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Global Mobility Services: Taxation of International Assignees -Hungary

Hungary

Taxation issues & related matters for employers & employees 2017

http://www.pwc.com/hu/en.html

Last Updated: February 2017

This document was not intended or written to be used, and it cannot be used, for the purpose of avoiding tax penalties that may be imposed on the taxpayer.

Global Mobility Country Guide (Folio) 3

Country: Hungary

Introduction: International assignees working in Hungary 4

Step 1: Understanding basic principles 5

Step 2: Understanding the Hungarian tax system 7

Step 3: What kind of immigration and working permission related

formalities you may have in Hungary 11

Step 4: What to do when you arrive in Hungary 14

Step 5: What to do at the end of the year 15

Step 6: What to do when you leave Hungary 17

Step 7: Other matters requiring consideration 19

Appendix A: Typical tax computation 20

Appendix B: Double-taxation agreements 21

Appendix C: Social security agreements 22

Appendix D: Hungary contacts and offices 23

Additional Country Folios can be located at the following website:

Global Mobility Country Guides

http://www.pwc.com/us/en/hr-international-assignment-services/publications/index.jhtml

4 People and Organisation

Introduction: International assignees working in Hungary

This booklet was prepared by

PricewaterhouseCoopers to

provide foreign nationals

planning to work in Hungary

with a general background of the

Hungarian tax laws and other

relevant issues. It reflects tax

laws and practice as of February

2017.

The booklet does not claim to be

a comprehensive guide.

Accordingly, we advise the reader

against making decisions without

taking professional advice.


Step 1:

Understanding basic principles

The scope of taxation in Hungary

1. A foreign national

working in Hungary will

subject to certain

conditions, become liable

to Hungarian taxation.

The main tax is personal

income tax. Other taxes to

which an expatriate can

become liable are local

taxes, vehicle tax,

property tax, property

transfer tax, etc.

Expatriates may become

liable to Hungarian social

security contributions as

well.

2. Taxable income of an

individual resident in

Hungary includes all

income regardless of age,

occupation, citizenship

and family circumstances.

Husband and wife are

treated as separate

individuals for tax

purposes.

The tax year

3. In Hungary the tax year is

the calendar year.

Generally, income is

taxed in the year in which

the payment or non-cash

benefit is actually

received.

Determination of residency

4. Following the Hungarian

personal income tax law,

the individual is

considered Hungarian tax

resident if one of the

following criteria is met:

Hungarian citizen;

Citizen of any Member

State of the European

Economic Area (“EEA”)

whose stay in Hungary

exceeds 183 days in the

tax year which

corresponds with the

calendar year in

Hungary;

Third country citizen

who has permanent

residence status or is a

stateless person.

Furthermore, any natural

person other than those

mentioned above:

Whose only permanent

residence is in

Hungary;

Whose centre of vital

interests is in Hungary

if there is no

permanent residence

in Hungary or if

Hungary is not the only

country where he/she

has a permanent

residence;

Whose habitual residence

is in the domestic territory

if there is no permanent

residence in Hungary or if

Hungary is not the only

country where they have a

permanent residence, and

if their centre of vital

interests is unknown,

where “centre of vital

interests” means the

country to which the

private individual is

primarily tied by bonds of

family and business

relations.

5. The tax treatment may

also be affected by the

terms of a double taxation

treaty. Treaties override

the local tax legislation.

Under the provision of

the Double Tax Treaty

between Hungary and the

home country, it may be

possible that the non-

Hungarian resident will

not have any tax liability

in Hungary. In order to

avoid Hungarian

taxation, the provisions of

the relevant Double Tax

Treaty need to be

fulfilled. We would

recommend seeking

advice before a transfer is

made to Hungary.

(Appendix B contains the

valid double taxation

treaties.)

6. Tax residents of Hungary

will be taxed on their

worldwide income while

non-residents will be

taxed only on domestic

source income or on


income which is taxable

in Hungary according to

the relevant Double Tax

Treaty.

Methods of calculating tax

7. The personal income tax

rate is flat 15% of the

taxable gross income.

8. The amount of the family

tax base allowance in

2017: HUF 66 670 /

month (approx. EUR 215)

for one dependent child,

HUF 100 000 /child

/month for two children

or 220 000 three or more

dependent children. The

family tax base allowance

can be deducted from the

tax base. These

regulations apply to all

private individuals

entitled to child benefit

according to the internal

law of any countries.

Non-resident private

individuals may only

claim the child tax

allowance if at least 75%

of their annual income is

taxed in Hungary.

9. Couples marrying after 31

December 2014 are able

to decrease their tax bases

under certain

circumstances for a

definite period. The

amount of the tax base

allowance for young

couples in first marriage

is HUF 33 335 per month

(which can be claimed by

the spouses jointly,

splitting the amount or

only one of the spouses

claims it). The allowance

is available for a

maximum period of 24

months and it can apply

together with the family

tax base allowance as

well.

10. In cases of income from

interests, dividends and

capital gains, the tax rate

is 15%. Additional 14%

healthcare tax may be

payable on dividends and

capital gains if certain

circumstances are met.


Step 2: Understanding the Hungarian tax system

Taxable income

11. Taxable income covers income

from:

Dependent services

(employees, elected

officials of corporations,

shareholders of

companies receiving

remuneration for

personal involvement);

Independent services

(including elected

auditors, shareholders

of companies receiving

remuneration for

services);

Interest, dividends,

capital gains; – non-

cash benefits;

Income from the benefit

of interest free loans (or

loans granted at a

preferential interest

rate);

Income from winnings

(lottery games, prize

draws); and

Private entrepreneurs'

(self-employment)

business activities.

Taxation of employment income

12. The gross amount of the

employment income is taxed at

15% flat rate. The calculated tax

liability is deducted from the

gross income. You cannot

reduce your income from

employment with business

expenses (unless you receive

the income as allowance).

Taxation of income from independent service

13. Income from independent

services can be reduced by

actual business expenses

supported by invoices, or in the

absence of invoices a lump sum

of 10% can be deducted. In case

of 10% deduction, an individual

cannot reduce the income by

actual expenses.

Taxation of investment income

14. The taxation of income from

capital (i.e. income from

interest, dividends, capital

gains, and the sale of real

estate) has basically remained

unchanged.

Dividend income is taxable at

15% personal income tax. An

additional 14% healthcare tax

may be payable on dividend

income (up to a yearly cap of

HUF 450,000). Dividends from

securities listed on a recognised

stock exchange in an EEA

Member State are taxed at a

15% personal income tax rate,

but the 14% healthcare tax does

not apply.

Taxes on dividend income from

non-Hungarian resident

companies have to be paid on

an annual basis, in accordance

with the filing of the annual

personal income tax return.

The tax on income from

dividends can be reduced by

credit for foreign withholding

taxes on dividends paid from

double tax treaty countries,

provided that the relevant

double tax treaty provides

limited taxation right to the

source country.

Interest income is also subject

to tax of 15%, but in certain

cases the tax rate is 0% on

interest received from

investments that have been

kept for at least five years, and

10% on investments that have

been kept for three years on a

“long-term investment

account”. The qualifying

criteria are stipulated in the

law. As of 2017 there is no

additional 6% healthcare tax

obligation on interest income.

Dividend, interest or capital

gains income from a “company

in a country with low tax rate”

or interest income from “non-

treaty country” are classified as

“other income” and thus part of

gross income.

If a private individual who lets

his or her property does not


qualify as a private

entrepreneur, the rental income

will be taxable as part of the

consolidated tax base. The

private individuals are able to

decrease the rental income they

earn by the rental fees they pay

for residential property in

another municipality, provided

that the rental period exceeds

90 calendar days. Expenses

supported by invoices and the

depreciation calculated under

the internal law can be

deducted from the taxable

revenue. Alternatively, a lump

sum of 10% can be deducted.

Taxable non-cash benefits

15. Based on the general rule,

benefits are taxable as part of

the individual’s aggregated tax

base.

Certain benefits listed in the PIT Act are taxable by the provider at different tax rates. As of 2017 the list of “benefits in kind” which are taxed separately with preferential tax rates by the employer only contains Széchenyi Recreational card and cash payment up to HUF 100 000. There are benefits defined in the law (called ‘other specific benefits’) which can be provided with preferential taxation (e.g. Erzsébet meal voucher or electronic card, employer contributions to mutual private pension or health insurance funds). Benefits are subject to 15% personal income tax and 14%/22% healthcare tax. In both cases the tax base is 1.18 times the value of the benefits provided.

Company cars

16. Company car tax is levied on

passenger cars owned by

companies and in some cases

on passenger cars owned by

private individuals, if costs

relating to the company care

are borne by the Hungarian

company or the individual uses

his own car for business

purposes and reimbursed for

the costs. The regulations

regarding the tax liabilities and

the tax rates are set in the

Vehicle Tax Act.

The private use of a company car is not subject to personal income tax.

The measure of the company car tax depends on the power in KW and the environmental classification of the company car.

17. The benefit of interest free

loans (includes any payments

made by the company to the

employee, which should be paid

back to the employer) and loans

provided by local employers at

a lower interest rate than the

official rate of the Hungarian

National Bank (currently 2 x

0.9% p.a.) plus 5% are regarded

as taxable benefit in the

amount of the unlevied interest

(Interest Rate Discount). The

provider is liable to pay 15%

personal income tax and 22%

healthcare tax on the calculated

amount multiplied with 1.18.

However, any payroll advances

granted in an amount not to

exceed five-times the prevailing

monthly minimum wage (which

is HUF 127 500 in 2017) in

effect on the date when

provided, which are to be

repaid within six months, do

not qualify as income from

Interest Rate Discount.

18. In cases where the foreign

employer is the provider, the

quasi income is classified as an

employment income and the

employee has to pay the

personal income tax and 22%

healthcare tax on it on a

quarterly basis (the base of the

liabilities depends on whether

or not the 22% healthcare tax is

overtaken from/reimbursed to

the assignee).

Stock option

19. Stock option plans are more

and more common in Hungary,

mostly at local affiliates of

international companies, who

expand their global plans to

Hungary.

20. Income from stock options

must be classified based on the

relationship between the

provider of the income and the

recipient, or based on their

relation to any other parties. In

general, since the recipients

would have an employment

relationship with the

Hungarian affiliate, the income

would be classified as

employment income even if the

options were provided by their

foreign mother company.

Taxation of stock options

cannot be qualified as non-cash

benefits.

21. Income from stock options is

not recognized at the time

when the option is granted to

the employee, but first when

the individual exercises an

option (transferable options

may be taxed differently). The

tax rate applicable is 15%. The

income realised may also be

subject to social security (both

employee and employer)

contributions or healthcare tax

depending on the individual’s

social security positions, the

provider and the content of the

plan.

22. ESOP (Employee Stock

Ownership Programs)


Organizations can be

established for remuneration

purposes which provides

favourable taxation for income

from share plans. Income from

share plans provided throught

ESOP Organisations are taxed

in a deferred way and as capital

gain instead of salary income.

Social security

23. Social tax liability of the

employer

The tax base is the gross income paid to the employee. The tax rate has been reduced by 5% as of January 2017, thus the applicable social tax rate is 22%.

Social tax allowance

The social tax allowances could be as follows in 2017:

The government launched a 10-point „Job Protection Action Plan” in 2013 which aims to improve the situation of disadvantaged employees, jobseekers and enterprises. Allowances relating to Job Protection Plan – among others – are as follows:

Employees under the age of

25 or above the age of 55:

11% up to HUF 100 000

(approx. EUR 339)/month

gross income

Career starter under the age

of 25: 22% up to HUF 100

000 (approx. EUR

339)/month gross income

Mothers having young child:

22% up to HUF 100 000


gross income for the first

two years of their

employment, and 11% up to

HUF 100 000 for the thir

year.

Operating in “free

entrepreneurship zones”:

22% up to HUF 100 000


gross income for the first

two years of the

employment and 11% up to

HUF 100 000 for the third

year, if the number of

employees

increasesResearchers: 22%

up to HUF 500 000

(approx. EUR 1 623)/month

gross income

Different social tax allowances generally cannot be applied on the same employee at the same time, however, employers can decide on their own discretion which type of allowances is the most beneficial for them with respect to the given employee.

The social tax allowances are available for every employer, applicable on the monthly gross salary but maximum on the first HUF 100 000 of the gross salary.

Social security contribution of

employee

In 2017 the rates for the employee part of the contributions are as follows:

10% pension contribution

(uncapped)

8.5% healthcare and

unemployment contribution

(7%+1,5%)-(uncapped)

As of 1 January 2014, the

allowance related to family

has been introduced. This

allowance is beneficial for

those individuals who are

unable to use the full

amount of the family tax

base allowance to decrease

their personal income tax

liability. The family

contribution allowance

decreases the individual’s

healthcare contribution

(7%) first then pension

contribution (10%). It is

important to note that the

family contribution

allowance does not affect

the individual’s eligibility to

social security benefit

The social security

contributions – such as 10%

pension contribution and

8.5% healthcare and

unemployment

contribution– are

uncapped, so have to be

paid irrespective of income

level.

The contributions are payable at least on the minimum wage. (HUF 127 500 /month, approx. 411 EUR)

Employers, and also individuals who are paid by a non-Hungarian company, are liable for both social security payments and the electronic filing of monthly social security declarations.

Dependent persons over 18 years of age are only eligible for health-care services only if they pay health-care service contributions.

Uninsured persons are liable for monthly contributions of HUF 7 110 (approx. EUR 23).

Foreign nationals become subject to Hungarian social security contributions only if:

1. They are employed

locally by a Hungarian

employer.

2. They work in Hungary as

employees of a non-

Hungarian employer and


are nationals of an EU

member state or of a

country that has a social

security treaty with

Hungary, but cannot

remain covered by the

social security system of

their home country.

3. They are third country

nationals assigned to HU

from a non-EEA country

and the length of their

assignment exceeds 2

years. If the length of the

assignment exceeds the 2

years limit, Hungarian

social security applies

from the start of the

assignment.

24. Since Hungary is a member of

the EU, the current EU co-

ordination regulations

(Regulation 883/2004/EC and

Regulation 987/2009/EC on its

implementation) must be

applied, and these affect the

social security liabilities of

individuals working in

Hungary. Thus, if an individual

works in Hungary and cannot

obtain an A1 from another EEA

state, he/she will fall under the

Hungarian rules on social

security.

Healthcare tax

25. Individuals may be subject to

14% healthcare tax on certain

types of separately taxed

income, including certain kind

of dividend income, income

from borrowing and lending

securities, capital gains, income

from entrepreneurship and the

total amount of rental income

exceeding the annual amount of

HUF 1 000 000 (approx. EUR

3 225 ). The 14% health care tax

is payable by the individual if

the health care contributions

paid by the company and the

total amount of 14% healthcare

tax paid already does not reach

a total of HUF 450 000

(approx. EUR 1 451 in a year.

Regarding income from

Employee Equity Plans, whether

social security contributions or

healthcare tax is payable on

such income depends on the

employment structure and the

content of the plan.

The fringe benefit scheme is

subject to 14% or 22%

healthcare tax payable by the

provider. In both cases the tax

base is 1.18 times the value of

the benefits provided.

As of 2017 the 6% healthcare tax

payment liability is eliminated,

therefore interest income is

subject only to 15% personal

income tax liability.

Taxation of private entrepreneurs

26. Entrepreneurial withdrawals

(the remuneration of private

entrepreneurs) originating

from business activities (and

recognised as entrepreneurial

costs) qualify as income from

dependent services and taxed at

a 15% personal income tax

rate.Private entrepreneurs are

subject to a 9% of

entrepreneurial income tax

payment liability and

entrepreneurial dividend tax

(15%) payment liability. If

certain conditions are met, the

private entrepreneurs can more

simplified taxation methods,

i.e. Simplified Entrepreneurial

Tax (EVA) or and the Small

Business Tax (KATA, KIVA).


Step 3: What kind of immigration and working permission related formalities you may have in Hungary

Citizen of the EEA or

Switzerland Third Country National

Residence in Hungary

Short term - to stay maximum 90 days within 180 days Long Term - to stay more than 90 days within 180 days

Short term Long term Short term Long term

Is the Hungarian registration necessary? (For example: Registration and address card for EEA citizens, visa and/or work permission for third country nationals, Single or normal residence permit for third country nationals)

NO YES YES

(on general basis)

YES

How long is the registration period? (From collecting the needed documentation till getting the permission)

- 1,5

month 1-1,5 month

2,5-3 month

Will they be able to start working before the registration?

YES YES NO NO

27. A citizens of EEA and

Switzerland (and the

accompanying family member

with third country nationality)

can stay and work in Hungary

for a period not exceeding 90

days within a 180-day period

(short-term for immigration

purposes) without a permit, i.e.

there is no need for a residence

or a work permit in Hungary.

28. If an EEA or Swiss citizen stays

more than 90 days within a

180-day period (long-term

for immigration purposes) in

Hungary, the EEA or Swiss

citizen must apply for an EEA

Registration Certificate as

well as for a Hungarian

address card. The procedure

takes about one and a half

months to collect all necessary

documents, schedule an

appointment with the

Immigration Office and carry

out the registration.

29. The accompanying family

member with third country

nationality must apply for a

Residence Card as well as for a

Hungarian address card when

the intended stay in Hungary is

for more than 90 days within a

180-day period. Such an

application process takes about

two and a half months. The

EEA Registration Card for

EEA/Swiss citizens is valid for

an indefinite period. The

Residence Card for

accompanying, third country

national family members of

EEA/Swiss citizens can be

issued with a validity period of

maximum 5 years.

30. As an EEA or Swiss citizen or

an accompanying family

member with third country

nationality does not need a

work permit in Hungary, the

individual can start working for

the firm in Hungary before the

registration process is

complete.

31. If a third-country national (i.e.

non EEA or Swiss citizen or

non-accompanying family

member of EEA or Swiss

citizen) would like to come and

work in Hungary for a short

term (not exceeding 90 days

within a 180-day period)


he/she might need a visa to

enter Hungary and he can only

start working for the firm in

Hungary with a work permit

(if applicable) to be applied by

the Hungarian company.

Officially, the visa process is 15

days (as a general rule) and the

Governmental Office must

issue the work permit within 21

days (as a general rule) or 10

days (if for example the

Hungarian company’s third

country national to all workers

ratio for the last day of the past

quarter is max 5% and the

company is majority foreign-

owned.) However, based on our

experience the process of

getting a visa (if needed) and a

work permit (if applicable)

takes about 1-1.5 months from

collecting the documents till the

visa and work permit are

issued.

32. If a third-country national

comes to Hungary for long-

term (more than 90 days within

a 180-day period) then he/she

must apply for a Single

Permit (i.e. work and

residency permit together) on

a general basis. Please note

that the whole process takes

about 2,5-3 months. Based on

our experience, collecting all

necessary documents (from the

firm and the individual) and

finding appropriate

accommodation in Hungary

usually takes a month and then,

after submission of the

application, the Immigration

Office has maximum 70 days to

make a decision. It is very

important that a third-country

citizen can only start working

for the firm in Hungary once

the decree regarding the

positive decision on Single

Permit application is issued

and picked up. A third-country

citizen has to extend his

residency in Hungary (usually

within every two years on a

general basis). The third

country national must start the

renewal process 30 days

before the date of expiry of his

permit otherwise a new

permit application has to

be initiated (which could

requires more documents

and the decision usually

takes longer).

33. An accompanying married

spouse who is a third country

national and who accompanies

the third country national

principal has to obtain

independent authorisation to

work, however may accompany

on a dependant permit or visa

(if applicable).

34. Foreign nationals will be

subject to a de-registration

process when their Hungarian

stays end.

35. A firm in Hungary can be

subject to immigration related

notification obligation(s) when

employing foreign nationals.

We always detect such cases

and assist the Hungarian

company without the

involvement of the individuals.


There is some additional

useful information:

36. When starting handling an

immigration process, the first

step is always that we notify the

inbound about the procedure to

be applied based on his/her

personal and employment

circumstances and request

him/her to send us the inputs

we need for facilitating the

process (e.g. original decree).

We request inputs from the

company or its dedicated

service provider that we can

expect from their side based on

such a request or the past

collaboration with the firm

(such documents can be the

assignment letter, certificate on

health insurance coverage,

proof of accommodation like

rental agreement or hotel

reservation)

.

37. There is no official way or legal

tool to speed up the

immigration procedure.

Nevertheless, we usually exert

constant yet polite pressure on

official personnel to facilitate

rapid decision making. To that

end, we will also strive to

promptly react to any queries

from official personnel.

38. It is not possible for a third

country national to start the

immigration procedure for a

short-term (where the intended

stay in Hungary is maximum

than 90 days) if it expected that

it will be a long-term (where

the intended stay in Hungary is

more than 90 days). This

means that if a third-country

national starts the application

for a short term residency

(where he/she should gather a

visa if applicable and the

Hungarian company should

apply a work permit if

applicable) then he/she will not

be able to start the application

for long-term residency (where

he/she should gather a single

permit) without violating the

Hungarian rules.

39. Our team is only responsible

for Hungarian immigration

matters when a foreign

individual wants to come work

in Hungary. We are not

competent to handle the

immigration related

administration of Hungarians

and other nationals in the

foreign countries where they

are going to work.

40. Our team can assist you during

the whole application

procedure including the

collection and review of all

necessary documents but we

are not competent to prepare

any documents, such as

employment contracts,

assignment letters or lease

agreements.


Step 4: What to do when you arrive in Hungary

Tax card number

41. Foreign nationals working in

Hungary have to register with

the competent tax authority

and apply for a personal tax

identification number (card) in

order to be able to pay taxes

and file a tax return.

Withholding tax

42. Hungary operates a system of

tax advance payments whereby

a Hungarian employer/payer is

required to deduct personal

income tax at source (PAYE)

the every monthly salaries,

while individuals employed by

a non- Hungarian company are

required to make tax advance

payments on a quarterly basis.

The quarterly tax advances are

due by Hungarian tax residents.

The quarterly advances are

payable by the 12th of the

month following the quarter.


Step 5: What to do at the end of the year

Tax return

43. After the end of each calendar

year a tax return must be filed if

the individual has received

income taxable in Hungary.

However, if the conditions set

out in the Personal Income Tax

Act are met, either the

Hungarian employer can

prepare and file the annual

personal income tax return on

behalf of the employee or, in

certain cases, the individual can

ask the tax authority to prepare

it.

44. The deadline for filing an

individual’s tax return is 20

May of the year following the

tax year. The overall tax liability

needs to be paid at the latest on

20 May if there is a balance due

over the total of withholdings

or tax advances paid during the

tax year. If the balance is for

some reason an overpayment,

then the difference can be

reclaimed. The Tax Authorities

are obliged to pay the reclaimed

amount back within 30 days

after the tax return is filed.

Extension is available up to 20

November, however the

extension request need to send

to the Hungarian tax

authorities up to 20 May.

45. Income subject to the 15% flat

rate, as well as non-Hungarian

interest income, dividends and

capital gains must be reported.

The tax-free income would not

need to be reported (e.g.: social

benefits, etc.). Income from the

sale of moveable if these

remain below HUF 600 000

(approx. EUR 1 948) in the year

do not need to be reported.

46. Effective from 1 January 2017,

the tax authority will prepare

draft personal income tax

returns for taxpayers registered

for electronic tax filing who

either did not request their

employers to prepare their tax

return for them or their request

was not granted. Taxpayers not

registered for electronic tax

filing may also request the tax

authority to prepare their draft

tax returns, at the latest by 15

March of the year following the

tax year.

We note that the draft tax

returns may not necessarily

include all income that the

persons concerned are required

to declare. This is because the

draft tax returns will be based

on data (e.g. on wages paid by a

Hungarian-based employer)

that is reported to the tax

authority during the year.

However, not all items of

income are subject to interim

reporting. Therefore, the draft

tax returns should be carefully

reviewed and corrected or

supplemented if necessary.

Foreign tax relief

47. If an individual is considered as

a Hungarian tax resident,

Hungary will seek to tax the

individual’s worldwide income,

which means that not only his

employment, but also his

private income received from

any other countries is subject to

Hungarian taxation. However,

if any other country would also

wish to tax the same income the

provisions of a double tax

treaty (if there is one, see

Appendix B for the list of the

countries Hungary has a

double-taxation agreement

with) will be applied to avoid

double taxation. In the absence

of a double tax treaty, the local

legislation would also provide

some relief from exposure to

double taxation of the same

income however this is

somewhat less favorable than

the relief provided by a treaty.

If an individual is a non-

Hungarian resident for tax

purposes, he/she has only

limited Hungarian tax liability,

meaning that only that part of

the total income is taxable in

Hungary that can be allocated

for work performed in Hungary

and/or he/she is subject to

Hungarian taxes on his/her

income originating from

Hungarian source. In this case

the individual would have to

present a so called “residency

certificate” (a document issued

by the relevant foreign tax

authority proving the

individual’s residency status).


48. Dividends, interest income and

capital gains derived by a

Hungarian tax resident

individual from sources outside

of Hungary are subject to

Hungarian taxation.

Penalties

49. A delay in filing a tax return

results in a penalty (default

fine) being charged up to HUF

200 000 (approx. EUR 645).

50. A 50% tax fine is levied on the

basis of unpaid taxes if the tax

authorities discover that the

taxpayer did not declare any

taxable income. This can be

200% in certain cases. The tax

authority may also levy a tax

penalty on taxpayers who

claimed any subsidies or tax

refunds without eligibility.

Penalties in these cases are

levied based on the amounts

claimed without eligibility.

51. Late payment penalty is

charged on overdue payments if

the tax payments are made

after the deadline. The annual

rate of interest is twice the

official rate of the National

Bank of Hungary (currently 2 x

0,9% p.a.). The late payment

penalty is calculated by the

Hungarian tax authority on a

daily basis.

52. You may correct your tax return

by a self-revision. However you

will need to pay a self-revision

charge on the increase of tax

liability due to the revision (if

there is a decrease, there is no

charge payable). The self-

revision interest is calculated

on a daily basis at a rate

equivalent to the official rate of

the National Bank (currently

0,9% p.a.). A late payment

penalty is not levied on the

overdue payments of the self-

revised period.

17 Global Mobility Country Guide (Folio)

Step 6:

What to do when you leave Hungary

Reporting departure

53. If you had a contract for

health insurance services,

then you must report your

departure and the cessation

of contributions to the social

security authorities as well.

54. If you leave Hungary during

the tax year, then you may

file a tax return by 20 May

of the following year, or you

may inform the tax

authorities about your

departure and the income

you earned.

In case of non-Hungarian tax

resident’s departure from

Hungary before the end of the tax

year without the intention to

return during the tax year to

continue engaging in taxable or

gainful activities, the tax authority

will establish the tax liability by

resolution. The tax authority must

be informed 30 days in advance

before the individual leaves

Hungary and all the documents

necessary for the tax assessment

shall be enclosed with the

notification.

VAT refund

55. Foreign citizens (with a residence

outside the European Union) can

reclaim VAT on possessions

purchased in Hungary and

subsequently exported.

56. VAT can be refunded if the

following conditions are met:

The goods purchased by the

foreign citizen belong to

his/her personal luggage (for

example a personal car

cannot be considered as tax-

exempted product);

The product is exported

within 90 days following the

date of purchase, and the

export is certified by the

customs officials;

The foreign citizen’s legal

status should be proved by a

valid travel document;

The total value of the invoice

including VAT is at least EUR 175

(HUF 51 625);

The vendor should complete a printed

form called “Tax reclaim form for

foreign traveller – A külföldi utas

áfavisszaigénylő lapja” at the place of

the purchase in three copies, which

should be given to the foreign national

in two copies together with the

original invoice. One copy of this form

will be kept by the Customs Office.

57. Tax exemption may be

asserted in two ways:

When the goods are sold, the

vendor issues an invoice

including VAT to the foreign

citizen and completes a VAT

reclaim form (“A külföldi utas

áfavisszaigénylő lapja”) at his

request, the first two copies of

which he hands over to the

foreign citizen, and keeps the

third for his own records. After

the transportation of the goods

to a third country, the foreign

citizen brings/sends the vendor

the first copy of the VAT

reclaim form endorsed and

stamped by the customs office

along with the original invoice

received at the transaction, and

the vendor refunds to the

foreign citizen the VAT charged

to him, provided that the

foreign citizen has provided

evidence of his legal status to

the vendor, the total value of

the purchased goods, including

VAT, exceeds EUR 175 and the

transportation of the purchased

goods has taken place within 90

days following the date of the

purchase of these goods.


58. The other way is that

the vendor may sell the

goods net of VAT to the

foreign citizen. If such

is the case, the foreign

citizen must provide

evidence to the vendor,

by sending the vendor

the first copy of the

VAT reclaim form

endorsed and stamped,

that he has transported

the goods to the

territory of a third

country within 90 days.

59. In case the vendor sells

the goods according to

the first mentioned

case, the repayment

will be made in HUF

but it can be converted

to foreign currency.

You may employ a

proxy to handle VAT

refunds.

Other issues

60. The export of certain

goods (e.g. object of

art) is limited or

specific permission is

required. For details

please contact our office.


Step 7: Other matters requiring consideration

Transfer tax

61. In general the transfer of

immovable property is

subject to 4% transfer tax up

to HUF 1 000 000 000

(approx. EUR 3 389 831).

Over that limit 2 % transfer

tax is payable by the new

owner. The transfer tax

applies equally to residents

and non-residents.

VAT

62. Hungary applies a VAT

system based on the relevant

European Union's directives.

The standard VAT rate is

27%, while the two reduced

rates are 18% and 5%. The 18

% VAT rate is applicable to

milk, certain dairy products,

bread and other bakery

products, hotel and holiday

accommodation etc., while 5

% applies to medicaments,

equipment for blind people,

books and journals. Some

services are exempt from

VAT (e.g. the services of the

Hungarian post, services

regarding nursing,

insurances and credit

granting).

Inheritance and gift tax

63. In order to simplify the

system, the new rules

collapse the number of tax

rates down to two. The new

general inheritance and gift

tax rate is 18 %, and a

preferential 9 % tax rate

applies to residential

property.

64. The transfers of property

without a consideration

between lineal rela

Purchase of real estate

65. Foreign individuals may

acquire the ownership of real

estate in Hungary (excluding

agricultural/and protected

nature conservation area)

with the permission of the

competent local authority.

For details please contact our

office.

Vehicle tax

66. Vehicle tax should be paid

for all vehicles whether

Hungarian registered

(Hungarian number plate

and car permit) or registered

abroad (foreign number

plate and car permit).

67. The tax is payable by the

registered owner of the car.

However, if the car permit

registers a different

authorized user of the car,

the latter is obliged to pay

vehicle tax. In the case of

foreign registered cars the

user is obliged to pay vehicle

tax.

68. Vehicle tax is based on the

registered power (in Kilowatt

or in horse-power) of the

vehicle registered in

Hungary. Vehicle tax is

levied by local governments.

69. Vehicle tax can be deducted

from the amount of wealth

tax payable after high-

performance passenger cars


Appendix A: Typical tax computation

Typical tax computation for 2017 (in HUF)

Employed by Hungarian company, Hungarian social security applies

Employed by non-Hungarian company (Hungarian, EU national if certificate of coverage is not available and third country national in case the assignment is longer than 2 years) Hungarian social security applies

Employed by non-Hungarian company (non-EU national, if the length of the assignment is 2 years or less) Hungarian social security does not apply

Individual's tax obligation

Gross income (HUF) 20 000 000 20 000 000 20 000 000

Base of personal income tax

20 000 000 20 000 000 20 000 000

Tax payable (15%) (3 000 000)

3 000 000

3 000 000

Pension contr. (10%) (2 000 000) (2 000 000) 0

Health care and unemployment contr. (8.5%) Uncapped

(1 700 000) (1 700 000) 0

Net income 13 300 000

13 300 000

17 000 000

Company's tax obligation

Social tax (22%) 4 400 000

4 400 000

0

Training fund (1.5%) 300 000 0 0

Total employer's cost 4 470 000

4 400 000

0

Subtotal employer's cost

24 470 000

24 400 000

20 000 000


Appendix B: Double-taxation agreements

Countries with which Hungary currently has double-taxation agreements

Albania Indonesia Poland

Armenia Ireland Portugal

Australia Iran Romania

Austria Israel Russia

Azerbaijan Italy San Marino

Bahrein Japan Saudi Arabia

Belarus Qatar Serbia

Belgium Kazakhstan Singapore

Bosnia and Herzegovina

Korea Slovak Republic

Brazil Kosovo Slovenia

Bulgaria Kuwait South Africa

Canada Latvia Spain

China Lichtenstein Sweden

Croatia Lithuania Switzerland

Cyprus Luxembourg Taiwan (R.O.C.)

Czech Republic Macedonia Thailand

Denmark Malaysia Turkey

Egypt Malta Turkmenistan

Estonia Mexico Tunisia

Finland Moldova Ukraine

France Mongolia United Kingdom

Georgia Montenegro United States

Germany Morocco United Arab Emirates

Greece Netherlands Uruguay

Hong Kong Norway Uzbekistan

Iceland Pakistan Vietnam

India Philippines


Appendix C: Social security agreements

Countries with which Hungary currently has social security agreements:

Australia Bosnia and Herzegovina

Montenegro

Canada Former Yugoslavian countries 2

Quebec

Albania Korea United States

Former Soviet countries 1

Mongolia India

Japan Moldova Serbia

EU regulations are applicable with the European Union member states.

Notes:

1. The agreement is applicable for the previous non-EEA

member Soviet countries except with Uzbekistan. The

applicability is uncertain in case of Azerbaijan, Belarus.

2. The agreement is applicable in case of Macedonia.


Appendix D: Hungary contacts and offices

Contacts

Dr. Tamás Lőcsei

Tel: [36] (1) 461 9358

Email: [email protected]. com

Bencze Róbert

Tel: [36] 30 870 3585

Email: [email protected]

Mónika Keztyűs

Tel: [36] 30 694 5867

Email:

[email protected]

Adrienn Verrasztó

Tel: [36] 30 958 3744

Email: [email protected]

Offices

Budapest

PwC Bajcsy-Zsilinszky utca 78.

H-1055 Budapest

Hungary

Tel: [36] (1) 461 9100

Fax: [36] (1) 461 9101

mailto:[email protected]








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