to short-term open-air events.[7]
From January 2017, under the new Corporate income tax regime, the corporate tax in Hungary is unified at a tax rate of 9% – the lowest within the European Union.[8] Dividends received are not subject to taxation, provided that are not received from a Controlled Foreign Company (CFC), capital gains are included in corporate tax, with certain exemptions.[9]
Employment income is subject to social security contributions, for the employer at a flat rate of 22%[10] Further more employers pay 1.5% into a training fund.[11] Capital gains is taxed at a flat rate of 15%[12]
History
Taxation in Hungary has varied over historical governments. After the Ottoman conquest of central parts of Hungary, the most common tax was the Ottoman administration's levy on Christians the dhimmi. During the time of Austria-Hungary, taxes was most of the time levied by the Austrian authorizes, but Hungary was later given more authority over its finances. This was largerly granted to Hungary in the compromise in 1867 with the Habsburgs.[13] In 1988 under the soviet Kádár governments liberalization under, a reform of taxes introduced a comprehensive tax system which mainly consists of central and local taxes, including a personal income tax, a corporate income tax and a value added tax.[14]
References
- 1 2 "Taxation and Investment in Hungary (rates are updated to 2017)" (PDF). Retrieved 29 May 2017.
- ↑ "EU tax GDP".
- ↑ "Adózás (Taxation)" (in Hungarian). Retrieved 18 January 2010.
- ↑ "TMF Group Income tax Hungary".
- ↑ "Family Allowance 2014".
- ↑ "Deloitte Tax News » Hungary: Corporate Income Tax and VAT changes 2012". Deloittetax.at. 1 January 2012. Retrieved 2 April 2012.
- ↑ "VAT 2014 KPMG".
- ↑ "Hungary to offer EU’s lowest corporate tax rate".
- ↑ "Residency and Incorporation in Hungary - Flag Theory". flagtheory.com. Retrieved 2017-04-20.
- ↑ (PDF) https://www.ps-bpo.com/wp-content/uploads/ps-hu-newsletter-changes-of-taxation-hungary-2017-16122016-web.pdf. Missing or empty
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(help) - ↑ "Training fund levy" (PDF).
- ↑ "Capital gains tax".
- ↑ "Nationalism in Hungary".
- ↑ Mihály Hőgye. "Reflection on the Hungarian Tax System and Reform Steps" (PDF). Retrieved 18 January 2010.