Tax benefits for government securities in Hungary
When you have income from interests, normally you pay personal income tax and social security contribution on those. However, if you invest in Hungarian government securities, you may not be required to pay either of those. Read on to find out when.
Taxes on income from interests
The standard tax on income from interests in Hungary is 28%, which is made up from the 15% personal income tax (that is normally referred to as “interest tax” in this context) and the 13% social security contribution. Whether you keep your money simply in your bank account, in a fixed term deposit, or in an investment portfolio, these are the taxes you pay. (In fact, these taxes are normally handled by the bank, so they deduct the taxes automatically, and you do not have to worry about them too much. In some cases you might be required to pay the taxes on your own; if you are not sure, just ask your bank.)
No interest tax on government securities
The Hungarian government tries to convince people to invest their disposable income in government securities by offering high interest rates on the one hand, and tax benefits on the other. In line with this, the income from interest on government securities issued as of 1 June 2019 is not subject to the interest tax. These include the following securities:
- Prémium Magyar Állampapír (PMÁP – Premium Government Securities)
- Bónusz Magyar Állampapír (BMÁP – Bonus Government Securities)
- Magyar Állampapír Plusz (MÁP Plusz – Government Securities “Plus”)
- nyomdai Magyar Állampapír Plusz (Printed Government Securities “Plus”)
- Babakötvény (Baby Bond)
- Egyéves Magyar Állampapír (1MÁP – One Year Hungarian Government Securities)
- Kincstári Takarékjegy (KTJ – Treasury Savings Bills)
- Euró Magyar Állampapír (EMÁP – Government Securities in EUR)
- Magyar Államkötvény (MÁK – Hungarian Government Bond)
- Diszkont Kincstárjegy (DKJ – Discounted Treasury Bill).
Most of the government securities currently available from the Treasury were issued after 1 June 2019. However, some of the long-term securities are still available for purchase, so whenever you buy securities, make sure you check the date they were issued. This piece of information is always indicated on the info sheet of each security.
Social security contribution on income from interests
Applying social security contribution to income from interests is a relatively new development, which is in force as of 1 July 2023. However, it does not apply to all forms of investment.
- The income from government securities issued as of 1 June 2019 is not subject to the 15% interest tax, and in line with this, it is not subject to the social security contribution either.
- If you are buying government securities issued before 1 June 2019 now (so after 1 July 2023), both the interest tax and the social security contribution will apply.
Avoid paying taxes through a TBSZ account
TBSZ stands for long-term investment account (“tartós befektetési számla” in Hungarian). This account type is available at various financial institutions, including the Treasury. You can buy securities for this account in the first “collection year”. You are supposed to retain those securities for at least 5 years, after which you are not required to pay the 15% interest tax. However, if you retain the securities for at least 3 years, the interest tax you pay is already reduced to 10%.
At the same time, interests from a TBSZ account are not subject to the social contribution tax, which makes them even more convenient.
Consult a financial advisor for the best results
Taxes on income from interest is pretty high in Hungary, but they can be reduced if you make the right investment choices. If you are doing business in Hungary as a foreign national, it makes sense to work with a financial advisor who can help you calculate the taxes you need to pay in Hungary and in your country of origin, and avoid double taxation of your Hungarian income.
Helpers Finance specializes in working with foreign owners of small and medium sized companies in Hungary, but our team also provide various additional services, including financial, legal, and tax advisory.
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DISCLAIMER: The information on this page is provided as general information only and it reflects the personal opinion of the authors. Nothing on this website constitutes investment advice or an investment offer as defined by Act CXXXVIII of 2007 (“Investment Service Act”), 4.§. (8) and (9). The content should not be used for financial or investment decisions, and it is not a personalized investment analysis. The information is provided without warranty of any kind. The authors, publishers and editors take no responsibility for any direct and indirect damage resulting from the use of the content of this site.
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