Hungary: Business Environment
A reduced rate of 18% is applicable for some basic foodstuffs (e.g. milk, certain dairy products, products made from cereals, flour, and starch) and entrance to certain open-air public music festivals.
Effective from 1 January 2024, a zero percent VAT rate is implemented on journals published at least four times per week.
Certain products are subject to the environmental protection product fee, including tyres, packaging materials, batteries, commercial printing paper, other plastic products, other chemical products, other crude oil products, etc.
A product tax must be paid by the initial domestic distributor of specific goods, as well as by those who acquire items from overseas to use in the production of their own goods sold in Hungary. The products subject to the tax include beverages, energy drinks, pre-packed products with added sugar, salty snacks, flavoured beer and alcoholic beverages, delicacies, fruit jams, etc.
An airline contribution shall be paid by the ground handling service provider entity after the air passenger transport activity based on the number of passengers on the aircraft served (rates vary according to the final destination of the passenger and the carbon dioxide emission value of the aircraft).
Registration tax is charged on passenger cars, motor homes, and motorcycles before they can be registered and put into service in Hungary; it is also payable by car fleet operators.
Telecommunications service providers are subject to a specific tax (HUF 2 per minute for calls made and HUF 2 per message sent for private individuals; HUF 3 per minute for calls made and HUF 3 per message sent for other entities).
Grants, asset transfers, liabilities assumed, or services provided without charge may be recognized as business expenses if the taxpayer obtains a declaration from the recipient confirming that the benefit has been accounted for as income in their profit and loss statement. This declaration ensures that the recipient's pre-tax profit and tax base remain positive, and corresponding corporate income tax is paid on the income. Special regulations govern grants to charitable organizations and non-business entities. However, grants provided to foreign individuals or foreign resident companies are consistently treated as non-business expenses.
Bad debts can be deductible if supported by legally valid third-party documents stating that the receivable cannot be collected. Furthermore, 20% of eligible bad debts are deductible from the corporate income tax base if the debt was not settled within 365 days from the due date. Taxes are usually deductible (not for the corporate income tax and the recoverable VAT). Employee benefits and the fringe benefits tax payable on them are also tax-deductible.
R&D expenditure can be deducted from taxable income, as well as investments that comply with energy efficiency objectives. 300% of the direct costs for R&D are deductible from the tax base (capped at HUF 50 million) if the research activity is carried out jointly with a higher education institution, the Hungarian Academy of Sciences, or a research institute established by them.
Operating losses generated after the tax year 2015 can be carried forward for five years (up to 50% of the tax base calculated without losses carried forward), whereas the carryback of losses is not allowed.
Municipalities have the authority to levy building tax and land tax annually. For the year 2024, the building tax rate can be either (i) a maximum of HUF 1,100 per square meter or (ii) a maximum of 3.6% of the adjusted fair market value of the building. Similarly, the land tax rate for 2024 can be either (i) a maximum of HUF 200 per square meter or (ii) a maximum of 3% of the adjusted fair market value of the land. The methodology applied is at the discretion of the municipality. The adjusted fair market value refers to 50% of the fair market value calculated under the inheritance tax and gift tax rules.
When real estate or shares in companies holding Hungarian real estate are transferred, the purchaser is liable for transfer tax at a rate of 4% of the property value up to HUF 1 billion, and 2% on any amount exceeding HUF 1 billion. The total tax obligation is limited to HUF 200 million per property. Certain exemptions may be applicable, such as for transfers occurring within preferential mergers or demergers of companies.
The most common types of stamp duty are gift duty and duty on transfers of property for consideration. Stamp duty is levied on movable and immovable property and property rights if they were acquired in Hungary, unless an international agreement rules otherwise.
Social security contributions paid by the employer amount to 13% of the employee's gross salary.
Mining companies must pay a mining royalty based on the quantity of the mineral resources extracted under authority permit. An environmental tax applies, calculated on the basis of the quantity of emitted materials (e.g. sulphur dioxide, nitrogen oxides, mercury, phosphorous, cyanides, etc.) multiplied by the respective fee rate.
Telecommunications service providers are subject to a specific tax (HUF 2 per minute for calls made and HUF 2 per message sent for private individuals; HUF 3 per minute for calls made and HUF 3 per message sent for other entities).
Various surtaxes are imposed on financial institutions, financial transactions, telecommunication services, insurance, retail, and energy companies, with rates varying depending on the entity and the type of transaction. Some surtaxes are calculated based on income, while others are based on revenue or total assets. Additional surtaxes were introduced for financial institutions, oil production companies, certain electricity sector entities, pharmaceutical companies, and airlines as of either 1 July or 1 August 2022. Moreover, the rates and coverage of several existing surtaxes were increased or extended at the same time. Initially intended to remain in effect until 31 December 2023, these measures have been prolonged until 31 December 2024.
Hungary | Eastern Europe & Central Asia | United States | Germany | |
Number of Payments of Taxes per Year | 11.0 | 13.9 | 10.6 | 9.0 |
Time Taken For Administrative Formalities (Hours) | 277.0 | 226.2 | 175.0 | 218.0 |
Total Share of Taxes (% of Profit) | 37.9 | 36.5 | 36.6 | 48.8 |
Source: Doing Business, Latest available data.
Personal Income Tax Rate (Employment and Passive Income including interests, dividends, rental income, etc.) | 15% |
The amounts of family tax allowance are as follows:
- HUF 66,670 if there is one dependent child
- HUF 133,330 if there are two dependent children, or
- HUF 220,000 if there are three or more dependent children, per month for each child.
The allowance is deductible from the taxpayer's tax base. 15% of the unused amount of the child tax base allowance is to be deducted from the health and pension insurance contribution.
Mothers who are either currently raising a minimum of four children or have raised four or more children throughout their lifetime will receive full exemption from paying personal income tax for specific types of income as defined by the law.
Couples married after 31 December 2014 are able to decrease their tax bases by a total monthly amount of HUF 33,335, under certain circumstances (for instance, at least one member of the couple must be in his/her first marriage). The allowance is available for a maximum period of 24 months. No age limit applies to the eligibility for the tax benefit of first marriage.
Individuals under age 25 can apply for a personal income tax allowance up to a maximum limit determined every year (HUF 559,100 until July 2024).
As of 1 January 2023, mothers aged under 30 or between 25 and 30 at the 91st day of pregnancy, childbirth, or adoption, can decrease their total taxable income with a deduction capped at HUF 83,865 per month in 2024. However, the deduction is applicable only if the woman becomes eligible for the family tax allowance after 31 December 2022 concerning her unborn, biological, or adopted child.
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Latest Update: July 2024