Personal income tax in Hungary
Who pays personal income tax in Hungary?
As a rule of thumb, natural persons who generate income in Hungary pay personal income tax in Hungary. This can be complicated if someone is not a tax resident in Hungary; in that case, the double taxation treaty between Hungary and your country of origin should be considered. For that, you should consult a tax advisor like Helpers Finance.
Types of income typically subject to personal income tax include:
- Salaries
- Dividend from your Hungarian company (also called dividend tax)
- Net revenues of your freelancing business
- Rental income from real estate
- Income for selling real estate
- Interest on your Hungarian investments or savings (also called an interest tax or a savings tax)
How much is personal income tax?
Personal income tax in Hungary is 15%. There are no income brackets like in many other countries, so the tax rate is the same regardless of income. (There is a chance that income brackets will be introduced under the new government, earliest from 2027. Watch this space!)
Tax benefits instead of income brackets
While currently no income brackets apply in Hungary, tax benefits are available to various groups based on nationality, age, marital status, and other circumstances.
Important! Not all tax benefits can be applied to all types of income. If you are unsure when a tax benefit applies, ask your accountant.
If you are an employer, you are supposed to pay the personal income tax (and the social security contribution) on behalf of your employees before paying them their net salaries. As a result, you will need to manage relevant data of your employees. (Alternatively, employees can apply these benefits themselves after the end of the fiscal year, during tax season.)
Tax benefits available to everyone:
- Tax exemption for mothers: for mothers with 3 children as well as mothers under 40 with 2 children and mothers under 30
- Disability benefit: available based on certain chronic health conditions
- EKHO for employees in creative professions
- Fringe benefits: non-salary compensation can be given to employees at preferential tax rates
- Healthcare and pension funds: members can get a tax reimbursement after 20% of their funds up to HUF 150,000 each year
- Flat-rate taxpayers are exempt from personal income tax for their income up to half the yearly minimum wage
Tax benefits available to everyone but certain third-country nationals:
- Tax exemption for employees younger than 25 years
- Tax benefit of newlyweds: available during the first 24 months after the wedding
- Family tax benefit: available to families raising 1, 2, or more children
- Family contribution benefit: if someone cannot take advantage of the family tax benefit to its fullest extent, the unused part can be applied to the social security contribution
Helpers Finance at your service
If you have income in Hungary, there is a high chance you need to pay personal income tax after that income. Our accountants can help you make the calculations – and if you are not a tax resident in Hungary, our tax advisor can help you review your option. If you operate a Hungarian business, payroll administration for your employees includes managing data relevant to tax benefits and calculating the taxes you have to pay after them.
FREQUENTLY ASKED QUESTIONS
Regarding personal income tax, no, there are no tax brackets in Hungary. PIT is 15% regardless of how much someone earns, although various tax benefits are available based on age, marital status, and other circumstances.
Tax benefits can also be applied retroactively, during tax season, when you submit your tax returns.
In Hungary, taxes are usually paid around the same time a transaction takes place, and tax benefits should be applied right then. For example, personal income tax on employment is paid by the employer to the Tax Authority around the time the employee receives the salary. If an employee is eligible for a tax benefit, it will be applied right then, and they can receive an increased net salary. However, if the employee forgets to mention to their employer that they became eligible for a tax benefit, because e.g. they got married, they can still apply for the tax benefit when they file their yearly tax returns. Learn more here.
Natural persons cannot deduct expenses from personal income tax. Deducting expenses is relevant only for businesses or freelancers, where expenses can reduce the tax base after which you are paying taxes.
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