If youre living in Hungary, you are subject to paying taxes in the country for all the income you may have earned during the tax year, both in Hungary and abroad. The good news is that the tax rates in Hungary are particularly low in contrast to other countries especially when it comes to businesses.
How the Hungarian system works
The process of becoming a taxpayer varies slightly depending on your nationality. EU/EFTA citizens need to start paying taxes in Hungary if they've stayed more than 183 days in the country. Third-country citizens, on the other hand, are considered taxpayers the moment they acquire their residence permit.
Once you are considered a taxpayer, you are obliged to deduct taxes and tax advances from your wage (if you're an employee, your employer will be doing the deduction) or other payments. At the end of each tax year, you'll need to complete your tax returns ' the filing of which is based on self-assessment. However, since 2017, the National Tax and Customs Administration calculates your income tax on your behalf. They do that by taking into account the tax advance payments that have been subtracted from your salary throughout the year, as well as any tax benefits you may be entitled to.
That calculation of your tax indicates if you have to pay more money, have the money returned to you or if it simply is nil. If you don't agree with the calculation of your tax return, you can modify the draft either online (if you're a registered user of the Client Gate interface) or by submitting a 16SZJA tax return form via post. Find out more here.
Good to know: There are some types of income and benefits that are exempt from taxes. These can include pension benefits, some services from insurance companies, state support for fostering and raising children, as well as any scholarships for studying or research.
Income, VAT & other tax types
The most significant tax in Hungary is the income tax, deducted as a flat rate of 15% from your salary. Along with that 15%, there are several social tax contributions (both national and local) that are also deducted bringing the total tax at 33.,5% ' which practically means that your net salary is the 66.5% of your gross salary.
Good to know: Some art, media and sports-related professions can be tax exempt up to a point (if your annual income is less than 60 million HUF for artists and journalists, or 250 million HUF for athletes).
Another substantial type of tax in Hungary is the VAT (value added tax). The VAT can be as high as 27%, but reduced VAT rates apply for things like medicine and food products. Services such as the internet, catering, admission to events and restaurants come with a VAT rate of 18%. You can submit VAT returns on a monthly, quarterly, or yearly basis.
Other types of taxes include corporate tax (one of the lowest in Europe at a 9% rate), transfer tax for real estate purchases (4% up to HUF 1 billion and 2% for the remaining amount), local taxes if you have a brick-and-mortar business, building taxes (divided amongst building owners) and land taxes, that are calculated by the local government.
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