HungaryTax Obligations Detailed

In Hungary, employers face various tax obligations related to employment income, social security contributions, and other taxes.

Income Tax

• Personal Income Tax: A flat rate of 15% is levied on employee income. Employers are responsible for withholding this tax and remitting it to the tax authorities by the 12th of the following month.

Social Security Contributions

• Social Security Contribution: Employers pay a social tax rate of 13% of the employee's gross income. Employees contribute 18.5% of their gross income. As of January 1, 2025, the minimum monthly wage is HUF 290,800, and the guaranteed minimum wage for skilled workers is HUF 348,000.
• Healthcare Contribution: The monthly healthcare contribution is HUF 11,800, or HUF 390 daily. The minimum contribution threshold is 30% of the current month's minimum wage, meaning a minimum individual contribution is calculated based on HUF 87,240 as of January 1, 2025.

Other Taxes and Reporting

• Local Business Tax: Rates vary by municipality, ranging from 0% to 2% (e.g., Budapest is 2%). The filing deadline and tax settlement are due by May 31 of the following year, with advance payments due on March 15 and September 15.
• Annual Tax Certificate: Employers are required to recalculate the annual tax and submit the Annual Tax Certificate (M30 form) to employees by January 31 each year.
• Tax Returns: Employees file personal income tax returns by May 20 of the following year, extendable to November 20 in certain cases.
• Global Minimum Tax: Enterprise groups with annual revenue exceeding EUR 750 million are subject to the Global Minimum Tax. Reporting and a top-up advance tax payment are required by November 20, 2025.

Additional Considerations for 2025

• Long-Term Investment Accounts (TBSZ): If a TBSZ is terminated within three years, a 13% social contribution tax applies to the capital gains. If terminated between three and five years, the rate is 8%.
• Labor Market Entrants' Benefit: Employers can reduce the social contribution tax base by the minimum wage amount for one year, then by 50% of the minimum wage for the following six months.
• Fringe Benefits: Favorable social tax rates on fringe benefits remain at 28%. The portion exceeding specified limits becomes a "certain defined benefit," subject to 33.04% employer-paid charges.
• SZÉP Card and Active Hungarians Sub-account: The SZÉP card recreational budget remains at HUF 450,000 annually. Amounts exceeding this are treated as a "certain defined benefit." A new "Active Hungarians" sub-account, linked to SZÉP card payments, is available for active lifestyle services, with a HUF 120,000 annual limit.
• Housing Benefit: For employees under 35, employer-provided housing benefits up to HUF 1,800,000 annually are taxed as fringe benefits.

This information is current as of February 5, 2025, and is subject to change. It's recommended to consult official sources and tax advisors for the latest regulations.

In Hungary, employers are responsible for deducting various taxes from employee salaries, including personal income tax and social security contributions.

Personal Income Tax (PIT)

The standard PIT rate in Hungary is 15% of the employee's taxable income. The taxable income is calculated by subtracting certain deductions and allowances from the gross salary. Tax advances are deducted monthly by the employer and paid to the tax authorities by the 12th of the following month. Annual tax returns are due by May 20th of the following year, with a possible extension to November 20th.

• Tax Benefits for Young Employees: Employees under 25 are eligible for a tax benefit, exempting a portion of their income from PIT. This exemption currently amounts to a monthly tax saving of HUF 98,518. However please note that, as of January 1, 2025, this tax benefit is no longer available to third-country nationals, excluding Serbian and Ukrainian citizens.

• Tax Allowance for Mothers with Four or More Children: Mothers with at least four children (or who have been entitled to family allowance for 12 years) are fully exempt from PIT.

• First Marriage Tax Benefit: Newly married couples, where at least one spouse is marrying for the first time, receive a monthly tax benefit of HUF 33,335 for 24 months, resulting in a tax saving of HUF 5,000 per month. Note that, this benefit is not available to third-country nationals since January 1, 2025. This exclusion does not apply to Serbian and Ukrainian citizens.

• Family Tax Benefit: This benefit reduces the tax base depending on the number of dependent children. As of today (February 5, 2025), the reductions are as follows:

  • One child: HUF 66,670
  • Two children: HUF 133,330 per child
  • Three or more children: HUF 220,000 per child.

  However, starting July 1, 2025, these amounts are scheduled to increase, and then increase again on January 1, 2026. Please be aware that the family tax benefit is not applicable to third-country nationals (except Serbian and Ukrainian citizens) since January 1, 2025.

Social Security Contributions

Both employers and employees contribute to social security. The employer pays a social tax of 13% of the employee's gross salary, while the employee contributes 18.5%. A portion of the unused child tax base allowance (15%) can be deducted from the employee's contribution.

Other Taxes and Benefits

• Minimum Wage: The minimum wage is HUF 290,800 per month as of 2025. The guaranteed minimum wage for those with secondary level or vocational training is HUF 348,000 per month.
• SZÉP Card “Active Hungarians” Pocket: A new benefit allows employers to contribute up to HUF 10,000 monthly (HUF 120,000 annually) to an employee's SZÉP card for active lifestyle-related services. This contribution is considered a fringe benefit. Amounts above this limit will be regarded as a specific allowance.
• Short-Term Assignments: Special considerations may apply to short-term assignments of foreign executives, regarding tax residency, income sourcing, and other regulations. It's crucial to consult with tax professionals for such cases.

It is important to note that this information is current as of February 5, 2025, and may be subject to changes due to legislative updates or future adjustments. Consulting with a tax advisor is highly recommended for the most accurate and up-to-date information.

In 2025, Hungary's VAT system involves a standard rate of 27%, reduced rates of 5% and 18%, and a 0% rate for specific cases, impacting businesses and consumers across various sectors.

VAT Rates

• Standard Rate: 27% (Applies to most goods and services not covered by other rates)
• Reduced Rates:
  • 5%: This rate applies to essential goods and services like certain foodstuffs (e.g., fresh milk, fish for consumption, certain meat products), pharmaceuticals, medical equipment for the disabled, books, newspapers, periodicals, internet access, hotel accommodations, restaurant services (food prepared on-site and non-alcoholic beverages), district heating, and new residential properties (until December 31, 2026, potentially extended to 2030 for ongoing projects under specific conditions).
  • 18%: This rate applies to certain foodstuffs (like some milk, dairy products, and cereal-based products), and admission to musical and dancing events.
• Zero Rate (0%): Applies to intra-community supplies, exports, and certain international transactions.

VAT Registration

• Threshold: No threshold for resident businesses; however, those with annual sales below HUF 12 million can request an exemption. As of January 1, 2025, businesses may qualify for cross-border VAT exemptions within the EU if their EU-wide revenue is below EUR 100,000 and they meet country-specific thresholds, such as Hungary's HUF 12 million limit.
• Non-Residents: No threshold for non-resident businesses. They must register for VAT.
• Process: Involves submitting form T201 and setting up e-filing accounts through the Electronic Public Road Trade Control System (EKAER). Non-EU businesses generally require a fiscal representative.

VAT Filing and Payment

• Returns: Monthly or quarterly returns are due by the 20th of the following month. Newly established businesses file monthly for the first two years. Annual filing is possible for businesses meeting specific criteria, with a due date of February 25th. As of January 1, 2025, VAT-exempt foreign taxpayers may opt for quarterly VAT filings.
• Payment: Due on the same day as the return submission. All payments must be made in Hungarian Forint (HUF).
• E-filing: Mandatory for VAT returns through the designated e-filing system.
• E-receipts: As of July 1, 2025, e-receipts will be mandatory and issued electronically, with data automatically reported to the tax authority.

VAT Exemptions

• Certain goods and services are exempt, including but not limited to:
  • Medical, cultural, sporting, and educational services provided as public services.
  • Financial and insurance services.
  • The supply or rental of a building, or parts of a building, the land on which it stands (though an option to apply VAT exists).
  • Building plots (cannot be VAT exempt).

Note: This information is current as of February 5, 2025, and might change due to future updates in regulations.

Hungary offers a range of tax incentives for businesses and individuals in 2025. Key changes include updates to family tax benefits, SZÉP card usage, and eligibility criteria for certain allowances.

Personal Income Tax (PIT)

• Family Tax Benefit: Increased in two stages. From July 1st, 2025: HUF 15,000 (1 dependent), HUF 30,000 (2 dependents), HUF 49,500 (3 dependents), plus HUF 15,000 for dependents with permanent illness/disability. From January 1st, 2026: HUF 20,000 (1 dependent), HUF 40,000 (2 dependents), HUF 66,000 (3 dependents), plus HUF 20,000 for dependents with permanent illness/disability. Eligibility restricted to Hungarian, EEA, Ukrainian, and Serbian citizens from January 1st, 2025.
• First-Time Married Couples Allowance: HUF 33,335 monthly reduction in tax base for 24 months, available to couples where at least one spouse is marrying for the first time (including registered partners). Eligibility restricted to Hungarian, EEA, Ukrainian, and Serbian citizens from January 1st, 2025.
• Under 25 Allowance: Exemption from PIT up to the gross national average income (HUF 636,700 as of July 2024). Eligibility restricted to Hungarian, EEA, Ukrainian, and Serbian citizens from January 1st, 2025.
• Mothers with Four or More Children (NÉTAK): Full PIT exemption for eligible mothers.

Fringe Benefits

• SZÉP Card: New "Active Hungarians" sub-account for sports-related services (HUF 10,000 monthly limit). Increased annual budget to HUF 570,000. Housing-related expenses limited to 50% of total funds.
• Tax-Free Benefits: Zoo and cultural admissions up to the annual minimum wage; free use of sports facilities, equipment and tickets for certain events are tax-exempt.
• Housing Allowance: New tax-advantaged housing allowance from employers at the same tax rate as the SZÉP Card.

Corporate Taxes

• Development Tax Incentives: Tax credits for investments exceeding HUF 100 million (medium-sized enterprises) or HUF 50 million (small enterprises). Incentives also available for job creation projects, regardless of investment value.
• R&D Tax Incentives: Double deduction of qualifying R&D costs, shareable with associated Hungarian corporate taxpayers under certain conditions. New refundable tax credit regime potentially offering cash refunds.
• Investment in Startups: Deduction from taxable income for investments in startups, up to HUF 20 million.
• Royalties: 50% deduction from taxable income for profits on royalties.
• Holding Structures: Exemption for dividends and capital gains on shares held for at least one year (subsidiary cannot be a Controlled Foreign Company (CFC)). Acquisition must be reported to tax authorities within 75 days.
• Intellectual Property: Exemption for capital gains on qualifying intellectual property held for at least one year. Acquisition must be reported to tax authorities within 60 days.
• Sports and Film Sponsorship: Tax credits available.
• Energy Efficiency Investments: Tax credits available.

Social Contribution Tax (SZOCHO)

• Labor Market Entrants Benefit: Reduced SZOCHO base by the minimum wage amount for one year, then by 50% for the following six months.
• Long-Term Investment Accounts (TBSZ): 13% SZOCHO on capital gains if withdrawn within three years, 8% if withdrawn between three and five years.

Other

• Minimum Wage Increase: HUF 290,800 (unskilled labor), HUF 348,800 (skilled labor).

This information is current as of February 5, 2025, and may be subject to change. It's recommended to consult with a tax advisor for personalized guidance.