Personal income and company taxes in Hungary in 2018
- Taxpayers with Hungarian residence have tax-paying obligations for their income originating both from Hungary and from abroad.
- Non-resident businesses are only taxable on activities conducted at their Hungarian branches (foreign entrepreneur), and proceeds from the sale or withdrawal of their shares in a company that owns real estate.
- Resident for corporate taxation purposes:
- business associations (such as public limited companies, private limited companies, limited liability companies and limited partnerships) including among others non-profit businesses and regulated real estate investment companies
- law offices
- foundations, public foundations
- institutions of higher education, student hostels
- single member companies
The corporate tax is 9% of the positive tax base. (No treshold)
- business associations are required to file their corporate tax returns and pay corporate tax by 31 May following the tax year
- if the taxpayer opts for a different tax year, the filing and payment deadline is the last day of the fifth month after the last day of the business year
- Tax credits:
- related to funding film making and performance arts (verified by professional authority)
- interest allowance for small and medium businesses (loan agreements for purchasing assets, where the amount of the allowance is the paid interest)
- development tax credit
- where establishing the food hygiene conditions of a previously occupied facility producing food of animal origin
- independent environmental protection investment
- investment in the development of electronic telecommunications network or Internet service
- investment designed to promote basic or applied research or experimental development
- investment designed to promote films and videos
- investment designed to create jobs
- investment by a small business company worth at least 500 million HUF (net present value)
- investment of at least 100 million HUF (net present value) put into operation and operated within the territory of a fee enterprise zone
- spectacle sports sponsorship
- related to funding Olympic tender till 01.01.2018
- related to investments for energy efficiency purposes
- related to live music services
- tax credit of Growth
Personal Income Tax:
- Resident tax payers shall be subject to tax liability in respect of all their income (all-inclusive tax liability). The tax liability of non-resident private individuals shall apply to income that originates in Hungary, or income taxable in Hungary on the basis of an international convention or mutuality.
- ‘Resident private individual’ means:
- any citizen of Hungary (with the exception of dual citizens without a residence or a place of stay in Hungary)
- citizens of EEC member states if residing in Hungary for more than 183 days in the year
- citizens of third countries with residence permits
- persons with residence only in Hungary
- tax rate is 15% of the tax base
- family tax credit:
- for one child: 66.670 HUF is available per month
- for two children: 100.000 HUF is available per child per month
- for three or more: children 220.000 HUF per child is deductible from the tax base
- a foreign resident individual may only apply family tax credit if he/she is not entitled to the same or similar tax credit elsewhere for the same period and at least 75% of his/her total income is taxable in Hungary
- private individuals are required to file their tax returns for the tax year (identical to the calendar year)
- employers are required to file monthly tax returns for tax computed and remitted
Local Business Tax:
- local business tax is payable by all entrepreneurs whose registered office or branch office is located within the jurisdiction of the municipality
- tax base:
- net sales revenues
- (-) cost of goods sold
- (-) value of services sold (intermediated)
- (-) value of subcontractors’ performance
- (-) direct cost of research and experimental development
- (-) material costs
- tax rate varies, but the max. rate of the local business tax is 2%
- The local business tax return has to be filed and paid by 31 May of the year following the relevant year.
Value Added Tax (VAT)
- the Hungarian VAT law is in line with the VAT directive of the EU
- The scope of the VAT covers the following:
- sales of products
- providing services
- procuring products (and services) within the European Community and importing products (and services)
- tax rates:
- 27% (the general tax rate)
- 18% (applies to milk and dairy products (except mother’s milk and milk under 5% VAT), flavoured milk, products made using corn, flour, starch and milk, and to commercial accommodation services and services providing only access to occasional open-air events, as well as internet services and catering at restaurants.
- 5% (applies to medicine, healthcare equipment, books, e-books, periodicals, pigs, cattle, sheep and goat, poultry, birds’ eggs, milk (except mother’s milk, UHT milk and ESL milk) and district heating, instrumental live music services of performing artists at private functions.
- frequency of filing VAT returns:
- quarterly (general rule)
- monthly, if the annual consolidated sum of the difference between the total tax payable in the second year preceding the relevant year and the tax deductible during the same year is positive and at least 1 million HUF and monthly for new corporations from 01.01.2015 in the first 2 years
- annually, if the aforementioned difference was less than 250.000 HUF (either positive or negative) and the amount of annual services and goods sold is less than 50 million HUF and the taxpayer has no community tax number
- the taxpayer is required to change from quarterly to monthly filing if the consolidated tax accounted from the beginning of the year is positive and has reached 1 million HUF
- deadline for filing VAT returns (and paying VAT / claim for refund):
- till the 20th day after the VAT period
- Intrastat report: monthly, if the procurements or sales reached 100 million HUF within the Community; deadline is the 15th day of the following month
Accounting and auditing
Hungarian accounting regulations are harmonized with the European Union directives and other international accounting principles. Businesses have to support their reports with double-entry bookkeeping. Accounting records and the financial report have to be prepared in Hungarian and in accordance with accounting principles. The annual report has to be prepared on every business year in Hungarian. International enterprise resource planning (ERP) systems may be used in Hungary but they have to comply with local rules.
The business organization is required to store the report on the business year, the business report, all supporting inventories, assessments and general ledger statement, chief account book and any other record fulfilling the requirements of the law in a legible format for a minimum of 8 years (annual report for a minimum of 10 years).
Documents may be forwarded for bookkeeping and processing purposes to other locations but have to be presented within 3 workdays if requested by the tax authority.
If the accounting record necessary for the authority’s review is only available in a foreign language and the facts of taxation may not be clarified otherwise, the taxpayer might be required to present the tax authority with certified Hungarian translations of the documents.
Business associations operating on the basis of double-entry bookkeeping are required to appoint an auditor, except if both of the following conditions are met (except business associations who has a public due reaching 10 million HUF and it is overdue more than 60 days at the balance-sheet effective date):
- annual net sales (calculated for the period of one year) did not exceed 300 million HUF on the average of the two financial years preceding the financial year under review
- average number of people employed by the undertaking did not exceed 50 people on the average of the two financial years preceding the financial year under review
In case of companies established without legal predecessor the above limits must be observed based on estimates and based on the results of the first business year or on the annualized results of the first business year.
Even if a business association is not obligated by the Accounting Act or any other law to appoint an auditor, it may still do so. Our professional tax advising and accounting partner: Budapest Consulting Kft
Contact us now by email or phone and get answers and qoute today: Dr. Nemes Tamas Law Firm.
Tel / Facetime: +36 30 242 37 43