National regulation and international agreements

Consumption taxes

Nature of the tax

ÁFA : Általános Forgalmi Adó

Tax rate

20%

Reduced tax rate

A 5% rate applies to pharmaceuticals and certain medical equipment, aids for the blind, books and newspapers.

Other consumption taxes

Excise tax is levied on items such as alcoholic beverages, petrol and tobacco products.

Corporate taxes

Tax rate

Resident companies are subject to taxation on their worldwide income. Domestic and foreign dividends received by resident companies are exempt from corporate tax unless the dividend comes from a controlled foreign company. Non-resident companies are taxed on all income derived through activities in Hungary.

:

16%

Tax rate for foreign companies

The basic corporate income tax on profits is 16%.

Capital gains taxation

Capital gains are included in the corporate tax base and taxed at the 16% rate; capital gains of foreign companies with no PE in Hungary are tax-exempt.

Main allowable deductions and tax credit

All expenses incurred in deriving taxable business income generally may be deducted.
Corporate taxpayers can deduct 50% of total capital gains derived from any official markets (for instance stock and commodity exchanges), royalties, net intra-group interest income, and 50% of net trading income on greenhouse gas emission units from their tax base. Dividends received (except for dividends from controlled foreign corporations), revenue derived due to cancelled receivables and debts, and subsidies provided by foreign entities are tax-exempt.

Other corporate taxes

Simplified regime available for small businesses: Self-employed entrepreneurs and small enterprises that have been in business for at least two years and have annual revenue of less than HUF 25m can choose to be taxed under the Simplified Entrepreneur Tax (EVA).
Local business tax: The local municipalities may levy business taxes up to 2% on gross sales revenue, less the cost of goods acquired for resale, subcontractors’ fees and the cost of materials.
Solidarity tax (surtax): levied at a rate of 4% on company profits. The tax does not apply to foreign-source dividend and interest income.

Individual taxes

Tax rate

Income tax: two rates the higher rate applying at an annual income level of 1,7 million HUF.	:	18% or 36%
Solidarity tax. This tax must be paid on annual income in excess of 6,748,850 HUF in 2007, which means that the total tax burden is 40% above this amount.	:	4%
Benefits in kind that are not tax-exempt are taxed separately	:	54%
On dividends on shares purchased on the stock exchange	:	10%
On dividends received by individuals.	:	25% or 35%
Healthcare contribution applies on income withdrawn from a business, dividends, income from securities lending, capital gains and income exceeding HUF 1m from renting out real property.	:	14%

Allowable deductions and tax credit

Tax deductions are allowed as school fees, interests paid annually for the purchase of a house, and sums paid to charity sales.

Special expatriate tax regime

Yes. It concerns especially health insurance and complementary retirement pension contributions. The requirements to obtain a residence permit depend on whether the applicant is a citizen of a country within or outside the European Economic Area (EEA).

Double taxation treaties

Countries with whom a double taxation treaty have been signed

Hungary Double Taxation Prevention Treaties

Whithholding taxes

Bilateral agreement

Sources of fiscal information

Tax Authorities

APEH

Other domestic resources

Pénzügy Sziget