1. What are the current tax rates in Hungary?

As of 2021, the current tax rates in Hungary are as follows:

1. Personal income tax: flat rate of 15%
2. Corporate income tax: flat rate of 9%
3. Value-added tax (VAT):
– Standard rate: 27%
– Reduced rate for certain products and services: 5% or 18%
4. Social security contributions:
– Employee contribution: 18.5%
– Employer contribution: 17.5%

Note that these rates may vary depending on a person’s income level and other factors, and they are subject to change in the future based on government policies and economic conditions. It is important to consult with a financial advisor or tax expert for specific and up-to-date information on taxes in Hungary.

2. How does Hungary determine income tax for individuals and businesses?

Individual Income Tax:
In Hungary, the individual income tax is a progressive tax system with various tax brackets. The amount of tax an individual owes is based on their annual income, and the tax rates increase as income increases.

For 2020, the following tax rates and income brackets apply:

– Income up to HUF 5 million: 15%
– Income between HUF 5 million and HUF 15 million: 20%
– Income above HUF 15 million: 25%

Additionally, there is a flat-rate health contribution of 7% for all individuals on their gross salary. There are also certain deductions and allowances available that can reduce an individual’s taxable income.

Business Income Tax:
In Hungary, businesses are subject to a flat corporate income tax rate of 9%. This means that regardless of the business size or its profits, they are only required to pay a flat rate of 9% on their taxable income.

However, certain sectors such as banks and insurance companies have different rates ranging from 10% to 19%.

There is also a separate taxation system for small businesses with an annual revenue below HUF 500 million. These businesses can opt for a simplified cash-flow-based regime where they only pay a flat rate of 13% on their total revenues without any deductions or allowances.

VAT:
Hungary has a value-added tax (VAT) system in which goods and services are taxed at different rates. The standard VAT rate in Hungary is currently set at 27%, with reduced rates of 18% for food products, pharmaceuticals, books, newspapers and magazines; and a super-reduced rate of 5% for certain essential goods such as medical equipment, water supply, public transportation services etc.

Other taxes:
Apart from the above-mentioned taxes, individuals may also be subject to other taxes such as property taxes, inheritance taxes, local business taxes etc., and businesses may be subject to other taxes such as social security contributions, real estate tax, environmental protection tax etc. These vary based on the location and type of business.

It is advisable for individuals and businesses to consult with a tax advisor or accountant to understand their specific tax obligations in Hungary.

3. Are there any tax relief programs or deductions available for taxpayers in Hungary?

Yes, there are several tax relief programs and deductions available for taxpayers in Hungary. These include:

1) Personal income tax refund: Taxpayers can claim a personal income tax refund if their annual income is below a certain threshold.

2) Family tax allowance: Parents or legal guardians with dependent children can claim a tax allowance for each child.

3) Life insurance premiums: Taxpayers can deduct up to 130,000 HUF per year for life insurance premiums.

4) Charitable donations: Donations made to registered charities are deductible from taxable income.

5) Employer-provided health insurance: The cost of employer-provided health insurance is not considered as part of an employee’s taxable income.

6) Education expenses: Taxpayers can claim deductions for education expenses such as tuition fees and textbooks for themselves or their dependents.

7) Housing savings accounts: Contributions made to housing savings accounts are eligible for a tax deduction of up to 30% of the contributed amount.

8) Social security contributions: Self-employed individuals can deduct social security contributions from their taxable income.

9) Deductions for employees with disabilities: Employers can receive a deduction from corporate income tax for hiring employees with disabilities.

10) Research and development incentives: Businesses that conduct research and development activities may be eligible for various incentives and deductions.

4. What are the major types of taxes collected in Hungary, and how much revenue do they generate?

The major types of taxes collected in Hungary include income tax, value-added tax (VAT), corporate tax, social contributions, and excise duties. In 2020, the total revenue from all these taxes amounted to approximately 22 trillion Hungarian forints (HUF).

1. Income Tax:
Income tax is one of the main sources of revenue for the government in Hungary. It is calculated on a progressive taxation system, where the tax rates increase with the level of income. In 2020, the income tax generated around 2.5 trillion HUF.

2. Value-Added Tax (VAT):
VAT is a consumption-based tax levied on most goods and services in Hungary. The standard VAT rate in Hungary is 27%, with reduced rates of 5% and 18% for certain essential goods and services. VAT accounted for approximately 4 trillion HUF in government revenue in 2019.

3. Corporate Tax:
Corporations registered in Hungary are subject to a flat corporate tax rate of 9%. This type of tax generated about 982 billion HUF in revenue for the government.

4. Social Contributions:
Social contributions are primarily paid by employees and employers to fund social security programs such as pensions, healthcare, and unemployment benefits. The total revenue from social contributions was estimated at around 8 trillion HUF in 2020.

5. Excise Duties:
Excise duties are taxes levied on specific goods such as alcohol, tobacco, fuel, and luxury items. The amount collected from excise duties reached an estimated 6 trillion HUF in 2019.

In addition to these major forms of taxes, there are also smaller sources of government revenue such as property taxes, inheritance and gift taxes, customs duties, and environmental taxes.

5. How does sales tax and value-added tax (VAT) work in Hungary?

Sales tax, known as value-added tax (VAT), is a consumption tax imposed on most goods and services sold in Hungary. The standard VAT rate in Hungary is 27%, with a reduced rate of 5% for certain goods and services such as basic food items, books, and some medical products.

Businesses who sell goods or services subject to VAT must register with the local tax office and obtain a VAT identification number. They are then required to charge the appropriate VAT rate on their sales and collect the tax from their customers.

The amount of VAT paid by businesses on their purchases (input tax) can be deducted from the amount of VAT they have collected from their sales (output tax). This means that businesses only pay the difference between input tax and output tax to the government.

For example, if a business sells a product for 10,000 HUF with a 27% VAT rate, they must charge their customer an additional 2,700 HUF in VAT. If the business had previously purchased goods or services for 7,000 HUF with a 27% VAT rate, they would be able to deduct 1,890 HUF (7,000 x 0.27) as input tax. This means that they would owe 810 HUF (2,700 – 1,890) in net VAT to the government.

VAT returns must be filed monthly or quarterly by businesses based on their annual turnover. There are also certain exemptions from paying VAT for small businesses with low turnover.

In addition to VAT, there are other taxes that may apply to specific products or industries in Hungary such as excise duty on alcohol and tobacco products.

Overall, sales tax/VAT plays an important role in generating revenue for the Hungarian government and is an integral part of doing business in this country. Businesses operating in Hungary should consult with a local accountant or tax advisor to ensure compliance with all tax regulations.

6. Are there any tax treaties in place between Hungary and other countries to avoid double taxation for individuals and businesses?

Yes, Hungary has entered into tax treaties with many other countries to avoid double taxation for individuals and businesses. As of 2021, Hungary has tax treaties with over 85 countries, including the United States, United Kingdom, Germany, France, China, and Japan. These treaties generally aim to prevent individuals and businesses from being taxed on the same income in both countries by defining which country has the primary right to tax certain types of income. They also typically provide for cooperation between the tax authorities of each country to resolve any issues related to cross-border taxation.

7. What is the process for filing taxes in Hungary? Is it mandatory for all citizens/residents to file a tax return?

The process for filing taxes in Hungary is as follows:

1. Obtain the necessary forms: Individuals can get tax return forms from local tax offices or they can download it from the website of the National Tax and Customs Administration (NAV).

2. Gather all necessary documents and information: This includes income statements, receipts, and any other relevant financial documents.

3. Fill out the tax return form: The form must be completed accurately and in Hungarian. If needed, individuals can seek assistance from a tax advisor.

4. Submit the tax return: The completed form must be submitted to a local tax office or electronically through the NAV’s online portal.

5. Pay any outstanding taxes: If an individual owes additional taxes after filing their return, they must pay them by the deadline specified by NAV.

It is mandatory for all Hungarian residents to file a tax return if they have received any income during the calendar year. Non-residents may also need to file a tax return if they have earned income in Hungary or if they are subject to Hungarian taxes on their worldwide income due to certain international agreements or domestic laws.

8. How does payroll or employment taxation work in Hungary? Are employers responsible for paying certain taxes on behalf of employees?

Employers in Hungary are responsible for paying payroll and employment taxes on behalf of their employees. These taxes are typically withheld from an employee’s salary and submitted to the Hungarian tax authority by the employer.

The main taxes that employers are responsible for paying include:

1. Social security contributions: Employers in Hungary must pay social security contributions, which consist of pension contributions, health insurance contributions, and unemployment insurance contributions.

2. Income tax: Employers must also withhold income tax from their employees’ salaries and submit it to the tax authority.

3. Local business tax: Companies operating in Hungary are subject to a local business tax based on their revenue or other criteria.

4. Solidarity surtax: This is an additional 7% tax imposed on top of the employee’s income tax, which is used to fund social programs in Hungary.

In addition to these taxes, employers may also be responsible for other contributions or deductions such as:

– Disability insurance contribution
– Labour market contribution
– Accident insurance contribution
– Pension fund contribution

Overall, employers in Hungary play a significant role in ensuring that their employees’ payroll taxes are properly withheld and paid to the relevant authorities. Failure to comply with these obligations can result in penalties and fines for the employer.

9. Are there any specific tax incentives offered by the government to encourage certain industries or investments in Hungary?

Yes, the Hungarian government offers several tax incentives to encourage investments in certain industries and areas. Some of these incentives include:

1. Corporate income tax reduction for small and medium-sized enterprises (SMEs): SMEs with an annual turnover of less than HUF 500 million can benefit from a reduced corporate income tax rate of 9% instead of the standard rate of 19%.

2. R&D tax allowance: Companies investing in research and development activities can benefit from a 50% tax allowance on eligible costs.

3. Investment tax allowance: Certain investments in fixed assets, such as machinery and equipment, can be deducted from the taxable amount up to a maximum deduction of 100%, depending on the location and type of investment.

4. Regional investment aid: The Hungarian government provides financial support for investments made in underdeveloped or economically disadvantaged regions through regional investment aid schemes.

5. Investment promotion subsidy: Eligible companies that create new jobs or make significant investments in Hungary may receive financial support from the government through this subsidy program.

6. Special economic zones (SEZ): Investments made in designated SEZs may be eligible for various incentives, including corporate income tax exemptions, accelerated depreciation, and customs duty exemption on imported goods used for production.

7. Tax allowances for film production: Foreign film producers can benefit from a 30% corporate income tax rebate on qualifying expenditures spent on filming in Hungary.

8. Green investment tax allowance: Companies investing in environmentally friendly technologies and products can benefit from a reduced corporate income tax rate of 5%.

It is important to note that eligibility criteria and conditions may vary for each incentive program offered by the Hungarian government. It is recommended to seek professional advice before making any investment decisions to fully understand the available incentives and their requirements.

10. Is there a progressive or flat tax system in place in Hungary? How do different income levels affect the amount of taxes paid?

Hungary operates under a progressive tax system, meaning that the tax rate increases as income rises. This means that individuals with higher incomes will pay a higher percentage of their income in taxes.

The progressive tax system in Hungary is divided into six tax brackets, with the lowest tax bracket starting at 15% and the highest reaching up to 40%. The tax brackets and rates for 2021 are:

– Up to HUF 500,000: 15%
– HUF 500,001 – 1,000,000: 20%
– HUF 1,000,001 – 10,000,000: 30%
– HUF 10,000,001 -15,000,000: 35%
– HUF over 15,000.00: 40%

Individuals with lower incomes will therefore pay a lower percentage of their income in taxes compared to those with higher incomes. For example, someone earning HUF400,000 per month would pay only HUF60,000 (or around $200 USD). On the other hand, someone earning HUF2 million per month would pay around HUF370.600 (around $1.200 USD) in taxes.

In addition to income tax, residents of Hungary also have to pay health and social security contributions based on their income level. These are set at a flat rate regardless of income level.

Overall, lower income levels can result in a smaller amount of taxes paid in both categories (income tax and contributions), while higher incomes may result in a larger amount of taxes paid in both categories.

11. What is the role of the national tax authority in collecting and enforcing taxes in Hungary?

The National Tax and Customs Administration of Hungary (NAV) is the national tax authority responsible for collecting and enforcing taxes in Hungary. Its main role is to ensure compliance with tax laws and to collect tax revenue for the government.

1. Collecting taxes: NAV collects various taxes, including income taxes, value-added tax (VAT), corporate taxes, excise duties, and local taxes. The agency is responsible for administering the tax system, processing tax returns, and collecting payments from taxpayers.

2. Enforcing tax laws: NAV enforces compliance with tax laws by conducting audits and investigations to identify any potential violations of tax regulations. The agency also has the power to impose penalties on taxpayers who fail to meet their tax obligations.

3. Assisting taxpayers: NAV provides information and assistance to taxpayers regarding their rights and obligations under the tax law. This includes issuing guidance on how to comply with tax regulations and answering questions related to taxation.

4. Administering customs duties: In addition to taxes, NAV also collects customs duties on imports into Hungary. This involves monitoring imports, assessing tariffs, and collecting payments from importers.

5. Cooperation with other countries: As part of its role in enforcing taxes, NAV also collaborates with other countries’ tax authorities through international agreements on exchange of information to prevent tax avoidance and evasion.

In summary, the role of NAV in collecting and enforcing taxes in Hungary is critical in ensuring that taxpayers fulfill their obligations while also generating revenue for the government to fund public services and projects.

12. How often do tax laws change in Hungary, and how can individuals/businesses stay updated on new regulations?

Tax laws in Hungary can change frequently, often on an annual basis. Updates to tax laws can also be made throughout the year through legislative changes.

Individuals and businesses can stay updated on new regulations by regularly checking the official website of the Hungarian Tax and Customs Authority (NAV), which publishes information about tax laws and changes. Additionally, consulting with a professional tax advisor or accountant can also help individuals and businesses keep track of any updates to tax laws.

13. Are there any special considerations for foreign investors or expatriates living/working in Hungary regarding taxation?

Foreign investors and expatriates living/working in Hungary may be subject to certain tax laws and regulations that are specific to foreign individuals. Some considerations may include:

– Residency status: Non-resident individuals are only taxed on their income from Hungarian sources, while residents are subject to tax on their worldwide income.

– Tax rates: Hungary has a progressive income tax system, with different tax rates for various income levels. Foreign individuals may be subject to different tax rates depending on their residency status.

– Social security contributions: Expatriates working in Hungary may be required to pay social security contributions to both Hungary and their home country, depending on the terms of any international treaties.

– Deductions and exemptions: Foreign individuals may be eligible for certain deductions and exemptions not available to Hungarian residents. These could include relocation expenses, housing allowances, or special deductions for expatriates.

– Dual taxation: Hungary has double taxation agreements with many other countries, which aim to avoid the same income being taxed twice. Expatriates should ensure they understand the terms of any such agreements between Hungary and their home country.

It is recommended that foreign investors and expatriates seek professional advice from a tax specialist familiar with Hungarian tax laws to ensure compliance with all relevant regulations.

14. Can taxpayers appeal their tax assessments or challenge any errors made by the national tax authority?

Yes, taxpayers have the right to appeal their tax assessments and challenge any errors made by the national tax authority. This process may vary depending on the country’s tax laws and procedures, but generally taxpayers can submit an appeal or dispute through written correspondence with the tax authority. The appeal will then be evaluated by a designated authority, such as an appeals board or tax court, before a final decision is made. Taxpayers may also have the option to resolve disputes through alternative methods such as mediation or arbitration.

15. Are capital gains taxed differently than regular income in Hungary? If so, what are the rules and rates applied?

Yes, capital gains are taxed differently than regular income in Hungary. The rules and rates applied vary depending on the type of capital gain.

1. Capital gains from the sale of real property: If a property is held for less than five years, the gain is considered as part of taxable income and taxed at the individual’s applicable personal income tax rate, which can range from 15% to 35%. If the property is held for more than five years, it is considered a long-term capital gain and subject to a flat tax rate of 15%.

2. Capital gains from stocks and securities: Gains from the sale of shares and other securities are also considered as taxable income and taxed at the individual’s applicable personal income tax rate. However, if these assets have been held for more than one year, they are subject to a lower tax rate of 15%.

3. Capital gains from other investments: Other types of capital gains, such as gains from the sale of business assets or rental properties, are subject to a flat tax rate of 15%.

In addition to these taxes, individuals may also be subject to social security contributions on their capital gains.

It is important to note that non-residents are generally subject to withholding tax on their Hungarian-sourced capital gains at a rate of 0-20%, depending on their country of residence and any double taxation treaties in place.

Overall, capital gains in Hungary are subject to progressive taxation with higher rates applied for higher levels of income. The specific rates may change each year depending on changes in tax legislation. It is recommended that individuals consult with a professional advisor for specific information regarding their personal situation.

16. Does inheritance or gift taxation exist in Hungary, and if yes, what are the applicable rates?

Yes, there is inheritance and gift taxation in Hungary. The applicable rates vary depending on the value of the inherited or gifted assets and the relationship between the donor/ deceased person and the recipient.

Inheritance tax rates range from 18% to 40%, with higher rates applying to more distant relatives or non-relatives. There are also tax exemptions and reduced rates for certain types of inherited assets, such as a family home or business.

The gift tax rate is a flat 18%, regardless of the value of the gifted assets and the relationship between the donor and recipient. However, there are several exemptions and reduced rates that may apply, depending on various factors such as the type of gift, its value, and any existing agreements between the parties involved.

It should be noted that inheritance and gift taxes are subject to frequent changes in Hungary, so it is important to consult with a local tax professional for up-to-date information on rates and exemptions.

17. How is property taxed in Hungary, both residential and commercial? And are there any exemptions available?

Property tax in Hungary is levied on both residential and commercial properties. It is calculated based on the market value of the property, which is determined by local authorities. The tax rate varies depending on the location and type of property, but it generally ranges from 0.1% to 1%.

There are a few exemptions available for property tax in Hungary. One exemption is for properties that are used exclusively for religious, educational, or cultural purposes. Another exemption is for properties owned by non-profit organizations or foundations.

In addition, there are some special rules for residential properties. For example, primary residences are subject to a lower tax rate than secondary residences or investment properties. Also, properties that have been owned by the same person for more than 15 years may be eligible for a reduced tax rate.

It’s important to note that property taxes may also vary depending on local regulations and policies. It’s best to check with your local authorities for more specific information on property taxes in your area.

18. Are there any local or municipal taxes in addition to national taxes in Hungary? How much do they contribute to overall tax revenue?

Yes, there are local or municipal taxes in addition to national taxes in Hungary. These are called “local business tax” and “real estate tax.”

1. Local Business Tax: This tax is paid by businesses operating within the jurisdiction of a particular municipality, such as a city or town. The rate of this tax is determined by each municipality, with a maximum rate of 2%.

2. Real Estate Tax: This is a property tax that is paid by individuals or companies that own real estate in Hungary. The rate of this tax also varies by municipality, but the maximum rate is 3%. It is calculated based on the market value of the property.

These local taxes contribute to about 6% of overall tax revenue in Hungary.

19. How do individual states/provinces within Hungary handle taxes, and is there a uniform tax code across the entire country?

Individual states/provinces within Hungary do not have separate tax systems. The country operates under a uniform tax code, with taxes being collected and managed by the national government. However, local municipalities may impose additional taxes or fees on top of the national taxes for specific services or activities, such as a local property tax or tourism tax.

20. What are the plans for future tax reforms in Hungary, and how will they impact taxpayers?

The current government in Hungary has proposed several tax reforms, mostly focused on reducing taxes for certain groups and increasing overall economic competitiveness. These include:

1. Decreasing the personal income tax rate: The government plans to decrease the personal income tax rate from 15% to 9% for those earning less than 14 million HUF annually (approximately $50,600 USD). This would benefit lower and middle-income earners.

2. Increasing the VAT threshold for small businesses: The value-added tax (VAT) threshold would be increased from 8 million HUF to 12 million HUF (approximately $32,000 to $42,000 USD) for small businesses. This would reduce the administrative burden on smaller companies.

3. Encouraging labor market participation: The government plans to introduce a “workfare” system where unemployed individuals would have to perform community service in exchange for receiving welfare benefits. This is aimed at increasing labor market participation and reducing dependence on social assistance.

4. Simplifying the tax system: There are plans to simplify the tax system by eliminating certain deductions and exemptions. This could make it easier for taxpayers to understand their obligations.

5. Corporate tax reforms: Hungary has a flat corporate income tax rate of 9%, which is one of the lowest in Europe. There are no immediate plans to change this, but there may be discussions on implementing targeted incentives and exemptions for certain industries or investments in the future.

Overall, these reforms are generally seen as positive for taxpayers as they aim to reduce their burdens and increase economic activity in Hungary. However, there may be concerns about the potential impact of reduced revenue on public services and social welfare programs.