REVIEW OF THE HUNGARIAN TAX SYSTEM
- Accident tax
- Bank tax
- Insurance tax
- Company car tax
- Simplified entrepreneurial tax (EVA)
- Energy tax
- Energy providers’ tax
- Medicine tax
- Innovation contribution
- Gaming tax
- Fixed-Rate Tax of Low Tax-Bracket Enterprises (KATA)
- Tax on small enterprises (KIVA)
- Environmental pollution fee
- Environmental product fee
- Tax of public utility lines
- Public health product fee (NETA)
- Financial transaction duty
- Advertisement Tax
Personal Income Tax
In Hungary, the income of private individuals resident in Hungary is comprehensively taxable, they pay taxes on the basis of their domestic and foreign income. The tax liability of private individuals having tax residence abroad only encompasses income generated from Hungary or income taxable in Hungary based on international agreements or reciprocity.
2. Taxable income
Any type of income of private individuals is taxable in respect of personal income tax except for those which are exempted from tax by law. Act CXVII of 1995 on Personal Income Tax (henceforward: PIT tax) identifies the following income categories for private individuals:
- Incomes from activities other than self-employment, self-employment activities and other consolidated incomes belong to the category of incomes to be consolidated.
- Separately taxed incomes are capital gains, incomes from private entrepreneurship, and incomes generated from the sale of real estate or movable property.
As of 2016 the rate of personal income tax is 15%.
2.1. Tax exempt income
Tax exempt incomes are mostly discussed by Section 7 and Schedule 1 of the PIT Act.
The following types of incomes belong to this category:
- certain forms of state allowances paid for raising children;
- scholarships paid by non-resident entities to students studying abroad or researchers working abroad;
- certain services provided by insurers;
- pensions including state pension benefits and pensions paid by private pension funds, and incomes defined as pension on the basis of the provisions of agreements for the avoidance of double taxation.
2.2. Income from activities other than self-employment
The PIT Act identifies incomes from activities other than self-employment which comprise, among others, activities pursued in an employment relationship, the activities of executive officers of business associations, and the personal participation of private individual members of a business partnership.
Income from activities other than self-employment comprises wages paid to a private individual in compensation of their activities, bonuses, and income paid on the basis of personal participation, as well as managerial and elected officer activities. Generally costs may not be subtracted from the income.
2.3. Income from self-employment activities
All activities, as a result of which a private individual receives income and which are not included in the sphere of activities other than self-employment are considered self-employment activities. This includes, in particular, the activities of small-scale agricultural producers, private entrepreneurs, lessors, appointed auditors, and people pursuing activities in employment under commission agency.
As a general rule the income generated from self-employment activities – apart from those pursued in private entrepreneurship – is regarded as the amount of all income with all expenses subtracted.
The taxpayer may choose from two methods of expense accounting:
- itemized expense accounting (on the basis of certified actually arising expenses) or
- 10 per cent of the revenues can be accounted without certification.
Only one method of expense accounting may be applied throughout one tax year.
Income generated from royalties at the original beneficiary is taxed in accordance with the rules pertaining to income from self-employment activities.
Special rules are applicable for private entrepreneurs.
Instead of the itemized expense accounting or the 10 percent expense ratio, small-scale agricultural producers may elect flat rate taxation.
2.4. Benefits which can be granted under the taxes payable by payers
These include benefits and services provided under the title of entertainment and promotional gifts, products and services provided to each employee (or a certain group of employees according to the internal regulations of the employer) either free of charge or at a discount price, eating and other services arising in respect of business trips. The base of tax is the value of the benefits multiplied by 1.19. The rate of tax is 15 percent. Besides the personal income tax, the payer, employer also has to pay the 27 percent healthcare contribution.
2.4.1. Non-wage benefits
Such benefits are, for instance – up to various threshold values separately defined for particular benefits – are the following items provided free of charge or at a discount price:
- travel passes for local public transportation;
- board services
- Erzsébet Voucher for the purchase of meals ready for consumption or hot meals in restaurants
- holiday services provided in resort facilities owned by the provider
- benefits transferred by the employee to a private individual’s account in voluntary pension funds, aid and healthcare funds.
The base of tax is the value of the benefits multiplied by 1.19, and the tax is payable by the payer or the employee. The rate of tax is 15 percent. Besides the personal income tax, the payer, employer also has to pay the 14 percent healthcare contribution in accordance with the rules in effect on 2016.
2.4.2. Low interest loans
In case of no interest or low interest loans, the payer, employer pays the tax on the amount of income arising from the unpaid interest. The tax base is the interest discount multiplied by 1.18 and the rate of tax is 15 percent and the 27 percent of healthcare contribution also has to be paid. When the income arising from the no interest or low interest loan is established the base rate of the Prime Bank of Hungary shall be taken into account with an additional 5 percentage points also added – and that is compared to the actually charged interest.
In cases defined in law, the income generated from discount interests is free of taxes.
2.4.3. Shares and option
If a corporation provides share to its employees in the framework of a share distribution system for employees, no taxable income is derived when shares are distributed if the aggregate amount of the regular market price of the thus acquired securities does not exceed 1 million HUF.
3. Private entrepreneurial revenues
Private entrepreneurs under the effect of the PIT Act are obliged to pay private entrepreneurial tax and dividend tax. If the conditions defined in law are met, the private entrepreneur may opt for flat rate taxation or may register under the Simplified Entrepreneurial Tax (EVA) and Fixed-Rate Tax of Low Bracket Enterprises (KATA).
The entrepreneurial withdrawal (the actual wage of a private entrepreneur) generated from economic activities and also accounted for as an expense shall be indicated among the incomes to be consolidated.
The tax base of the entrepreneurial income is taxed as the difference between the total aggregate income and expense. There is a minimum personal income tax and contributions base for private entrepreneurs for which public dues are to be paid.
The system of writing off depreciation allowances is similar to the system applied with employees of companies.
The private entrepreneur has the option to account for their losses that were deferred in due observation of the principle of proper execution of the law within its meaning and intent against their revenues derived from the private entrepreneurship in the ensuing five tax years (but in the year of cancelling of their business activities at the latest) in accordance with rules defined in the PIT Act at the latest.
The rate of tax imposed on entrepreneurs is 10 percent until a tax base of 5000 million HUF and 19 percent above that.
Entrepreneurs opting for flat rate taxation pay tax on the basis of their total revenues with a fixed amount of expense ratio subtracted, the expense ratio varies between 40 percent and 93 percent according to the sphere of activity. The income defined as a flat rate amount is a part of the consolidated tax base.
4. Income from capital investments
The payer automatically subtracts tax from the dividend income. The agreement on the avoidance of double taxation regulates tax liabilities regarding the dividend income of the private individuals of foreign tax residence, and if no such agreement exists, the rate of tax is 15 percent.
In the case of foreign dividend income of private individuals of Hungarian tax residence, the amount of dividend tax certifiably paid abroad can be subtracted from the 15 percent of taxes. If Hungary has no agreement on the avoidance of double taxation with the particular country, then the tax rate in Hungary is 5 percent at least.
A 15 percent rate of personal income tax is also imposed on the income generated from interests. Among others, the interest paid on deposits made on savings accounts, the interest and other income derived from publicly offered and traded securities and investment certificates qualify as interest.
A personal income tax of 15 percent is payable on the income realized upon the sale of securities (capital gains). The tax base is the selling price with the documented expenses, such as the entry price and the transactional costs subtracted.
A 15 percent tax is imposed on the income withdrawn from business accounts.
Dividends, interests or capital gains paid by legal persons or other organizations seated in offshore countries qualify as taxable income to be consolidated.
It is worthwhile to take care of the fact that – on the basis of Act LXXX of 1997 on on the Eligibility for Social Security Benefits and Private Pensions and the Funding for These Services (henceforward: Tbj) – a 14 percent healthcare contribution is also payable on the income generated from dividends, capital gains and incomes withdrawn from business accounts with the 15 percent tax rate.
With the exceptions determined in law a 6 percent healthcare contribution is imposed on the income generated from interests. A foreign private individual – defined as such by the Tbj – has the option to reclaim the 6 percent healthcare contribution subtracted by the payer.
5. The avoidance of double taxation
The avoidance of double taxation is performed on the basis of the provisions of agreements on the avoidance of double taxation, and on the basis of Hungarian legal regulations if no such agreement exists.
In case an agreement on the avoidance of double taxation exists, its relevant provisions are to be applied in respect of foreign income.
The income of a private individual of foreign tax residence – taxable in Hungary on the basis of an agreement on the avoidance of double taxation – is taxed in accordance with the rules pertaining to individuals with a Hungarian tax residence. The income of a Hungarian private individual which is taxable abroad on the basis of the agreement is exempted from taxation by Hungary (with dividends being typical exceptions).
If nothing else follows from international contracts or the principle of reciprocity, the calculated tax is reduced by 90 percent of the tax paid abroad, but – at most – by the tax established with the tax rate applicable to the tax base of that income.
6. Administration (tax returns, tax payment)
The declaration of personal income tax takes place on the basis of self-assessment. Non-entrepreneurial private individuals may request the assistance of the tax authority for preparing their tax returns. Employers and payers are obliged to subtract taxes and advance tax payments from the wages and other payments they pay. The private individuals themselves are obliged to pay the taxes or advance tax payments on the income they earned if the income has not been paid by a payer or employer.
The annual tax returns of private individuals are to be filed until 20th May of the year following the tax year, and until 25 February for private individuals obliged to pay VAT and private entrepreneurs. This is the deadline of paying taxes potentially still outstanding with the subtracted or paid tax advance payments taken into consideration.
Tax return obligations are to be complied with on forms distributed by the tax authority.
Corporate income tax
Subject of corporate income taxes:
- domestically resident economic companies and other organizations defined in the Act on Corporate Income Tax,
- enterprises resident in foreign countries.
Taxable persons resident in Hungary are obliged to pay taxes on their ‟revenues from the world” (that is, both their revenues from Hungary and abroad). Those foreign enterprises that pursue entrepreneurial operations in a domestic permanent establishment (are known in Hungary as ‟foreign enterprises”) pay taxes in Hungary on their income earned from their entrepreneurial operations performed at their domestic permanent establishment.
For the definition of permanent establishment, the terms of the relevant agreement on the avoidance of double taxation (and in the lack of such an agreement, the provisions of the Act on Corporate Income Tax) are to be taken into account.
If a foreign entrepreneur decides to place the premises of their management in Hungary, they become a domestically resident taxpayer on the basis of their Hungarian premises of management. The transfer of business management must be reported to the tax authority by using the form no. 'T201 (can be downloaded from here: http://nav.gov.hu/nav/letoltesek/nyomtatvanykitolto_programok/nyomtatvan...).
The base of tax is the result before taxation modified by the correctional items defined in the corporate tax act. The following are the most important out of those:
- deferred losses
- correctional items related to deprecation
- correctional items related to received royalty
- received dividends
- profits made by an off-shore company
- reliefs awarded for research and technology
- costs arising for purposes other than the company
- investment tax base reliefs
- transfer pricing rules.
The rate of corporate tax is 10 percent up to the amount not exceeding 500 million HUF of the positive tax base and 19 percent on the part that does exceed 500 million HUF.
Up to a determined percentage of the calculated corporation tax certain tax reliefs are available out of which the following are the most important:
- investment tax relief of small and medium enterprises
- development tax relief
- tax relief for the support of spectacular team sports.
The company income tax is assessed and declared through self-assessment. The tax year is generally the calendar year, but there is an option to choose a business year different from the calendar year (for instance due to the nature of the business and the information needs of the parent company).
Tax returns are to be submitted by May 31st of the year following the tax year for taxpayers operating in accordance with the calendar year and by the last day of the fifth month following the tax year for those taxpayers who use a business year different from the calendar year.
The tax return can be downloaded from the website of the National Tax and Customs Administration.
Rules regarding companies having real estate
Those foreign persons who had acquired income as a result of selling or withdrawing their share in a company having real estate (referred to in Hungary as “members of companies having real estate) are obliged to pay a tax to the Hungarian tax authority with the rate of the company income tax. The base of tax is the positive amount of price at the time of selling the share or at the time of the reduction of the registered capital of the company with the price of the acquisition and the certified expenses related to the acquisition or holding of the share subtracted.
The Hungarian transfer price regulations have been prepared in harmony with OECD regulations.
Related parties are required to set prices in their contracts that are used in contracts signed with independent parties under the same conditions. If the related parties in their contracts or agreements signed with one another apply a higher or lower counter value than the one that would be used in contracts signed with independent parties under the same condition, the tax base must or may be modified with the difference between the customary market price and the applied counter value. The taxpayer must increase the pre-tax earnings with the difference if due to the difference it has achieved lower pre-tax earnings than what it would have achieved with the application of the customary market price.
The taxpayer is generally obliged to prepare a transfer pricing documentation on the basis of its contracts and agreements in force with related parties if performance took place under these contracts and agreements in the tax year. No transfer pricing documentation is required from taxpayers who qualify as micro and small businesses.
More detailed information can be found of the rules of the company income tax here: http://en.nav.gov.hu/taxation/taxinfo/summary_companies.html.
Social security contributions
1. Payment of contributions
The ensured persons (employees) have an obligation to pay contributions to cover social security services and labour market objectives.
Among others ensured are:
- those in an employment relationship,
- the private entrepreneurs and members of business partnerships if not retired,
- persons in a special legal relationship of working personally in exchange for compensation (for instance on the basis of a commission contract) if their compensation reaches a certain amount of money.
- pays an 8.5 percent healthcare and labour market contribution and
- a 10 percent pension contribution.
The base of the contributions is – among others – the income taken into account when the tax advance payment is calculated from the income derived from self-employment and non-self-employment consolidated in accordance with the PIT Act, and in the lack of that, the base salary fixed in the working contract.
Administration: Contributions are established, subtracted by the employer and declared by them to the National Tax and Customs Administration (NTCA) until the 12th day of the month following the month in question that also serves as the payment deadline.
Contributions paid by private entrepreneurs
The ensured private entrepreneur pays a 10 percent pension contribution and 8.5 percent labour market contribution. In case of tax payment according to the entrepreneurial revenues, the tax base is the entrepreneurial withdrawal, in case of flat rate taxation, the base of contribution is the income established in the lump sum with the condition that the base of the pension contribution is at least the monthly minimum wage (111,000 HUF in 2016), and the base of the health insurance and labour market contribution is at least the amount one and a half times that of the minimum wage.
The rules of the contribution payment obligations of the private entrepreneur are different from the above if they are full-time students in a secondary school or higher education establishment, or they are in an employment relationship besides their entrepreneurial activities or if they are retired etc.
Administration: The ensured private entrepreneur is obliged to declare and pay their contributions until the 12th day of the month following the month in question.
Contributions paid by members of business partnerships
Contribution payments of members of business partnerships depend on the type of legal relationship (employment relationship, commission relationship in accordance with the Civil Code or as a member) in the framework of which they work in a business partnership. Whether or not the member is also the manager of the business partnership is also an important factor.
Useful additional information
Detailed information regarding the contribution payment of business partners can be found on the English language website of the NTCA in the 12th information booklet uploaded under the Tax/ Booklets menu items.
- Act LXXX of 1997 on the Eligibility for Social Security Benefits and Private Pensions and the Funding for These Services (Tbj.)
- Government Regulation no. 195/1997 (XI. 5.) on the implementation of the Act LXXX of 1997 on the Eligibility for Social Security Benefits and Private Pensions and the Funding for These Services
2. Social contribution tax
The social contribution tax is imposed, among others, on the payer (e.g. the employer), the private entrepreneur and business partner. Its rate is 27 percent. The payable tax can be reduced by reliefs defined in law.
The base of tax
The base of social contribution tax is – among others – the income taken into account when the tax advance payment is calculated from the income taxable in accordance with the PIT Act, derived from self-employment and non-self-employment and paid by the payer to a natural person that is in a legal relationship with them resulting in tax payment obligations. In the lack of an income defined above, the base salary fixed in the working contract or the salary defined in the commission contract is the tax base.
Administration: The payer establishes the payable social contribution tax monthly. The deadline of declaration and payment is the 12th day of the month following the month in question.
• Chapter IX of Act CLVI of 2011 on the amendment of certain tax laws and acts related to them (Szocho Act)
3. Healthcare contribution
Healthcare contribution is payable for certain defined incomes in order to supplement resources to fund healthcare services. Such obligation however does not arise in respect of foreign persons with the exception of performing artists.
In accordance with the PIT Act a performer with a foreign residence can decide to comply with their tax payment obligations arising on the basis of their domestically taxable income paid by a person not qualifying as a payer to compensate for their activities done in Hungary as a performer in accordance with special rules.
In this case the performer with a foreign residence is obliged to pay a 14 percent healthcare contribution for their income that consists the base of personal income tax the upper limit of which is 450,000 HUF in the tax year.
Administration: A natural person establishes, declares and pays their healthcare contributions described above simultaneously with the personal income tax.
Useful additional information
Detailed information regarding healthcare contribution payment can be found on the English language website of the NTCA in the 11th information booklet uploaded under the Tax/ Booklets menu items.
- Act LXVI of 1998 on healthcare contributions (Eho Act)
4. Vocational contribution
Economic companies and private entrepreneurs pay a vocational contribution of 1.5 percent. As a main rule, the base of the contribution is identical of the tax base of the social contribution tax. In certain cases the base of vocational contribution can be reduced by the gross amount of wage of the person employed, but by 100,000 HUF per month at most (e.g. if the employee is a career starter).
- Act CLV of 2011 on Vocational Contribution and the support of training
Value added tax
Act CXXVII of 2007 on value added tax (VAT Act) is in line with the VAT directive of the EU. Taxpayers with no residence in Hungary but liable to pay taxes in Hungary have to register under the VAT taxation scheme.
The scope of the VAT Act covers the following: the supply of goods, the intra-Community acquisition of goods, the supply of services and the importation of goods.
- The place of the supply of goods and the supply of services determines whether or not the Hungarian VAT Act applies to the transaction: according to general rules, if the goods are not dispatched as a consignment or not transported, the place of supply of the goods is the place where the goods are actually located at the time when the supply takes place; when the goods are transported, the place of supply where the goods are located at the time when the dispatch or transport of the consignment is started. According to general rules, the place of supply of services performed for a taxable person shall be the place where the customer has established his business or, in the absence of such a place of business, the place where he has his permanent address or usually resides.
- The place of supply of services performed for a non-taxable person is the place where the supplier has established his business, or, in the absence of such a place of business, the place where he has his permanent address or usually resides.
Currently in Hungary there are three tax rates in force: the standard rate of 27 percent, reduced rates of taxation of 18 percent or 5 percent. Beyond these, the Hungarian VAT system also contains tax exempted areas.
The vast majority of products sales in markets, fairs and/or exhibition events are categorized within the tax rate of 27 percent. Within the reduced rate of taxation of 18 percent certain milk and bakery products are classified, as well as commercial accommodation services, under the 5 percent rate certain medicine, healthcare equipment, books, e-books, periodicals and district heating are classified.
As a general rule, taxpayers are required to file a tax return in every year quarter.
The frequency of submitting value added tax returns may be monthly, year quarterly or annual depending on the tax output – or in certain cases, the income. Certain taxpayers – such as tax subjects starting their taxable activities in Hungary in the year of their registration and in the following year – are obliged to file monthly tax returns.
Regarding the provisions of the Act on VAT, the rule in effect as of 1 January 2016 must be highlighted which renders new apartments constructed or to be constructed in multi-apartment complexes and not exceeding 150 square meters in area, as well as new real estate properties with single apartments not exceeding 300 square meters in area under the 5% tax rate.
For further information visit the English website of the National Tax and Customs Administration: http://en.nav.gov.hu/
Under the empowerment of the Act Nr. 100 of 1990 on Local Taxes and according to its provisions the representative body of the local government may introduce local and community taxes with its decrees.
The act on local taxes only curbs the circle of possible tax subjects but besides it does not constitute frames – possible tax objects, bearings of the tax case, the burdens of determining tax relating local taxes –, within which the local government is allowed to introduce community tax.
Administration: depending on the local decree either the local government imposes the tax based on the tax declaration of the taxpayer or the taxpayer sets the tax himself.
Building tax liability is linked to buildings and building sections either used for housing purposes or not (hereinafter referred to as “buildings”). The tax base of building tax may be the net floor space expressed in square meters, or the adjusted market value of the building as the local government may decide.
Subject to the tax are private individuals, legal persons and other organizations who is the owner of the building (or holder of a right regarding to the building) as of the first day of the calendar year.
The act on local taxes implies several exemptions (eg. temporary housing units) but the local government has the empowerment to extend the exemption rules.
The maximum rate of building tax per annum is 1100 HUF/sqm for tax based on net floor space or 3,6% of the adjusted market value.
Administration: the local government imposes the tax based on the tax declaration of the taxpayer or the taxpayer sets the tax himself.
Property tax liability covers properties lying in the area of jurisdiction of the municipal government. The tax base is – depending on the decision of the municipal government – the actual area of the land parcel expressed in square meters, or the adjusted market value of the parcel.
Subject to the tax are private individuals, legal persons and other organizations who are the owner of the building (or holder of a right regarding to the building) as of the first day of the calendar year.
The act on local taxes implies several exemptions (eg. parcel under building prohibition) but the local government has the empowerment to extend the exemption rules.
The maximum rate of building tax per annum is 200 HUF/sqm for tax based on the area of the parcel or 3% of the adjusted market value.
Administration: the local government imposes the tax based on the tax declaration of the taxpayer or the taxpayer sets it himself.
Personal Community Tax
Personal community tax is actually a simplified form of building and property taxes, it is a so called flat tax and its subject may only be private individuals. The tax object may be the building or property in the ownership of the taxpayer or under some right of the taxpayer or the right to lease of a building in the ownership of a non-individual. For the starting of tax liability for properties in the ownership or under the right of private individuals the rules for building and property tax apply. In case of lease right of a dwelling place the tax liability shall commence on the first day of the year following the conclusion of the lease contract.
The maximum rate of personal community tax per annum is 17 000 HUF per tax object.
Administration: the local government imposes the tax based on the tax declaration of the taxpayer.
Private individuals are to pay tourism tax who are not permanent residents in the area of jurisdiction of the local government, spending at least one guest-night there.
Depending on the decision of the local government the tax base may be either the number of guest-nights spent or the price of the accommodation.
The tax measure is adjusted to the tax base. The maximum tax rate is 300 HUF/person/night, or 4% of the price or offset of accommodation.
Administration: the person required to collect the tax shall set, declare and pay the tax to the local tax administration.
Local Business Tax
All business activities pursued (for income or profit) permanently or temporarily in the area of jurisdiction of a local government (hereinafter referred to as 'commercial activity') shall be subject to taxation.
The taxable person shall be the entrepreneur according to the act on local taxes, furthermore, the assets managed in a trust fund under a fiduciary asset management contract as provided for in the Civil Code shall be subject to taxation.
The character of the activity may be permanent or temporary.
An entrepreneur whose commercial domicile or place of business is located in the area of jurisdiction of a local government shall be regarded as conducting permanent commercial activities, regardless of whether any or all of his operations are conducted outside his commercial domicile (place of business).
Commercial activities shall be regarded temporary if, in the area of jurisdiction of a municipal government, an entrepreneur without a commercial domicile or place of business registered in such area is engaged in: construction, or any activity, that directly results in income, provided that the entrepreneur does not have a commercial domicile or place of business registered in the area of jurisdiction in Hungary.
The tax base of local business tax – similarly to the tax liability – depends on whether the activity is permanent or temporary. Moreover in case of permanent activity of some certain taxpayers the act on local taxes provides a simplified setting of the tax base.
For permanent business activity the tax base of local business tax is the net sales revenue according to the local business act curtailed by the sum total of the original costs of goods sold and the value of mediated services, sums paid to subcontractors, material costs, and the direct costs of basic research, applied research and experimental development claimed for the tax year.
For any entrepreneur who is engaged in the pursuit of commercial activities on a permanent basis in the areas of jurisdiction of more than one municipal governments or abroad, the tax base shall be divided, with regard to the most characteristic nature of the activities performed, by the entrepreneur as prescribed in Schedule No. 3 of the act on local taxes.
For permanent commercial activities the maximum rate of tax per annum is 2% of the tax base.
For temporary commercial activities the tax rate shall be maximum 5,000 forints per calendar day.
The amount of the tax to be payed to the local government according to the domicile or place of business may be lessened with the items described in the act on local taxes (up to that amount).
The local government is permitted to set tax exemption or tax reduction – beyond the exemptions in the tact on local taxes according to the conditions defined there.
Administration: the taxpayer sets, declares and pays the tax to the local tax authority.
References: Act Nr. 100 of 1990 on local taxes
Central announcement and declaration forms: annexes to the Decree of the Ministry of Finance Nr. 35/2008 (XII.31.).
Tax measures, tax exemptions and attainabilities of local governments (for each local government): https://hakka.allamkincstar.gov.hu
The duty on quid pro quo transfer of property is due when capital contribution in a company with holdings in real estate or domestic real estate properties is acquired.
The general rate of the duty on quid pro quo transfer of property is 4 percent of the market value of each real property acquired up to 1 billion forints, without any deduction of encumbrances, plus 2 per cent of the portion of the market value above 1 billion forints, with the condition that 200 million forints per property is not exceeded.
In respect of the acquisition of title to a motor vehicle, the rate of duty on the quid pro quo transfer of property is determined on the basis of the age and the capacity of the motor vehicle’s engine. In respect of the acquisition of title to a trailer the rate of duty is aligned to the permissible maximum gross weight of the trailer.
When a real estate property or immovable property is inherited or transferred as a gift the general rate of duty is 18% of the net worth of the acquired item of property. In case an apartment is inherited or transferred as a gift, the rate of duty is 9%.
If a motor vehicle or trailer is inherited or transferred as a gift, the double of the duty on quid pro quo transfer of property becomes payable.
The inheritance and transfer of property as a gift between lineal relatives and spouses is free of the duty on quid pro quo transfer of property.
As a main rule a procedural fee or an administrative service or court fee is payable for administrative and court proceedings. The duty is paid either through the electronic payment and settlement system or by fee stamp, by postal money order, by way of bank transfer or by bank card.
The most important rules about the duty on the acquisition of real estate property can be found here: http://en.nav.gov.hu/taxation/taxinfo/duty_payment_purchase_real_estates.html
The information booklet on the rules about the duty on quid pro quo transfer of property can be downloaded here: http://en.nav.gov.hu/data/cms404496/19___DUTY_ON_QUID_PRO_QUO_TRANSFER_OF_PROPERTY_2016.pdf
Major rates of duties can be found on the following page: http://en.nav.gov.hu/taxation/taxinfo/Fees_charges_duties.html
Motor vehicle tax
Motor vehicle tax shall be payed after vehicles with inland number plate and being officially in public traffic. It is a yearly tax so as the subject to the tax and the person liable to pay the tax is the one having the vehicle in exploitation or in absence of that the owner of the vehicle on the first day of the tax year – according to the vehicle registry. The tax liability begins generally on the first day of the month following the involving of the vehicle in public traffic.
The tax on passenger vehicles (passenger car and motorcycle) is based on the capacity – expressed in kilowatt – and age (year of production) according to the vehicle registry. The tax on vehicles with temporary number plate is set in a general rate (for passenger vehicles with sign “E” the measure of the tax is 10 000 HUF, for trucks 46 000 HUF, for vehicles with sign “P” the tax is 23 000 HUF).
For buses, caravans and mobile homes the tax is based on the net weight according to the vehicle registry. For trucks the tax amount is based on the net weight plus the 50% of its carrying capacity. For semi-trailers the tax base is the double of its net weight plus the positive difference of its highest permitted all-weight and the net weight of the semi-trailer.
The tax on vehicles with sign “E” the measure of the tax is 10 000 HUF, for trucks 46 000 HUF, for vehicles with sign “P” the tax is 23 000 HUF.
The act on motor vehicle tax implies several exemption and reduction rules based on the subject and object of the tax, eg.:
- budget organs enjoy total exemption
- associations, foundations (in case they have no other tax liability),
- environment-saving vehicles
- certain handicapped persons for low capacity vehicles may deduct a certain amount.
The tax exemptions laid down in the act on motor vehicle tax are in conformity with environment-saving efforts, since tax allowance is 20-30% for vehicles with a device for lowering pollution, in connection with proven combined freight-traffic it is 10%.
Reference: Act Nr. 82 of 1991 on Motor Vehicle Tax
Administration: the local government imposes the motor vehicle tax based on the country registry from which the KEKKH derives a yearly and a monthly information including data on the engrossed E and P number plates.
Other tax types
Operators of motor vehicles with Hungarian permanent establishments are obliged to conclude insurance contracts with an insurer to cover for the damages caused in the course of operating their vehicles – with the exception of certain exempted and state motor vehicles. The subject of the accident tax is the operator, and as a main rule, the base of tax in the case of an insurance contract with an indefinite term is the annual automobile liability insurance premium; and in case of insurance contracts with a definite term, the one fold insurance premium paid for the definite term. The rate of tax is the 30 percent of the tax base. but at most 83 HUF/day per motor vehicle for each calendar day insured by the insurer. As a main rule the tax is assessed, declared and paid by the insurer having the obligation to collect.
Bank tax is an umbrella term of taxes imposed on various financial institutions as well as financial and investment enterprises.
A special tax imposed on the insurance sector encompasses the provision of casco insurance and the property and accident insurances if the place where the risk arises is Hungary. The website of the National Tax and Customs Administration offers more information on the rules of the insurance tax (http://en.nav.gov.hu/taxation/taxinfo/rules_of_insurance_tax_2013.html).
Company car tax
Company car tax is payable for those passenger cars registered in domestic authority registries which are not owned by a private individual. The tax payment obligation also exists for those cars which are – although owned by a private individual – but expenses and depreciation allowances have been written off in respect of them with the method of itemized expense accounting in accordance with the PIT Act.
The taxable person is the owner registered in the registry of vehicles or the financial lessee.
The rate of tax is established on the basis of the capacity of the passenger car and its environmental classification, the tax amount is between the range of 7,700 HUF and 44,000 HUF per month.
As a main rule, the company car tax is established year quarterly by self-assessment for each month of the calendar year in which the tax obligation existed. The tax return is to be filed until the 20th day of the month following the year quarter to the state tax authority and that is also the deadline of tax payment.
Useful additional information
Detailed information concerning the company car tax can be found on the English website of the National Tax and Customs Administration in the menu item “Tax” and sub menu item “Booklets” where the information booklet no. 31 can be found.
- Chapter IV of Act LXXXII of 1991 on motor vehicle tax
- Act CXVII of 1995 on Personal Income Tax (PIT Act)
Simplified Entrepreneurial Tax (EVA)
Private entrepreneurs, sole proprietorships, limited liability companies, limited partnerships and general (unlimited) partnerships are entities eligible to choose Simplified Entrepreneurial Tax (EVA).
Conditions of opting for EVA:
- the total annual revenue in the previous tax year and the tax year immediately preceding the previous year did not exceed 30 million HUF,
- The reasonably expected gross revenues of the entity in the tax year does not exceed 30 million HUF,
- all members of the economic company or sole proprietorship are private individuals who hold no shares in another legal person,
- the taxable person accounted for income/receipts in the two years preceding the time when EVA is selected.
The base of EVA is the total income gained in the tax year which needs to be modified with the correction factors defined in law. The rate of tax is 37 percent of the positive tax base.
EVA substitutes for the following tax types: entrepreneurial personal income tax, the tax on the entrepreneurial dividend base, (corporate income tax in case of companies), and the value added tax, as well as the tax on dividends provided to a member and the personal income tax on income withdrawn from an enterprise.
- Act XLIII of 2002 on Simplified Entrepreneurial Tax (EVA)
With consideration to the objectives of energy management and environmental protection and for the purpose of integration external environmental damage into energy prices, promoting energy saving and creating the conditions supporting these criteria in the taxation of electric power, natural gas and coal, this energy tax is payable on certain energy trade services.
- HUF 310,5/MWh electric power
- HUF 93,5/Gigajoule natural gas
- HUF 2516/1,000 kg coal
Energy providers’ tax
The tax subject is the energy service provider (except for newly established taxpayers in their first business year). The petroleum product manufacturer and the petroleum product wholesaler with an excise license qualify as energy service provider. The income tax obligation is assessed solely on the basis of the business activities pursued through domestic permanent establishments for foreign enterprises. The base of tax is the profit before tax with certain corrections, the rate of tax is the 31 percent of the positive tax base.
Medicine tax is an umbrella term for several payment obligations which are imposed upon the license holder of medicine distribution, in certain cases the distributor of medicine, or agents performing activities related to medicine promotion.
Innovation contribution is a tax imposed on medium and large enterprises with Hungarian seats, the base of which is identical to the local business tax and its rate is 0.3 percent.
Gaming tax is the collective name of special taxes imposed on organizers of gambling games which cover many types of payment obligations (the gaming tax of lotteries, betting, distant gambling, gaming tax of slot machines, gaming tax of card room establishments, gaming tax of casinos and online casinos).
Fixed-Rate Tax of Low Tax-Bracket Enterprises (KATA)
Private entrepreneurs, sole proprietorships, as well as limited partnerships and general partnerships where all members are natural persons may be eligible for the fixed-rate tax of low tax bracket enterprises, except for such an enterprise which has received income from activities classified as leasing (letting) real estate in their ownership or rented by them in the year of opting for this tax subject status.
The low tax-bracket enterprise must pay a monthly itemized tax of 50 thousand HUF for each of their members registered as full-time small taxpayers, and a monthly itemized tax of 25 thousand HUF for each non-fulltime small taxpayer members if the annual income does not exceed 6 million HUF. If the income of the enterprise exceeds 6 million HUF in the tax year, a 40 percent tax is to be paid for the part of income that exceeds 6 million HUF. If the small taxpayer enterprise is not obliged to pay itemized taxes for each month of the calendar year, the 40 percent tax is to be paid on the part of its income which exceeds the product of multiplication of the number of months where tax payment obligation exists and the 500 thousand HUF per month.
KATA substitutes for the following tax types: entrepreneurial personal income tax, the tax on the entrepreneurial dividend base, corporate income tax, social contribution tax, health insurance and labour market contributions, pension contributions, health care contributions and vocational contribution.
The small taxpayer enterprise pays the itemized tax until the 12th day of the month following the subject month, the 40 percent rate tax until the 25th day of February of the year following the tax year.
- Act CXLVII of 2012 on the Fixed-Rate Tax of Low Tax-Bracket Enterprises and on Small Business Tax (KATA)
Tax on small enterprises (KIVA)
Tax on small enterprises is a simplified tax type which substitutes for the following three tax types paid by enterprises:
- the social contribution tax,
- the vocational contribution and
- the company income tax.
The rate of tax is 16 percent of the tax base. The base of tax before 1 January 2017 is the sum of personnel expenses and the turnover result, which is grounded on the changes taking place in the funds of enterprises, and the funds withdrawn from and added to the enterprise (dividend, capital operations and other flows of money). The tax base will change significantly in the future, the turnover result will be substituted by the balance of the dividends withdrawn from the company and the capital transactions and a few tax base modifying factors.
Environmental pollution fee
The agent emitting environmentally polluting material into the air, surface waters, intermittent streams or into the soil must pay an environmental pollution fee for each unit of pre-defined environmentally polluting material.
Environmental product fee
Environmental product fee is due on the domestic release of batteries (accumulators), packaging material, other products made of petroleum, electric and electronic appliances, tyres, papers used as a medium of advertisement, other plastic products, other products of the chemical industry and office papers either produced in Hungary or imported from the Community or a third country. Domestic release means the release into domestic free circulation, the use for the purposes of one’s own and the purchase for a stock.
The base of the payable environmental product fee is the weight of the taxable product, the unit fees for which are listed below:
- Battery (accumulator) 57 HUF/kg
- Packaging material 19 – 1900 HUF/kg
- Other products made of petroleum 114 HUF/kg
- Other plastic products 1900 HUF/kg
- Other products of the chemical industry11 HUF/kg or 57 HUF/kg
- Electric, electronic appliances 57-304 HUF/kg
- Tyres 57 HUF/kg
- office paper 19 HUF/kg
- paper used for advertising 85 HUF/kg
Tax of public utility lines
A payment obligation is imposed upon the owner of public utility lines (e.g. communication cables, sewage pipes, district heating lines), the amount of tax is 125 HUF for each started meter of the track of the public utility line.
Public health product fee (NETA)
Persons or organizations who/that sell any of the following products in Hungary for the first time or acquire any of the following products and use them as raw materials or components for the manufacturing of self-produced goods sold in Hungary must pay public health product fee: soft drinks, energy drinks, prepacked sugared products, salted snacks, food flavouring, flavoured beer, alcoholic refreshments, jam, alcoholic beverages.
The tax rate is:
|Other soft drinks||7 HUF/litres|
|Energy drink||250 or 40 HUF/litres|
|Sugared cocoa-powder||70 HUF/kilogram|
|Other prepacked sugared products||130 HUF/kilogram|
|Salty snacks||250 HUF/kilogram|
|Food flavouring||250 HUF/kilogram|
|Flavoured beer, alcoholic refreshments||20 HUF/litres|
|Alcoholic beverages||20-900 HUF/litres (depending on volume percent)|
Financial transaction duty
Payment service providers seated or having permanent establishments in Hungary, credit institutions licensed to perform currency exchange operations and key mediators authorized to mediate currency exchange are obliged to pay financial transaction duty on certain operations performed in the framework of the provision of payment services (for example transfer, collection).
The publication of advertisements in pre-defined channels or surfaces (e.g. outdoor advertising media, vehicle, published material, on a real estate property, in the internet, predominantly in Hungarian language and on Hungarian internet websites) is subject to the advertisement tax and with certain exceptions the order for such advertisement is also subject to tax.
Avoidance of double taxation
Hungary has signed treaties with a number of countries on the avoidance of double taxation. The list of those countries with which Hungary has effective and applicable tax treaties can be found here: http://en.nav.gov.hu/taxation/double_taxation_treaties