Taxation in Hungary

Last updated
Taxation in Hungary (2017), Source: Deloitte. [1]
Corporate income tax rate9%
Branch tax rate9%
Minimum taxApplied to 2% of adjusted gross profit
Capital gains tax rate9%
Tax basis Worldwide income
Participation exemption Yes
Loss reliefCarryforward: Indefinite, but limitations apply
Carryback: Generally not available
Double taxation reliefYes
Tax consolidation For VAT purposes
Transfer pricing rulesYes
Thin capitalization rulesYes (ratio 3:1)
Controlled foreign corp. rulesYes
Tax yearCalendar year,
but different fiscal year may be elected
Advance payment of taxMonthly/quarterly
Return due dateLast day of the fifth month
following of the end of the fiscal year
Withholding tax Dividends: 0%
Interest: 0%
Royalties: 0%
Branch remittance tax: 0%
Social security contributions 15.5% of gross wages for the employer
(from July 2020)
Capital tax No
Building tax/land tax May apply at municipal level
Real estate transfer tax 4% up to a value of HUF 1bn (€3.3 million)
and 2% on the excess,
capped at HUF 200 million (€0.65 million)
Local business taxmaximum 2% of net sales revenue
Innovation contribution0.3%
Financial transaction tax 0.3% of transferred amount
maximum HUF 6000 (€20)
VAT 27% (standard), 18%, 5%
Hungary quick tax facts for Individuals (2017), Source: Deloitte. [1]
Income tax rate15%
Capital gains tax rate15%
Tax basis Worldwide income
Double taxation reliefYes
Tax yearCalendar year
Return due date20 May
(Tax authority prepares it electronically
to everyone automatically)
Withholding tax Dividends: 15%
Interest: 15%
Royalties: 15%
Healthcare contribution14% or 22% on some income
maximum annual HUF 450 000 (€1460)
Social security contributions 18.5% of gross wages for the employee
Net wealth tax No
Inheritance and gift tax9% or 18%
Real estate tax May apply at municipal level
VAT 27% (standard), 18%, 5%

Taxation in Hungary is levied by both national and local governments. Tax revenue in Hungary stood at 38.4% of GDP in 2017. [2] The most important revenue sources include the income tax, Social security, corporate tax and the value added tax, which are all applied at the national level. Among the total tax income the ratio of local taxes is solely 5% while the EU average is 30%. [3]

Income tax in Hungary is levied at a flat rate of 15%. [4] A tax allowance is given through a family allowance (Hungarian : családi adókedvezmény), which is equal to the allowance multiplied by the number of "beneficiary dependent children". For one or two children the allowance is HUF 62,500 per child, for three or more HUF 206,250 per child. [5] The allowance can be split between spouses or life partners.

The standard rate of value added tax is 27% as of January 2012 the highest in the European Union. [6] There is a reduced rate of 5% for most medicines and some food products, and a reduced rate of 18% for internet connections, restaurants and catering, dairy and bakery products, hotel services and admission to short-term open-air events. [7]

In January 2017, corporate tax was unified at a rate of 9% the lowest in the European Union. [8] Dividends received are not subject to taxation, provided that are not received from a Controlled Foreign Company (CFC). Capital gains are included in corporate tax, with certain exemptions. [9]

Employment income is subject to social security contributions for the employer at a flat rate of 17,5%. [10] Capital gains are taxed at a flat rate of 15%. [11]

History

After the Ottoman conquest of central parts of Hungary, the most common tax was the Ottoman administration's levy on Christians the dhimmi. Under Austro-Hungarian rule, taxes were mostly levied by Austria, but Hungary was later given more financial autonomy in the Austro-Hungarian Compromise of 1867. [12] In 1988, liberalization of the Soviet-influenced Kádár government introduced tax reform, establishing a comprehensive tax system of central and local taxes, consisting mainly of a personal income tax, a corporate income tax and a value added tax. [13]

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Taxation in Norway is levied by the central government, the county municipality (fylkeskommune) and the municipality (kommune). In 2012 the total tax revenue was 42.2% of the gross domestic product (GDP). Many direct and indirect taxes exist. The most important taxes – in terms of revenue – are VAT, income tax in the petroleum sector, employers' social security contributions and tax on "ordinary income" for persons. Most direct taxes are collected by the Norwegian Tax Administration (Skatteetaten) and most indirect taxes are collected by the Norwegian Customs and Excise Authorities.

Taxes in Germany are levied by the federal government, the states (Länder) as well as the municipalities (Städte/Gemeinden). Many direct and indirect taxes exist in Germany; income tax and VAT are the most significant.

Taxation in Spain

Taxes in Spain are levied by national (central), regional and local governments. Tax revenue in Spain stood at 36.3% of GDP in 2013. A wide range of taxes are levied on different sources, the most important ones being income tax, social security contributions, corporate tax, value added tax; some of them are applied at national level and others at national and regional levels. Most national and regional taxes are collected by the Agencia Estatal de Administración Tributaria which is the bureau responsible for collecting taxes at the national level. Other minor taxes like property transfer tax (regional), real estate property tax (local), road tax (local) are collected directly by regional or local administrations. Four historical territories or foral provinces collect all national and regional taxes themselves and subsequently transfer the portion due to central Government after two negotiations called Concierto and the Convenio. The tax year in Spain follows the calendar year. The tax collection method depends on the tax; some of them are collected by self-assessment, but others follow a system of pay-as-you-earn tax with monthly withholdings that follow a self-assessment at the end of the term.

Taxation in Estonia consists of state and local taxes. A relatively high proportion of government revenue comes from consumption taxes whilst revenue from capital taxes is one of the lowest in the European Union.

Taxes in Portugal are levied by both the national and regional governments of Portugal. Tax revenue in Portugal stood at 34.9% of GDP in 2018. The most important revenue sources include the income tax, social security contributions, corporate tax and the value added tax, which are all applied at the national level.

In Slovakia, taxes are levied by the state and local governments. Tax revenue stood at 29.5% of the country's gross domestic product in 2013. The most important revenue sources for the state government are income tax, social security, value-added tax and corporate tax.

Czech Republic's current tax system was put into administration on 1 January 1993. Since then, an updated VAT act was introduced on 1 May 2004 when Czech Republic joined the EU and the act had to correspond to EU law. In 2008, the administration also introduced Energy Taxation. Changes to tax laws are quite frequent and common in the Czech Republic due to a dynamic economy. Highest levels of revenue are generated from income tax, social security contributions, value-added tax and the corporate tax. In 2015, total revenue stood at CZK 670.216 billion which was 36.3% of GDP. The tax quota of the Czech Republic is lower than the EU average. Compared to the averages of the OECD countries, revenues generated from taxes on social security contributions, corporate income and gains and value added taxes account for higher proportions of total taxation revenue. Personal income tax lays on the other end of the spectrum where the revenue is proportionally much lower than the OECD average. Taxes on property also account for lower levels of revenue.

Taxes in Poland are levied by both the central and provincial governments. Tax revenue in Poland is 33.9% of the country's GDP in 2017. The most important revenue sources include the income tax, Social Security, corporate tax and the value added tax, which are all applied on the national level.

Taxes in Lithuania are levied by the central and the local governments. Most important revenue sources include the value added tax, personal income tax, excise tax and profit tax, which are all applied on the central level. In addition, social security contributions are collected in a social security fund, outside the national budget. Total tax revenues in Lithuania, including social security contributions, was only 27.5% of GDP in 2012, the lowest in the European Union.

In Latvia, taxes are levied by both national and local governments. Tax revenue stood at 28.1% of the GDP in 2013. The most important revenue sources include income tax, social security, corporate tax and value added tax, which are all applied on the national level. Income taxes are levied at a flat rate of 23% on all income. A long range of tax allowances is given including a standard allowance of €900 per year and €1980 per year for every dependent.

Taxation in Bosnia and Herzegovina includes both federal and local taxes. Tax revenue in Bosnia and Herzegovina stood at 28.6% of GDP in 2013. Most important revenue sources include the income tax, Social Security contributions, corporate tax, and the value added tax, which are all applied on the federal level.

In Belgium, taxes are collected on both state and local level. The most important taxes are collected on federal level, these taxes include an income tax, social security, corporate taxes and value added tax. At the local level, property taxes as well as communal taxes are collected. Tax revenue stood at 48% GDP in 2012.

Taxes in Cyprus are levied by both the central and local governments. Tax revenue stood at 39.2% of GDP in 2012. The most important revenue sources are the income tax, social security, value-added tax and corporate tax, and are all collected by the central government.

References

  1. 1 2 "Taxation and Investment in Hungary (rates are updated to 2017)" (PDF). Retrieved 29 May 2017.
  2. "Tax to GDP". 2018-12-03.
  3. "Adózás (Taxation)" (in Hungarian). Retrieved 18 January 2010.
  4. "TMF Group Income tax Hungary".
  5. "Family Allowance 2014". angloinfo.com. Retrieved 14 January 2018.
  6. "Deloitte Tax News » Hungary: Corporate Income Tax and VAT changes 2012". Deloittetax.at. 1 January 2012. Retrieved 2 April 2012.
  7. "VAT 2014 KPMG". KPMG. 2019-08-07.
  8. "Hungary to offer EU's lowest corporate tax rate". Financial Times.
  9. "Residency and Incorporation in Hungary". flagtheory.com. 2017-01-30. Retrieved 2017-04-20.
  10. "KPMG – taxes H2 2019".
  11. "Capital gains tax". clearstream.com.
  12. Sowards, Stephen W. (11 June 2009). "Nationalism in Hungary, 1848-1867". Michigan State University . Retrieved 14 January 2018.
  13. Hőgye, Mihály. "Reflection on the Hungarian Tax System and Reform Steps". Petru Maior University of Târgu Mureș. Archived from the original (PDF) on 17 June 2010. Retrieved 18 January 2010.