Taxes on dividend and dividend advance payments in Hungary
Calculating the taxes on dividend and dividend advance is a complex task, so make sure to ask your accountant or payroll specialist to advise you on your specific case before you take dividend from your Hungarian company. Below you may find some general guidance for the calculation.
1. Dividend to Hungarian tax residents
When Hungarian residents receive a dividend payment, they usually have to pay 15% income tax on the whole dividend amount and 17.5% social contribution tax up to a yearly limit. This upper limit of the social contribution tax is HUF 625,800 (ca. EUR 1,950) per year in 2019 and it can be reduced by the amount of social contribution tax you have already paid (or would have paid) that year on other income (taxable in Hungary).
Some examples for calculating taxes on dividend:
A) Your only income (taxable in Hungary) is your dividend from your single Hungarian company:
Gross dividend: HUF 3,576,000 (EUR 11,175)
15% income tax: HUF 536,400 (EUR 1,675)
17,5% social contribution tax: HUF 625,800 (EUR 1,950)
Net dividend: HUF 2,413,800 (EUR 7,550)
Taxes and contributions should be deducted by your company and transferred to the tax authority, so you will receive only the net dividend. If the above indicated amount is the gross dividend, the social contribution tax is paid to the upper limit. On any further dividend you take, only the income tax will need to be paid.
B) You both receive salary and take dividend from your Hungarian company.
Annual gross salary: HUF 2,400 000 (EUR 7,500)
Social contribution tax: HUF 420,000 (EUR 1,310)
When you take a dividend as well, the social contribution tax already paid will be discounted from the yearly maximum social contribution tax you have to pay.
Gross dividend: HUF 3,576,000 (EUR 11,175)
15% income tax: HUF 536,400 (EUR 1,675)
17,5% social contribution tax: would be HUF 625,800 (EUR 1,955), but due to your other payment: HUF 625,800 (EUR 1,955) – HUF 420,000 (EUR 1,310) = ONLY HUF 205,800 (EUR 645)
Net dividend: HUF 2,833,800 (EUR 8,855)
Taxes and contributions should be deducted by your company and transferred to the tax authority, so you will receive the net dividend.
2. Dividend to private individuals who are not tax residents in Hungary
Point 1 applies if you are a tax resident in Hungary. If you are not a Hungarian tax resident, other rules might apply for paying taxes on dividend, based on where you are actually a tax resident. Hungary has several double taxation treaties (tax treaties to avoid double taxation) with other countries that determine where and how to pay taxes after your income. See more here, or consult your accountant!
3. Dividend between companies
If a Hungarian company is owned by another Hungarian or foreign company, the profit after tax can be transferred between the companies without paying dividend tax on it. When the profit is paid out to a private individual in the end, that is when the taxes on dividend must be paid – and that should be done in accordance with the residency of the private individual.
E.g.: A Hungarian KFT transfers the profit after tax to its French parent company. The French parent company has two private individual owners (one is French, the other is American). When the French company pays dividend to its owners, the taxes on dividend must be paid according to each owner’s tax residency.
4. Dividend advance
If you are a Hungarian tax resident, only the income tax is to be deducted and transferred to the tax authority when you take a dividend advance. At the end of the fiscal year, when the dividend advance turns into dividend, your accountant will examine how much social contribution tax you have to pay, and you have to transfer the amount then calculated to the tax authority. Income tax is to be deducted only if you are a tax resident in Hungary. If you are not, the terms of tax treaties to avoid double taxation between Hungary and your country of residency will apply. Make sure to consult your accountant well in advance.
Want to learn more?
Click here to see our summary on how to take dividend in Hungary.
Click here to see how being or not being a tax resident in Hungary affects the taxes you pay on dividends.
Updated: 26 July, 2019.
Social contribution tax was 19,5% in Hungary from 1 January to 30 June, 2019, and it is 17,5% as of 1 July. Due to the change, the actual amount of the social contribution tax depends on when you took the dividend. Please make sure to consult your accountant for further information.
The post Taxes on dividend and dividend advance payments in Hungary appeared first on HELPERS.
