Tax Figures
Corporate Income Tax
Corporate income tax rate is 19%. But a rate of 10% is applicable to the part of the tax base which does not exceed HUF 500 million.
Income Tax Rate
All levels of income: 15%
Sales Tax
A foreign taxable person is eligible to recover Hungarian input VAT if the following conditions are met.
- The business does not have Hungarian residency
- The business does not have any taxable supplies in Hungary
- Tax exempt cross border transportation from/to third countries
- Tax exempt cross border passenger transportation
- Supplies for which the reverse charge mechanism applies
- Electronically provided supplies where the foreign taxable person opted for application of the special regime for non-established taxable persons supplying electronic services to non-taxable persons
The standard VAT rate is 27%. While the reduced VAT rates are 18% and 5%. It’s not necessary to appoint a Hungarian fiscal representative to claim a VAT refund based on Directive 2008/09/EC or the 13th Directive.
Withholding Tax
There is no withholding tax levied on dividends paid to foreign companies. However, dividends paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.
Hungary does not levy withholding tax on interest paid to foreign companies. However, interest paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.
There is no withholding tax levied on royalties paid to foreign companies. However, dividends paid to a non-resident individual can be subject to withholding tax at 18% unless if the tax rate is reduced under a tax treaty.
Hungary does not levy tax on branch profits.
Income Tax (Personal Allowance)
A personal income tax allowance is granted through a family allowance (Családi Adókedvezmény). The total allowance is equal to the individual allowance multiplied by the number of beneficiary dependent children. For the first and second child an allowance of HUF62,500 is granted while an allowance of HUF206,250 is granted in the case of 3 or more children.
Time to prepare and Pay Taxes
277 hours
Employers Social Security and statutory contributions
Foreign nationals are subject to Hungarian social security contributions only if:
- They are employed locally by a Hungarian employer
- They work in Hungary as employees of a non-Hungarian employer and are nationals of an EU member state
Employer social security contributions total 19.5% of gross monthly compensation, and employees contribute 18.5% (10% pension, 7% health, 1.5% unemployment) from their salary. There is an exemption for non-EU expats and their employers, as well EU citizens whose country has a tax treaty with Hungary
Minimum monthly wage is used to calculate social security contributions and also cover work injury benefits, sickness and maternity benefits and unemployment benefits.
Employees Social Security and statutory contributions
Employee contributions are 18.5% of covered monthly earnings. Since January 1 2014 resident non-citizens are exempt from paying contributions for up to 2 years. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.
Payroll
There are specific rules in Hungary depending on whether your company employs residents or non-residents. The key concerns for a company that needs to comply with tax laws in Hungary are net taxable income, social security contribution, value added tax (VAT), corporate income tax, specific business tax (SBT), value added tax (VAT), and property tax. Moreover, international treaties to avoid double taxation, international social security agreements, free trade agreements and special tax regimes for specific industries or sectors can make an indirect impact on a company’s tax environment.
Remote payroll
A remote payroll in Hungary is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Hungary.
Thus a non-resident company is permitted to process payroll for Hungary residents who are on its payroll. Another option for a non-resident company to payroll its employees in Hungary would be to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.
Local Payroll Administration
In some cases, a company will register their business in Hungary under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.
Internal Payroll
Larger companies with a commitment to Hungary may wish to run their own local payroll for all employees, foreign and local. In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff. There will be a need for in country human resources personnel who have the background needed to manage a Thai payroll, and can fulfil all tax, withholding, and payroll requirements.
This approach carries significant cost and requires some knowledge of local employment and payroll regulations. The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Thai employment laws.
Setting up payroll in Hungary
Currency
Hungarian Forint (HUF)
Employee Information Required
- Personal information (name, date of birth, postal address, place of relevant details)
- Passport
- Bank statements proving sufficient funds are available for the stay
- Proof of health insurance coverage
- Statement of permission to stay in your residential property, from the land owner. A signed tenancy agreement is acceptable
Tax Registration Requirements
A foreign national working in Hungary is liable to pay personal income tax. For personal income tax purposes the following individuals are considered as tax residents.
- A Hungarian resident
- A European Economic Area resident whose stay in Hungary exceeds 183 days
- Third country citizen who has permanent residence status
Tax residents will be taxed on their worldwide income while non tax residents will be taxed on the domestic source of income or income as per the double tax treaty.
Foreign nationals and Hungarians working in Hungary must register with the competent tax authority and obtain a personal tax identification number to pay taxes and file a tax return (tax card number).
The tax forms can be obtained through the National tax and customs administration in Hungary
Social Security Registration
Foreign nationals are subject to Hungarian social security contributions only if:
- They are employed locally by a Hungarian employer
- They work in Hungary as employees of a non-Hungarian employer and are nationals of an EU member state
Employer must contribute 27% of gross monthly payroll in the form of social contribution tax. As of 1st of January 2014, Employers of non Hungarian citizens are exempt from paying social security contributions for such employees. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.
Minimum monthly wage is used to calculate social security contributions and also cover work injury benefits, sickness and maternity benefits and unemployment benefits.
Employee contributions are 8.5% of covered monthly earnings. Since January 1, 2014 resident non-citizens are exempt from paying contributions for up to 2 years. While the minimum wage used for the calculations is 101,500 forints there is no maximum limit.
Documentation Required for New Employees
- Employment contract
- Tax card number
- Address card registration
- Social security registration
Payment Mode
Wages should be paid in cash or by way of transfer to the employee’s bank account.
Wages may not be paid in the form of vouchers or any other means of substitute payment instruments.
Frequency of Salary Payment
In the absence of an agreement, wages should be paid retrospectively accounted for atleast once a month. Wages should be paid by the tenth of the month following the month to which it pertains.
Invoice / Payslips required
A salary slip is required. A payroll statement of wages paid shall be made available in writing by the tenth day of the following month.
Minimum Wage
HUF 105,000 as of 1st January 2015.
