Hungary tax system: audit, reporting and optimization of taxation of Hungarian companies and individuals: VAT, income tax and capital gains

Basic taxes (briefly)

Personal tax 15%
Corporate tax (in detail) Corporate tax rate is 9%
Capital gains tax. Details
VAT. Details
Other taxes transfer tax, social tax
Government fee
Stamp duty No

International tax agreement

Albania, Armenia, Australia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Chinese Taipei, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hong Kong (China), Iceland, India, Indonesia, Iran, Iraq, Ireland, Israel, Italy, Japan, Kazakhstan, Korea (Republic of), Kosovo, Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Mongolia, Montenegro, Morocco, Netherlands, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, San Marino, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Vietnam.
   
Jersy, Guernsey.


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Taxation of individuals

Personal income tax in Hungary is levied on the worldwide income of residents. Non-residents pay tax on income earned in Hungary.

Income tax is levied at a rate of 15%.

This rate applies to capital gains and dividends (in some cases an additional tax of 15.5% is paid).

Income tax

Income tax is paid by all resident companies on their worldwide income. Non-resident companies pay taxes on income earned in Hungary.

Taxable income includes financial profit of the company, as amended in accordance with the tax law. Dividends received by a Hungarian company are generally exempt from income tax, except for dividends distributed by a controlled foreign company.

The income tax rate is 9%.

Capital gains tax

There is no separate tax on capital gains in Hungary. Capital gains are included in the taxable base of income tax and are taxed at the rate of 10% or 19%. However, no tax is levied if the exemption on dividends applies. Capital gains realized on the sale of shares by a shareholder of a Hungarian real estate company resident in a country with which there is no treaty are taxed at 19%.

Municipal business tax

Local authorities have the right to impose this tax, it is deductible for income tax purposes.

The tax base is different from the income tax base.

Tax rates vary by region, but should not exceed 2%.

The rate for medium and small businesses is reduced by half.

Duty to support innovations

This levy is paid at the rate of 0.3%.

The tax base is generally the same as the municipal business tax base.

Medium and small businesses are exempt from this levy.

Capital gains tax

There is no separate capital gains tax in Hungary. Capital gains are included in the general tax base.

An exemption applies to certain types of income.

VAT

Companies in Hungary obtain a VAT number by default during the registration process, which is a great advantage of this jurisdiction. In most European countries obtaining a VAT number is a rather lengthy procedure involving a number of conditions, while in Hungary there are no special conditions for obtaining a VAT number.

The standard VAT rate is 27%.

Reduced rates of 18% and 5% apply to certain categories of goods and services.

Withholding tax

Dividends, interest and royalties paid to a non-resident company are not subject to withholding tax. Dividends, interest and royalties paid to a non-resident individual may be taxed at 15%, unless the rate is reduced under a double taxation treaty.

Social contributions

Employers pay social contributions at a rate of 15.5% on employee compensation.

In addition, a training fund contribution is paid at the rate of 1.5%.

Employees pay the social tax at the rate of 18.5% (pension tax 10%, health insurance 7%, and the employment maintenance fund contribution 1.5%).

Stamp Duty

Stamp Duty applies mainly to gifts and transfers of property and property rights.

In general, Stamp Duty is levied on donations of property and property rights at the rates of 9% of market value for residential real estate and 18% for other property.

Stamp duty is also levied on the acquisition of real estate, property rights, shares in companies that directly or indirectly own real estate in Hungary. The rate is 2 - 4% of the market value of the object, but not more than 200 million forints.

Taxes on buildings and land

Municipalities are entitled to impose these taxes within the limits established at the national level

CFC rules

A controlled foreign company is defined as a foreign company subject to a low tax rate (less than half of the Hungarian tax rate) if the Hungarian company owns directly or indirectly, individually or jointly with related parties, more than 50% of the capital, 50% of the voting rights or rights to more than 50% of the after-tax profit.

CFC rules should not apply in a number of cases, including if the taxpayer can prove that the income of the foreign company does not arise in connection with transactions aimed at tax evasion.

Double taxation treaties

Hungary has entered into a number of double taxation avoidance and tax information exchange mechanisms:

82 DTCs: Albania, Armenia, Australia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Chinese Taipei, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hong Kong (China), Iceland, India, Indonesia, Iran, Iraq, Ireland, Israel, Italy, Japan, Kazakhstan, Korea (Republic of), Kosovo, Kuwait, Latvia, Liechtenstein, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova (Republic of), Mongolia, Montenegro, Morocco, Netherlands, Norway, Oman, Pakistan, Philippines, Poland, Portugal, Qatar, Romania, Russian Federation, San Marino, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Tunisia, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United Kingdom, United States, Uruguay, Uzbekistan, Vietnam.

2 TIEA: Jersey, Guernsey.

Foreign Exchange Control

There are no currency controls in Hungary.

    Taxes of Hungary

    Min. rate for corporate tax 9% + 2%
    Capital gains tax Regular rate
    VAT 27%
    Withholding tax 0%/0%/0%
    Exchange control No
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