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Hungary, a landlocked country in Central Europe, is bordered by Slovakia to the north, Ukraine and Romania to the east, Serbia and Croatia to the south, Slovenia to the southwest, and Austria to the west. It has been a parliamentary republic since 1989 and is split into 19 counties, with Budapest as its capital. The official language of Hungary is Hungarian, and the currency is the Hungarian forint (HUF).




CIT = Corporate Income Tax - corresponding to IRPEG

SSC = Social Security Contribution - corresponding to the Social Contribution (Employee + Employer)


Hungary continues to be one of the leading nations in Central and Eastern Europe for attracting foreign direct investment: the inward FDI in the country was $119.8 billion in 2023, while Hungary invests more than $50 billion abroad. As of 2023, the key trading partners of Hungary were Germany, Austria, Romania, Slovakia, France, Italy, Poland and the Czech Republic. Major industries include food processing, pharmaceuticals, motor vehicles, information technology, chemicals, metallurgy, machinery, electrical goods, and tourism (in 2022 Hungary welcomed 12.1 million international tourists). Hungary is the largest electronics producer in Central and Eastern Europe. Electronics manufacturing and research are among the main drivers of innovation and economic growth in the country. In the past 20 years Hungary has also grown into a major center for mobile technology, information security, and related hardware research. The employment rate in the economy was 68.7% in January 2017, while the employment structure shows the characteristics of post-industrial economies. An estimated 63.2% of the employed workforce work in the service sector, industry contributed by 29.7%, while agriculture employed 7.1%. The unemployment rate was 3.8% in September–November 2017, down from 11% during the financial crisis of 2007–08. Hungary is part of the European Single Market which represents more than 448 million consumers. Several domestic commercial policies are determined by agreements among European Union members and by EU legislation.

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Taxation of individuals

Hungarian personal income tax (PIT) is assessed on the following.

  • Domestic-source income.

  • Foreign-source income, provided to an individual resident in Hungary.

Income derived from employment activity performed in Hungary can qualify as domestic-source income, even if it is paid from abroad. In the case of income paid from abroad, income tax can be due whether or not the income has been transferred (e.g. electronically, by bank-to-bank transfer) or brought into the country in cash.

Personal income tax (PIT) rate

The PIT rate is 15% of taxable gross income.

Social Contribution  

The social security contribution base is the gross income paid to the employee. The employer's contribution rate (so-called 'social tax') is 13% in 2024. The employees' social security contribution rate is 18.5%. 15% of the unused amount of the child tax base allowance can be deducted from the total amount of 18.5% social security contribution obligation.

In 2024, the amount of the minimum wage is 266,800 Hungarian forint [HUF] per month, and the guaranteed minimum wage for those employed in jobs requiring at least secondary level qualifications or vocational training is HUF 326,000 as of 1 January 2024. Employers (seated in Hungary) are liable for both social security payments and the electronic filing of monthly social security declarations. Non-Hungarian employers have similar obligations; however, if they fail to complete them, the employees will be responsible for these tasks.

As a general rule, dependent persons over 18 years of age are only eligible for healthcare services if they pay healthcare service contributions. Uninsured persons are liable for monthly contributions in the amount of HUF 11,100/month in 2024.

Social tax allowances

Only one type of allowance can be applied on a given employee; however, it is the employer's decision which is the most beneficial based on the given circumstances.

With these allowances, the government intended to reduce the employment cost relating to the employees like jobseekers, jobseeker mothers with three or more young children, individuals with reduced ability to work, researchers, etc.

With employment of the above employees, the employer can apply social tax allowances. The eligibility periods of the allowances and their exact amounts depend on the employee.

Social security contribution of foreign nationals

In order to determine whether a foreign national should become subject to Hungarian social security contributions, both the local and international rules should be carefully reviewed. One should count with Hungarian social charges typically when the foreign nationals:

  • are employed locally by a Hungarian employer in the territory of Hungary

  • work in Hungary as employees of a non-Hungarian employer and are nationals of a European Union (EU) member state or of a country that has a social security treaty with Hungary but cannot remain covered by the social security system of their home country, or

  • are third-country nationals assigned to Hungary from a non-EEA country and the length of their assignment exceeds two years.

Taxation of legal persons

Resident taxpayers are subject to all-inclusive or unlimited CIT liability. Non-residents are subject to CIT on their income from their Hungarian branch’s business activities.

From 1 January 2017, the CIT rate is a flat 9% of the positive CIT base. The taxable base is calculated by adjusting the accounting pre-tax profit shown in the taxpayer’s financial statements by the tax base increasing and decreasing items (e.g. tax depreciation, thin capitalisation, provisions, tax loss carry forwards) prescribed in the Act on Corporate Tax and Dividend Tax (CDTA).

Minimum tax base

Except in the pre-company period and in the first tax year of a company’s existence (or in the first tax year if separate financial statements are not required for the pre-company period), as well as in some other defined cases, certain rules apply if the profit before taxation or the general CIT base (the higher of the two) is below the minimum tax base.

The minimum corporate tax base is calculated as 2% of the total revenue with some increasing and decreasing items (e.g. transactions falling under the EU Merger Directive). In the above case, a company may decide to pay CIT based on the minimum tax base or may declare a statement in the CIT return. The statement provides additional details about the financials of the company, based on which the tax authority decides whether or not to initiate a tax audit.

Local business tax (LBT)

All municipalities are entitled to levy LBT. LBT is deductible for Hungarian CIT purposes and is not treated as ‘income tax’ in the application of the tax treaties.

The LBT base is the total net sales revenue reduced by the cost of goods sold (COGS), subcontractors’ work, material costs, mediated services, and research and development (R&D) costs. These items are deductible under a decreasing scale at taxpayers with larger turnover (with the effect that lower margin businesses may have higher effective LBT rates). In order to prevent tax avoidance, the tax base shall be calculated on a consolidated basis for affiliated entities that have a gross margin (net sales revenue - COGS and mediated services) of less than 50% in Hungary provided the related-party relationship was formed as a result of a demerger carried out after 1 October 2016.

As LBT is payable in each municipality where the taxpayer is active, there are detailed rules to allocate the taxable base among these locations and a separate PE definition is applicable for LBT purposes. PE for LBT purposes shall also include solar power plants. Starting from 1 January 2021, a PE is deemed to exist in the case of construction operations exceeding 180 days. However, other business activities carried out temporarily are not subject to LBT. In general, the allocation is calculated based on a formula comprising tangible asset value (i.e. tax depreciation of the assets) and payroll cost figures.

General service fees, depreciation, and labour costs are typically not deductible for LBT purposes. Interest income, dividend income, and the LBT base of a foreign PE of a Hungarian company are exempt from LBT. Royalty exemptions, on the other hand, have been significantly narrowed down in line with the Organisation for Economic Co-operation and Development (OECD) nexus approach (from mid-2016, with an applicable grandfathering period).

The LBT rate may differ from municipality to municipality but is capped at 2% by law. In the tax year that ended in 2022, the maximum level of the LBT rate was 1% for micro, small, and medium-sized businesses, even if a higher tax rate was set forth in the municipal decree however from 1 January 2023 the deducted LBT rate is not applicable.

With effect from the tax year starting from 1 January 2020, in line with other taxes, top-up liability for LBT purposes was abolished. 

From 1 January 2019, local governments have the possibility to introduce tax allowance or tax exemption aimed at encouraging investment projects carried out within the territory of the municipality. Tax advantage may be provided from the LBT payable by the taxpayer for its taxable activities performed within the territorial jurisdiction of the municipality in the year in which the investment project is carried out or, depending on the local government’s decision, also in subsequent years.

From 1 January 2023, the taxpayers can also fulfil their obligation to pay the LBT advance and LBT to the National Tax and Customs Office by transferring it to an account to be made for this purpose for tax payment in US dollars or euros.

The transferred USD or EUR amount will be credited to the taxpayer's tax account in Hungarian forint based on the Hungarian Central Bank’s exchange rate on the day of the transaction.

Calculation of LBT for small businesses

The calculation of LBT for small businesses was amended from 1 January 2023. According to the legislation, a company qualifies as a small business if its annual income does not exceed HUF 25 million, or HUF 120 million for a retailer company. The tax applies to the taxable base differentiated according to the income brackets (up to HUF 25 million or HUF 120 million) and the minimum business tax is HUF 50,000. The tax must be paid once a year, and no tax return is required.

New PE definition

The Act introduces a new PE definition for entrepreneurs who perform air passenger transport activities. From 1 January 2024, these entrepreneurs will be subject to LBT in the jurisdiction of the local municipality where there is an airport from which the entrepreneur's flights depart, irrespective of not having any fixed establishments there. The Act also explicitly states that the net sales revenue of the airlines should include the consideration received for the air passenger transport service provided on flights departing from Hungary and the services provided together with it.

In addition to the above rules, the Act also introduces a special calculation method for splitting the LBT base between the Hungarian PEs, if more than one is created.

As many airlines with departing flights from Hungary are not Hungarian tax residents and have no fixed establishment in Hungary which would have qualified as a PE for the purposes of the LBT under the previous rules, the Act will introduce a new levy for non-resident airlines which will result in additional tax payment and compliance obligations for these entities in Hungary. Additionally, airlines with fixed establishment in Hungary may also be impacted, to the extent they do not already report all of the revenue earned from their Hungarian departing flights for LBT purposes (e.g. because the tickets are not sold through the Hungarian establishment).

Additionally, due to the PE triggered for local business tax purposes, airlines would also be subject to innovation contribution, which is calculated as 0.3% of the same tax base.

Value Added Tax

VAT is payable on sales of goods and the supply of services. VAT is also payable on the importation of goods, on the intra-Community acquisitions of goods, and on the purchase of certain services provided to Hungarian taxable persons by foreign taxable persons.

VAT rates

The general VAT rate is 27%.

A reduced VAT rate of 18% is applicable for some products (e.g. certain milk, certain dairy products, products made from cereals, flour, and starch). The 18% VAT rate is also applicable to services that grant admission to musical and dancing events.

A reduced VAT rate of 5% is available for new residential property, certain pharmaceutical products, audio books, printed books, newspapers, district heating services, certain live performance activities, commercial accommodation services, certain products of the animal sector (e.g. live and processed large animals, such as pig, sheep, goats, cattle, poultry, eggs), fresh milk, internet access services, local dining services (i.e. meals and non-alcoholic beverages prepared locally in bars and restaurants), fish for consumption purposes, and the edible by-products and meat offal of domestic swine.

The reduced 5% VAT rate on the supply of new residential property will be applicable until 31 December 2024, but under the transitional rule it will apply until 31 December 2028 for long-delayed construction projects for which the building permit has become final on 31 December 2024 or the construction has been notified by that date under the simple notification rules.

As of 1 January 2024 a new, 0% VAT rate is introduced on journals published at least four times a week (daily newspapers).

Immovable-property-related VAT matters

From 1 January 2023, the domestic reverse-charge mechanism is changing regarding construction services supplied in connection with immovable property. According to the new legislation, the reverse-charge mechanism rules are applicable in case the building or the modification of the immovable property must be declared to any (not only building) authority (or in case it requires an authorisation, notification of some sort from an authority).

As of 1 January 2024, the law extends this declaration obligation to the service provider by providing that if the official authorisation or notification to the authority relates to the activity carried out by the service provider in relation to immovable property, the declaration is to be made by the service provider to the recipient of the service.

In case of a real estate where there is a change of function (change of use or change of the number of units of the property), then it is regarded as a new real estate in terms of VAT. In such cases, its supply will be VATable, provided that no more than two years elapse between the issue of the official certificate and the sale.

Exempted, out of scope transactions

Certain services are exempt from VAT, including, but not limited to, medical, cultural, sporting, and educational services provided as public services. VAT exemption is also available for financial and insurance services. The intra-Community supplies of goods, services, and exports are also treated as exempt transactions.

Generally, the supply of a building or parts of a building, the land on which it stands, and the rental of real estate are VAT exempted. An option is available to apply VAT on the supply or rental of this real estate. VAT exemption cannot be applied to the supply of building plots.

There are some special transactions that may be out of scope of the Hungarian VAT, provided that special conditions are met. These include the acquisition of any contributions in kind, the acquisition of any assets by way of succession, and the transfer of business as a going concern. Regarding the agricultural sector, the conclusion of a farm transfer agreement constitutes a succession under the VAT Act. The predecessor is jointly and severally liable with the successor in title.

Reverse-charge mechanism

A domestic reverse charge applies between Hungarian taxable persons for the following activities:

  • Services related to immovable property (e.g. construction, maintenance).

  • Sales of certain steel products.

  • Sales of waste materials.

  • Sales of carbon quotas.

  • Sales of real estate and land if the application of VAT was chosen.

  • Sales of certain agricultural products (e.g. maize, wheat, barley, rye).

  • Leasing staff or making available personnel and the use of student-work placement offices in relation to certain construction and other similar works.

VAT recovery

VAT deduction is available only for the business-related element of purchases that were made partially for non-business purposes.

If a taxpayer has a negative VAT balance in a VAT period, the amount can be recovered, provided that the VAT balance reaches or exceeds an absolute value of HUF 1 million for monthly filers, HUF 250,000 for quarterly filers, or HUF 50,000 for annual filers.

As a general rule, the deadline for remitting VAT reclaims is 75 days, irrespective of the amount concerned. However, if all incoming invoices, regarding which the VAT was deducted in the VAT return, are settled (paid fully to the suppliers) by the due date of the related VAT return, a 30-day deadline can be applied, and a deadline of 45 days might be considered if the amount to be transferred exceeds HUF 1 million. The preferential deadline is applicable for taxpayers qualified as a ‘reliable taxpayer’ by the Hungarian tax authority.

Special VAT refund procedure

Taxable persons, first in 2020, may request a refund from the tax authority of the input VAT charged to them if they, for reasons beyond their control, are unable to recover it in any other manner, which is contrary to the principle of fiscal neutrality. Requests are possible to be submitted to the tax authority no later than six months prior to the end of the period of limitation concerning the tax to be refunded.

As of 1 January 2021, the rules for the special VAT refund procedure were extended to the output VAT as well if the conditions laid down in the VAT Act are met.

Further to the above, as of 1 July 2021, the rules of the special VAT refund procedure changed slightly as if the occurrence of the reason for the refund request is within six months to the end of the period of limitation or after the period of limitation has lapsed, the taxpayer is entitled to submit this request within one year from the occurrence of the reason for the request.

Deducting bad debts from the tax base

From 1 January 2020, taxable persons shall be able to retroactively deduct bad debts from their tax base through self-revision. Subject to certain conditions, it shall be possible to reduce the tax base by the net amount of receivables recognised as bad debt. The VAT Act shall specify in detail the claims that may qualify as bad debt under the VAT rules (i.e. the cases in which the above option could be invoked). Under the transitional provisions, taxpayers will first be able to exercise this option in cases in which the date of supply of the goods or services forming the basis of the claim falls after 31 December 2015.

As of 1 January 2021, VAT refunds on uncollectible debts extended to debts owed by non-taxable persons. However, an overly strict interpretation of the eligibility criteria for the VAT refund (e.g. if a debt settlement procedure for private individuals must also be carried out in order to collect the debt) might call into question the utility and cost-effectiveness of this provision.

Starting from 1 July 2021, if the occurrence of the reason for the deductibility of bad debts (e.g. the date when the dab debts become definitively irrecoverable) is after the period of limitation has lapsed, the taxpayer is entitled to deduct bad debts within one year from the occurrence of the reason for the request. As a transitional rule, if the occurrence of the reason for VAT deductibility of bad debts is prior to the entry into force of this rule (which will be 1 July 2021) and the one-year deadline has not been lapsed, the taxpayer can apply for deduction if one submits a request within 180 days after the date of entry into force of this legislation.

Additionally, as of 1 July 2021, the strict requirements in relation to the person receiving the invoices from the applicant of the bad debt deduction request (e.g. the non-paying receiver of the services or goods) will be abolished.

Directive for refunds of foreign taxable persons

Taxable persons with their establishment in an EU country, other than Hungary, or in Switzerland, Lichtenstein, Norway, Serbia, or Turkey can recover local VAT. The refund applications have to be submitted electronically. Reclaim requests should be submitted to the tax authority of the country where the EU-registered taxable person is established.

VAT refund reciprocity with the United Kingdom (UK)

Based on the principle of reciprocity, the VAT reclaim procedure is available for taxpayers established in the United Kingdom (taking into account the provisions of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community and the Northern Ireland Protocol).

Administrative simplification to the VAT refund claims made by a foreign traveller

According to the new rules, the VAT reclaims made by a foreign traveller could be underpinned by a stamped electronic invoice. Going forward, this means that there is no need to present a paper-based invoice to the customs authorities in this procedure, thus the stamped electronic invoices serve as the electronic certificate.

Reporting obligations

All types of intra-Community transactions have to be reported in the periodic Intra-Community List in Hungary.

Taxpayers registered in Hungary have to submit domestic recapitulative statements regarding incoming B2B invoices. If a domestic recapitulative statement has to be prepared, the VAT return can only be submitted in electronic form. From 1 July 2020, the rules for the supply of data by taxpayers changed significantly, as the former HUF 100,000 reporting threshold was abolished. Under the new regulations, taxpayers’ recapitulative statements are required to include all invoices on the basis of which they exercise the right of deduction of input VAT as well as any document that relates to an invoice that is/was already indicated in the statement and qualifies in fact as an invoice whose effect is taken into account in the given period (e.g. modification or credit invoice).

As of 1 July 2018, taxpayers are required to report to the Hungarian tax authority certain data regarding B2B invoices that are issued by invoicing software and have a VAT content of at least HUF 100,000. Such reports have to be made electronically, through an online connection, using a specific XML file format. As of 1 July 2020, the HUF 100,000 threshold was abolished, and data shall be provided on all invoices issued by the company to a domestic taxable person for domestic transactions. As of 4 January 2021, the range of invoices to be reported further expanded, as the data of issued invoices for which the Hungarian invoicing rules are applicable shall be reported towards the tax authority. The above-mentioned amendment resulted in that Intra-Community and Extra-Community transactions will have to be reported and, with a few exceptions, invoices issued to non-taxable persons. Also, the scope of the data to be reported extended.

An Electronic Road Freight Control System (EKAER) number needs to be requested from the tax authority for specific road shipments. The taxpayers who do not fulfil this reporting obligation can face serious consequences (e.g. if a taxpayer fails to report or reports an incorrect weight or value data, the tax authority is entitled to levy a default penalty of up to 40% of the value of the incorrectly reported goods and also to seize the goods).

New rules regarding e-commerce

Distance services

In line with Council Directive (EU) 2017/2455, additional simplification has been introduced regarding the VAT rules on electronically supplied telecommunication and broadcasting services (‘distance services’) for non-taxable private individuals. If certain conditions are fulfilled, the service provider taxpayer is allowed to determine its VAT liabilities according to the regulation of the member state where it is established instead of the member state of the service recipient, up to a threshold of EUR 10,000, which, as of 1 July 2021, is consolidated with the intra-Community distance sales performed by this taxpayer as well. As a result of this simplification, the service provider taxpayer is able to avoid VAT registration in each of the affected member states of the service recipients.

However, the regulation sets out that the service provider taxpayers still have the right to decide to determine their VAT liabilities according to the rules of the member state of their service recipients instead of applying the new simplification rules. In this case, taxpayers will remain bound to their decision until the end of the second calendar year subsequent to the calendar year of their decision.

The rules apply to supplies performed after 31 December 2018.

Distance sales

In accordance with the VAT Directive, the VAT Act defines 'intra-Community distance sales' and the 'distance sale of goods imported from a third country'. Both definitions stipulate that the goods must be supplied to non-taxable persons. Distance sale means a transaction in which a private individual resident in an EU member state buys goods at a distance from a taxable person in another EU member state or from a third country, and the goods are delivered directly to that individual.

The VAT on the supply of goods at a distance must be paid in most cases (i.e. for intra-Community distance sales above a certain threshold) in the member state of consumption (which, in practice, means that the taxpayer selling the goods must register for, declare, and pay VAT in that member state). Therefore, in order to reduce the administrative burden on taxpayers carrying out such activities, the following arrangements and special rules were introduced:

Extension of the One-Stop Shop (OSS)

The OSS, which previously applied to telecommunications, broadcasting, and electronically supplied services, is extended to include all other services provided to non-taxable persons in EU member states and also covers the obligation to declare and pay tax on intra-Community distance sales. The use of the OSS is optional, but many taxpayers are expected to opt in since it can significantly reduce the taxpayers’ administrative burden.

In the case of a Hungarian person who chose individual tax exemption status, they cannot act in this capacity in the case of intra-Community distance supplies in another EU member state or of import distance supplies, but they are entitled to deduct the input VAT in relation to these transactions. However, the value of the OSS transactions will be not included of the threshold for the individual tax exemption status. Taxpayers are able to use the system after 1 July 2021, subject to prior registration.

Introducing the Import One-Stop Shop (IOSS)

A separate IOSS has been introduced for declaring and paying tax on intra-Community distance sales of goods imported from a third country. In addition to reducing administrative burdens, another advantage of this system is that the goods concerned will be exempted from import VAT.

The conditions for using the IOSS system are stricter: it can only be used for the distance sale of low-value consignments of a value up to EUR 150 (i.e. the duty exemption threshold), and non-resident taxpayers must also usually authorise an intermediary. The intermediary must meet the same requirements as those imposed on financial representatives and will be jointly and severally liable with the taxpayer giving the authorisation for fulfilling the tax obligations.

However, it is important to note that the one-stop shops described above allow tax payments only.

Special rules for paying import VAT on low-value consignments

As of 1 July 2021, the VAT Act laid down simplified rules for the payment of import VAT on imports of low-value consignments worth less than EUR 150 if the seller does not use the IOSS.

Under this simplification, as a rule, the person initiating the release of the goods for free circulation should collect the import VAT from the consignee and pay it to the tax authority. However, the above simplification may only be used by taxable persons registered in Hungary who initiate the release for free circulation and hold an authorisation for deferred payment of customs duties.

Under the above simplified import VAT payment, the rate of import VAT is 27% in all cases, regardless of the VAT rate applicable to the imported goods.

In addition, the tax exemption of consignments of a value up to EUR 22 has been abolished.

Platforms as new quasi-taxpayers

The rules effective as of 1 July 2021 treat platforms and online marketplaces as taxable persons acting as intermediaries in the supply of goods. This change primarily affects platforms, and taxable persons selling through these platforms, rather than the customers.

If certain criteria are met, platforms will qualify for VAT purposes as 'both the buyers and sellers of the goods'. These criteria include facilitating the distance sale of goods imported from a third country with a value not exceeding EUR 150 or facilitating the sale of goods already in the territory of the Community, provided that the seller is not established in the Community.

Under the new rules, taxable online platforms are required to record transactions that have been carried out for non-taxable persons with their participation in the territory of the Community. The purpose of this obligation is to make sure that taxes are paid on supplies of goods and services in electronic commerce. These records must be retained for ten years.

Group taxation for VAT

The VAT Act allows all companies that have established business presences in Hungary and qualify as related enterprises to form a VAT group. The essence of a VAT group is that its members act under a single VAT number in their transactions (i.e. they issue invoices under a shared VAT number and submit a single, joint tax return) and the supplies of products and services between the members do not qualify as business transactions from a VAT perspective.

In case a member leaves the VAT-group, it also qualifies as a succession for VAT purposes.


Our office in Budapest can count on the support of a firm of Accountants and Auditors founded in 2001 made up of 5 Partners as well as a staff of 18 people who work daily in the areas of auditing, payroll processing, accounting, tax assistance and compliance.  

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