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Hungary
Principal Tax Contact
Tamás Vékási
Mobile: +36 (30) 515-5013
Email: tamas.vekasi@hu.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory
András Módos
Miklós Sánta
Tibor Pálszabó
Mobile: +36 (30) 559-1471
Email: andras.modos@hu.ey.com
Mobile: +36 (70) 375-3844
Email: miklos.santa@hu.ey.com
Mobile: +36 (30) 280-5243
Email: tibor.palszabo@hu.ey.com
International Tax and Transaction Services – International Capital Markets
Tibor Pálszabó
Mobile: +36 (30) 280-5243
Email: tibor.palszabo@hu.ey.com
International Tax and Transaction Services – Operating Model Effectiveness
Miklós Sánta
Mobile: +36 (70) 375-3844
Email: miklos.santa@hu.ey.com
International Tax and Transaction Services – Transfer Pricing
András Módos
Zoltán Lipták
Mobile: +36 (30) 559-1471
Email: andras.modos@hu.ey.com
Mobile: +36 (30) 635-9204
Email: zoltan.liptak@hu.ey.com
International Tax and Transaction Services – Transaction Tax Advisory
Róbert Heinczinger
Mobile: +36 (30) 919-3814
Email: robert.heinczinger@hu.ey.com
International Tax and Transaction Services – Tax Desk Abroad
Richard Kocsis
(resident in San Jose)
Business Tax Advisory
Zsolt Kocsis
Róbert Heinczinger
Tibor Pálszabó
Tamás Szűcs
Ildikó Ádám
Tax Policy and Controversy
Róbert Heinczinger
+1 (408) 947-6753
Email: richard.kocsis1@ey.com
Mobile: +36 (30) 959-7150
Email: zsolt.kocsis@hu.ey.com
Mobile: +36 (30) 919-3814
Email: robert.heinczinger@hu.ey.com
Mobile: +36 (30) 280-5243
Email: tibor.palszabo@hu.ey.com
Mobile: +36 (70) 375-3860
Email: tamas.szucs@hu.ey.com
Mobile: +36 (70) 501-8485
Email: ildiko.adam@hu.ey.com
Mobile: +36 (30) 919-3814
Email: robert.heinczinger@hu.ey.com
Gergely Séra
Global Compliance and Reporting
Andrea Ruzic
People Advisory Services
Veronika Oláh
Indirect Tax
Áron Nagy
Mobile: +36 (30) 559-1429
Email: gergely.sera@hu.ey.com
Mobile: +36 (30) 343-5691
Email: andrea.ruzic@hu.ey.com
Mobile: +36 (30) 559-1221
Email: veronika.olah@hu.ey.com
Mobile: +36 (30) 375-3855
Email: aron.nagy@hu.ey.com
The Hungarian National Bank exchange rate as of 29 December 2023 was HUF346.44 = USD1.
A. At a glance
(a) The 9% rate applies to tax years beginning on or after 1 January 2017. All taxpayers must pay tax on the alternative minimum tax base if this base exceeds taxable income calculated under the general rules (for further details, see Section B).
(b) Permanent establishments of foreign companies are subject to special rules for the computation of the tax base (see Section B).
(c) See Section B.
(d) Losses incurred before the 2015 tax year can be carried forward indefinitely. Losses incurred in the 2015 tax year or subsequent years can be carried forward for five years.
B. Taxes on corporate income and gains
Corporate income tax. Companies incorporated in Hungary are subject to corporate tax on their worldwide profits. A company not incorporated in Hungary that has its place of effective management in Hungary is regarded as a Hungarian resident for corporate tax purposes and, accordingly, is subject to corporate tax on its worldwide profits. If a double tax treaty applies, the provisions of the treaty may affect residence. Foreign companies carrying out taxable activities in Hungary through a permanent establishment are subject to corporate tax on their net profits derived from Hungarian sources.
Rates of corporate income tax. The tax rate for tax years beginning on or after 1 January 2017 is 9%.
Community (EC) law, for up to 13 tax years if they satisfy all of the following conditions:
• They make an investment of at least HUF3 billion or an investment of HUF1 billion in an underdeveloped region.
• During the four tax years following the tax year in which the tax credit is first applied, the average statistical headcount of the taxpayer does not fall below the average headcount equivalent to the arithmetical mean of the three tax years preceding the start of the investment.
• The investment comprises one of the following:
— The acquisition of a new asset
— The enlargement of existing assets
— The fundamental modification of the final product or the previous production method as a result of the investment
The application of the tax allowance is subject to a government resolution based on the authorization of the European Commission.
Taxpayers may claim a development tax allowance with respect to investments of at least HUF100 million in free entrepreneurial zones.
Small and medium-sized enterprises may become eligible for development tax allowances with respect to investments implemented in any region in the amount of at least HUF50 million (small-sized enterprises) and HUF100 million (medium-sized enterprises).
A development tax allowance can also be claimed for investments of at least HUF100 million in the fields of food product hygiene, environmental protection, basic or applied research or film production, if certain other requirements are met. Investments of any amount in any field that result in a certain level of job creation may also qualify for a tax allowance.
In general, companies must submit a notification regarding the allowance to the Ministry of Finance before the start date of the investment and self-assess the tax allowance. However, companies must obtain permission from the Ministry of Finance if their investment-related costs and expenses exceed EUR110 million.
The tax allowance may reduce the company’s corporate income tax liability by up to 80%, resulting in an effective tax rate of 1.8% (instead of 9%). Depending on the location of the project, the allowance may cover between 30% and 60% of the eligible investment costs. In general, the allowance may be used within a 13-year period after the investment is put into operation, but it must be used by the 16th year after the declaration for the allowance was filed. In general, the 13-year period begins in the year following the year in which the investment is put into operation. However, the investor may request that the 13-year period begin in the year in which the investment is put into operation.
Profit-based cash grant. The aid is available to members of a multinational group or a large domestic group of companies whose annual turnover, as reported in the consolidated accounts of the ultimate parent company, is equal to or exceeds HUF750 million in at least two of the four financial years immediately preceding the financial year under review. This cash
participation acquired in the startup company previously entitled the taxpayer to apply a tax-base allowance. However, this does not extend the length of the initial application period.
Tax-base allowances to promote labor mobility. Under the taxbase allowances to promote labor mobility, the pretax profit can be decreased by the following:
• The amount recorded as the acquisition value or the increment of the acquisition value of workers’ hostels in the tax year in which the investment or renovation is finished
• The amount recorded as the rental fees for properties used as workers’ hostels, or incurred with respect to the maintenance and operation of workers’ hostels in the current tax year
• The amount of the net asset value or the increase in the net asset value of the property with a long-lasting structure built to provide housing for the taxpayer’s employees in the tax year in which the investment or the development is completed
Film tax credit. Tax relief is provided to Hungarian companies sponsoring film production carried out in Hungary. The contributions are effectively refunded by the state because the sponsors can deduct the contributions from the corporate income tax payable, but the amount deducted may not exceed 30% of eligible expenses of the film production. In addition, these contributions, up to the above limit, are also deductible for corporate income tax purposes. The tax relief may be carried forward for a period of eight years. It is available only if the sponsor does not receive any rights with respect to the sponsored film.
To qualify for tax incentives, films are subject to a comprehensive cultural test, which grants points for various aspects of the production, including the members of the crew, the actors and the theme of the film being European. In general, only films receiving more than a certain number of points qualify.
To use the film tax credit, the taxpayer must pay 6.75% supplementary support to the beneficiary in the tax year in which the basic support is provided. The supplementary support is not deductible for corporate income tax purposes.
Sports tax credit. Tax relief is provided to Hungarian companies supporting sports organizations in the following popular team sports:
• Football (that is, soccer)
• Handball
• Basketball
• Water polo
• Ice hockey
• Volleyball
Under the sports tax credit incentive national sports associations, professional sports organizations, amateur sports organizations, nonprofit foundations and civil sports organizations may be supported. Donations granted to these sports organizations are fully creditable against the corporate tax liability of the donor, capped at 70% of the donor’s total corporate tax liability, if the taxpayer does not have government liabilities in arrears. Unused tax credits may be carried forward for a period of eight years. In addition, amounts donated are also deductible for corporate income tax
purposes. Supplementary sport development aid must be paid by the donors within the framework of sponsorship or aid contracts equal to at least 6.75% of the amount indicated in the support certificate. This expense is not deductible for corporate income tax purposes. The supplementary development aid must be transferred to the respective national sport associations or the respective sports organizations or foundations.
New film and sports tax credit. Film productions and sports organizations may be supported by Hungarian corporate taxpayers in a new manner, as an alternative to the “old” model that will also remain in existence. Under the new rules, the taxpayer may designate a portion of its tax liability as support for a selected, qualifying organization. On receiving the tax payment from the taxpayer, the tax authority remits the designated amount to the beneficiary. Taxpayers can designate up to 80% of their monthly or quarterly tax advance payments and year-end tax payments. The total amount of the support is capped at the same amounts as under the “old” rules. As a benefit, the tax authority credits 7.5% of the amounts designated from advance tax payments and 2.5% of the amounts designated from the year-end tax payment to the taxpayer’s tax account.
Capital gains. With the exception of capital gains on “reported shares,” “reported intangibles” and certain other intellectual property (see below), capital gains derived by Hungarian companies are included in taxable income and taxed at the standard corporate income tax rate.
Capital gains derived by nonresident companies from disposals of Hungarian shares (except for shares in Hungarian real estate companies, see below) are not subject to tax, unless the shares are held through a permanent establishment of the seller in Hungary.
Reported shares. If a taxpayer has held registered shares of an entity for at least one year and reported the acquisition of the shares or an increase in the shareholding within 75 days after the date of the acquisition to the Hungarian tax authorities, the shares are “reported shares.” If a shareholding has already been reported to the tax authorities, further reporting is necessary only if the proportion of the shareholding increases.
In line with the introduction of the Global Minimum Tax, there is a one-time opportunity for taxpayers holding shares that currently do not qualify for the participation exemption to make the election in their corporate income tax return for 2023. As a result, the shares they hold would become eligible for the regime. The deemed election date is 31 December 2023. The election can be made until the filing deadline of the corporate income tax return of 2023 (that is, 31 May 2024 for calendar-year taxpayers).
Capital gains (including foreign-exchange gains) derived from the sale of the reported shares or from the contribution of the reported shares in kind to the capital of another company are exempt from corporate income tax. Capital losses (including foreignexchange losses) incurred on such investments are not deductible for tax purposes.
Reported intangibles. Similar to the rules of reported shares, the acquisition and creation of royalty-generating intangible assets
the late payment of tax at a rate equal to the National Bank of Hungary prime interest rate plus 5 percentage points (on 31 December 2022, the prime interest rate was 13%; accordingly, the daily interest on the late payment would be 18/365%). Interest is charged beginning on the date the payment is due, and it may be charged for up to three years.
In their corporate income tax returns, taxpayers also declare the tax advances that they will pay for the 12-month period beginning in the second month after the filing deadline. The total of these advances equals the amount of tax payable for the year covered in the corporate income tax return. For calendar-year taxpayers, which have a filing deadline of 31 May, advances are payable over a 12-month period beginning in July of the year following the year covered in the corporate income tax return and ending in June of the subsequent year. For companies with a corporate income tax liability exceeding HUF5 million in the preceding year, advance payments are divided into 12 equal monthly installments. Other companies make quarterly advance payments.
Administration for Global Minimum Tax. The constituent entity is obliged to register if it qualifies as the subject of the Global Minimum Tax. This should be done within 12 months from the start of the relevant tax year. In addition, the constituent entity must submit a global information return and provide data on the QDMTT and the top-up taxes paid under the income inclusion rule or the undertaxed payments rule regime.
The global information return must be submitted to the tax authorities, and the tax must be paid no later than 15 months after the last day of the relevant tax year. The tax should be paid in HUF, USD or EUR.
As a temporary benefit, the data provision and declaration obligation must be fulfilled within 18 months after the last day of the first transitional tax year. No fine may be imposed for tax years beginning before 31 December 2026 if the group member(s) acted in good faith, as expected in the given situation (that is, acted reasonably).
Dividends
Dividends paid by Hungarian companies. Withholding tax is not imposed on dividends paid to foreign companies.
Withholding tax at a rate of 15% is imposed on dividends paid directly to resident and nonresident individuals. Tax treaties may override Hungarian domestic law with respect to the withholding tax on dividends.
Dividends received by Hungarian companies. In general, dividends received by Hungarian companies are exempt from corporate income tax. The only exception applies to dividends paid by controlled foreign corporations (CFCs; see Section E).
Interest, royalties and service fees
Interest, royalties and service fees paid by Hungarian companies. Withholding tax is not imposed on interest, royalties and service fees or any other payments made to local or foreign companies.
Hungary imposes a withholding tax at a rate of 15% on interest paid directly to individuals.
Interest and royalties received by Hungarian companies. A tax incentive may apply to royalties received by Hungarian companies (see Tax incentives). Interest received by a Hungarian company is taxable according to the general rules.
Exit taxation. Effective from 1 January 2020, capital withdrawals can be taxed based on market value if a taxpayer takes any of the following actions:
• Relocates its tax residency by moving its place of management from Hungary to another country
• Relocates assets from its registered office in Hungary to a permanent establishment outside Hungary
• Relocates assets from its permanent establishment in Hungary to its registered office or permanent establishment outside Hungary
• Transfers the business activity performed in Hungary to a foreign country
If capital is withdrawn, the tax base increases by the market value of the relocated assets or activities prevailing at the time of the withdrawal less their tax book value at the time of withdrawal.
Taxpayers subject to the exit tax can choose to pay the tax in five equal installments, as indicated in their tax return for the last tax year, provided that their place of management has moved to another European Union (EU) Member State or certain European Economic Area (EEA) countries.
Foreign tax credit. Foreign taxes paid on foreign-source income may be credited against Hungarian tax. Foreign dividend withholding tax may be credited for Hungarian tax purposes if the dividend or the undistributed profit is subject to tax in Hungary.
C. Determination of trading income
General. Taxable income is based on financial statements prepared in accordance with Hungarian accounting standards. These standards are set forth in the law on accounting, which is largely modeled on EU directives.
Effective from 1 January 2017, the following companies can elect to use International Financial Reporting Standards (IFRS) for purposes of preparing their stand-alone Hungarian financial statements:
• Entities subject to compulsory statutory audit
• Companies whose direct or indirect parent prepares a consolidated report under IFRS
• Insurance companies
• Banks and other entities subject to similar prudential rules
• Entities providing financial services under the supervision of the Hungarian National Bank
• Hungarian branches of non-Hungarian entities
Effective from 1 January 2017, the use of IFRS is mandatory in the following circumstances:
• The entity’s stock is listed on any of the stock exchanges in the EEA, excluding banks and other entities subject to similar prudential rules and insurance companies).
• It is mandatory under Regulation 1606/2002 of the European Parliament and of the EU Council.
The application of IFRS is mandatory for banks and other entities subject to similar prudential rules (regardless of whether their stock is listed on any of the stock exchanges in the EEA) and insurance companies with securities listed on any of the stock exchanges in the EEA from the tax year beginning in 2018.
Taxable income is determined by adjusting the pretax profit shown in the annual financial statements by items described in the Act on Corporate Income Tax. If IFRS are applied, the starting point for the determination of the corporate income tax base is the IFRS result, but different adjustments apply. The purpose of making adjustments to the IFRS result is to arrive at a tax base that is largely similar to the tax base of companies reporting under Hungarian accounting standards.
Some items are not subject to tax as income, such as dividends received (but see the controlled foreign corporation rules in Section E).
Some items, such as transfers without consideration, are not deductible for tax purposes.
Tax depreciation. In general, depreciation is deductible in accordance with the Annexes to the Act on Corporate Income Tax. Lower rates may be used if they are at least equal to the amount of the depreciation used for accounting purposes. The annexes specify, among others, the following straight-line tax depreciation rates.
Relief for losses. Losses incurred in 2015 and subsequent years may be carried forward for five years only. Losses from previous tax years may be carried forward indefinitely. Tax losses may be deducted from the pre-tax profit up to 50% of the tax base for the tax year.
Change-of-control restrictions have been introduced with respect to the availability of previously incurred tax losses after corporate transformations, mergers and acquisitions.
Groups of companies. Effective from 1 January 2019, taxpayers can opt for group taxation for corporate income tax purposes. Corporate income tax groups can be formed by at least two
Nature of tax
Bank tax; imposed on various entities in the financial market; the tax rate varies by financial activity Various Levy on energy suppliers (“Robin Hood tax”) 41 (The 31% Robin Hood tax rises to 41%, for the 2023 and 2024 tax years only.)
Surtax payable by pharmaceutical distributors (The tax rate increase of 20% for pharmaceutical tax to 28% is extended to 2024, and the tax rate is increased to 40% effective from April 2023.) 20/28/40
Windfall tax payable by pharmaceutical manufacturers 0.5/1.5/4
Surtax on credit institutions and financial enterprises 10 Financial transaction tax
(The tax is capped at HUF10,000 per transaction.)
Telecommunication surtax 0/1/3/7
(The government imposed surtaxes on extra profit on 1 July 2022; the extra profit surtax affects seven sectors, which are the banking, insurance, energy, retail, telecommunication, airlines, and pharmaceutical distributors; the list above does not cover all tax types; extra profit surtaxes apply to 2022 and 2023, and the total annual amount must be paid for 2022 as well based on the respective company’s 2021 tax year figures.)
Advertisement tax; this tax is not being imposed currently 0
Employment-related taxes
Social security contributions, on gross salaries; in general, expatriates do not participate; paid by Employer
Other taxes
Excise duty, on various goods, including gasoline, alcohol, tobacco, beer, wine and champagne Various
Local business tax; imposed on turnover or gross margin 2
(A decision of the European Court of Justice held that this tax was compatible with EU law.)
E. Miscellaneous matters
Foreign-exchange controls. The Hungarian currency is the forint (HUF). Hungary does not impose any foreign-exchange controls; the forint is freely convertible.
Companies doing business in Hungary must open a bank account at a Hungarian bank to make payments to and from the Hungarian authorities. They may also open accounts elsewhere to engage in other transactions.
Payments in Hungarian or foreign currency may be freely made to parties outside Hungary.
If in previous tax years, the tax base was increased based on this provision, in the year in question, the tax base can be decreased by up to the same amount, to the extent of the current year’s interest deduction capacity. The law does not specifically restrict the length of time that the previous years’ tax base increasing item can be applied to reduce the tax base.
The deduction restriction is broader than in the previous thin-capitalization rule, to the extent that any costs and expenditures equivalent to interest in economic terms, as well as costs and expenditures accounted for in connection with raising funds, are also subject to restrictions, in addition to interest expenditures. The deduction of foreign-exchange losses, borrowing fees and related legal costs as well as the deduction of the costs of any potential hedging transactions can also be restricted. The law provides that the above financing costs can be reduced by interest income and other taxable income that is equivalent to interest income when determining the net financing costs. This amount should be compared to the limit provided by law when calculating the increasing item.
Like the previous rules, the measure for the increase in the tax base does not have to be applied by financial institutions, investment enterprises, alternative investment funds, the management companies of undertakings for collective investment in transferable securities or by taxpayers qualifying as insurance and reinsurance companies. However, there is no similar exception from applying the increasing item with respect to borrowings from the above list.
For financing agreements concluded before 17 June 2016, the new rule will be applied for the first time with respect to amended contract amounts or amended terms, from the day following the date on which the amendment for the increased contract amount or the extension of maturity enters into force. Otherwise, the previous thin-capitalization rule continues to apply to these contracts. However, taxpayers may also opt to apply the new interest deduction restriction rule.
In the case of corporate income tax groups, the members first must aggregate the net financing costs and EBITDA for the tax year. Taking this amount and the HUF939,810,000 limit into account, which collectively applies to the members with the net financing costs, they determine the amount of the nondeductible interest at the group level. This determined amount must be taken into account in the individual tax base of each member in proportion to the EBITDA in the tax year, and each member must take into account the amount assigned and thereby increase its individual tax base.
Foreign investment. No restrictions are imposed on the percentage of ownership that foreigners may acquire in Hungarian companies. Some restrictions exist with respect to the ownership of farmland.
Mandatory reporting of tax planning arrangements. The purpose of Council Directive 2011/16/EU (DAC6) is to identify and prescribe the reporting of cross-border tax planning arrangements that meet certain hallmarks. Data must be reported to the tax
Czech Republic
Malta Thailand
Denmark Mexico Tunisia
Egypt Moldova Türkiye
Estonia Mongolia Turkmenistan
Finland Montenegro (b) Ukraine
France Morocco United Arab
Georgia Netherlands Emirates
Germany
North Macedonia United Kingdom
Greece Norway Uruguay
Hong Kong Oman Uzbekistan
Iceland Pakistan Vietnam
India Philippines
(a) The 1985 treaty between Hungary and the former Socialist Federal Republic of Yugoslavia is applied with respect to Bosnia and Herzegovina.
(b) The 2001 treaty between Hungary and the former Federal Republic of Yugoslavia is applied with respect to Serbia. In practice, Hungary and Montenegro also apply this treaty, but no formal announcement has been made to confirm this practice.
Hungary is negotiating double tax treaties with Algeria, Argentina, Chile, Colombia, Ethiopia, Panama and Sri Lanka.
The Hungary-United States tax treaty terminated on 1 January 2024.
On 7 June 2017, Hungary signed with more than 65 other countries the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (MLI). The MLI ensures that rules designed to prevent cross-border tax evasion will be incorporated into bilateral tax treaties. It will also enable hundreds of tax treaties to be updated with OECD BEPS measures without the need for drawn-out bilateral negotiations. The Hungarian government has opted out from all provisions of the MLI that allow an opt-out.