Income tax in Hungary is computed on a calendar year basis, which is why most residents and enterprises file their tax returns at the end of each year. Keep in mind that some tax advances must be paid during the year as well.
Businesses, Hungarian nationals, and even foreign nationals must pay income tax if they earn money in Hungary. In Hungary, every individual’s income is taxed. Tax exemptions and tax relief schemes are available in Hungary, as they are elsewhere in the globe, although they are governed by unique criteria.
This article discusses how income is taxed in Hungary, the income tax rate in Hungary, when and how expats in Hungary must pay income tax, corporate income tax in Hungary, and much more.
What income is taxed in Hungary?
If you live permanently in Hungary, you are required to pay your international income there. If you spend fewer than 183 days in Hungary during the tax year, you are not considered a tax resident and must only pay tax on the income generated in Hungary.
Taxable income include, but are not limited to:
- Allowances for living expenses
- Housing allowances or the value of furnished housing
- Home leave
- Contributions to a pension or life insurance
- Provision of a corporate automobile
- Options on stock
What is the income tax rate in Hungary?
In Hungary, income tax is levied at a flat rate of 15%.
Are there any deductible expenses for income tax?
Hungarian income tax deductible costs may vary, but they include:
- Some types of public assistance for parenting minors
- Non-resident scholarships awarded to students studying at a foreign educational institution or researchers working overseas.
- Some types of assistance in the acquisition of real estate
- Insurance firms provide services.
When and how is income tax for expats in Hungary payable?
If you work for a Hungarian firm, your pay, daily allowances, or other remuneration are subject to income tax and social contributions. You must file a tax return only if you obtain money from sources other than your employer or if you work for two or more employers at the same time. All tax returns must be filed by May 20th of the following year.
Are there any tax-free incomes in Hungary?
Certain types of income are exempt from taxation in Hungary. Among these include, but are not limited to:
- Assignment housing given by the employer
- Assignment mobility expenses
- Vouchers for culture
- Certain types of life insurance
Corporate income tax Hungary
Corporate income tax may be imposed on businesses that have not chosen to employ special taxation systems such as KATA or KIVA.
The following is an approximate computation of the corporate income tax basis:
Earnings before taxes +/- corporate income tax modifiers = taxable profit
The corporate income tax rate is set at 9%.
There is something known as a minimal tax basis. It should be implemented after the company’s first tax year. The basic idea behind this method is that if the real tax basis falls below a specific threshold, 2% of all revenues should be treated on a minimal tax basis.
Are taxes in Hungary high?
In 2021, the OECD average tax wedge was 34.6 percent (2020, 34.6 percent ). Hungary has the seventh biggest tax wedge among the 38 OECD member nations in 2021, the same position it had in 2020. The employee net average tax rate is a measure of the net tax paid directly by the employee on labor income.
What is the average income in Hungary?
Hungarians earn an average of USD 25 409 per year, which is much less than the OECD average of USD 49 165.
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