The “benefit in kind” category was replaced by two new categories, effective from 1 January 2011. These categories are “certain specific benefits” and “fringe benefits” and are taxable according to the following rules:
• For “certain specific benefits,” the tax base is 1.18 times the arm’s-length value that was not reimbursed by the individual, and the tax rate is 15%. In addition, “certain specific benefits” listed in the Hungarian personal income tax legislation (for example, telephone services for private purposes, business travel-related meals and representation and business gifts that are not exempt from tax) are also subject to a 13% social tax. Consequently, the effective tax rate for these benefits is 33.04%.
• “Fringe benefits” (for example, the Széchenyi Recreation Card) are also subject to a 13% social tax in addition to the personal income tax of 15%. However, the tax base is the arm’s-length value of the benefit (without 1.18 tax base increasing multiplication). Consequently, the effective tax rate for “fringe benefits” is 28%. The maximum annual amount that can be transferred to the Széchenyi Recreation Card is HUF450,000 provided that the employment relationship persists the whole year. Any payment exceeding the maximum amount is taxed as certain specific benefits.
The Széchenyi Recreation Card can be used for the following purchase types from the accommodation sub-account (from 9 January 2023; prior to that date there were three sub-accounts):
• For accommodation purposes
• For recreation purposes (for example, fitness passes)
• For purchasing meals and beverages at catering service providers (see next paragraph)
Purchases made must be in line with the scope of the Széchenyi Recreation Card. Generally, only meals and beverages from catering service providers are included in the scope of the Széchenyi Recreation Card.
Both the personal income tax and social tax are borne by the Hungarian employer for “certain specific benefits” and “fringe benefits.” In general, benefits provided in the context of an employment relationship are taxed as regular employment income.
Non-Hungarian tax residents who work in Hungary are generally subject to personal income tax on their income relating to their Hungarian workdays.
Foreign tax-resident individuals are generally taxed on their wages, salaries and other remuneration for services performed in Hungary.
Income from independent activities. All activities that are not included in employment (dependent) activities and for which an individual receives income are considered to be independent activities (for example, activities of private entrepreneurs and agricultural producers).
Investment income. Dividend income from a Hungarian source is subject to a final withholding tax at a rate of 15%. Interest and capital gains are subject to the same tax rate. However, in contrast
to the 13% social tax on dividends, social tax on interest income is uncapped and should be applied as of 1 July 2023. According to the previous legislation that was in force between 1 July 2023 and 31 July 2024, in the case of securities that produce interest income (for example, notes and units), the social tax is applicable on the proceeds if the securities are purchased after 1 July 2023. After 1 August 2024, the social tax is applied definitively to proceeds from securities that are purchased after 31 July 2024 or to interest from fixed deposits that are payable in a period after 31 July 2024. After 1 August 2024, the social tax is applied definitively to proceeds from securities that are purchased after 31 July 2024 or to interest from fixed deposits that are payable in a period after 31 July 2024.
Royalty income is included in ordinary taxable income, and is taxed, after the deduction of expenses, at the normal rate (15%), subject to certain circumstances as “other income.” Moreover, royalty income can be subject to 13% social tax under certain circumstances.
Income derived from the renting out of real estate is considered part of the consolidated tax base. Depreciation of the property is deductible for tax purposes.
Non-Hungarian residents who are residents of treaty countries are subject to Hungarian withholding tax at the reduced treaty rate (certain treaties provide for no withholding tax) if specified administrative requirements are met (for example, certificate of residence).
Directors’ fees. Directors’ fees are generally subject to tax at the same rate as employment income. Directors’ fees are sourced in the country in which the payer company is resident. Tax treaty provisions covering directors’ fees generally state that if a resident of one treaty country receives a director’s fee from a company resident in the other treaty country, the fee may be taxable in the other country.
Other income Other income includes certain types of income listed in the Hungarian tax law, such as amounts paid by a voluntary or a private pension fund as a taxable benefit (excluding pension payments), interest or dividends paid by an entity located in a low-tax country that does not have a valid double tax treaty with Hungary, and capital gains relating to shareholding of an entity located in a low-tax country that does not have a valid double tax treaty with Hungary. In the case of interest or dividend income from a low-tax country, this rule should not be applied to proceeds from securities issued by entities located in an Organisation for Economic Co-operation and Development (OECD) Member State or if interest is paid by entities located in an OECD Member State.
Taxation of employment-related stock options. Employmentrelated stock options are taxed at the time of exercise. The taxation of the option income is determined by the relationship of the provider and the recipient and the circumstances of the acquisition.
The following are the applicable rules:
• If the employee of a Hungarian company receives his or her other employment income directly from abroad, the employee is subject to tax on a quarterly basis at the regular income tax rate of 15% on the market value of the stock at the exercise date, less the strike price and the acquisition and transaction costs, if any. Foreign-source stock option income is also subject to social tax at 13%, payable by the employee. If the social tax is paid by the employee, the tax base is 89% of the fair market value of the options at the exercise date. However, the income tax and social tax may be assumed by the Hungarian employer. If the social tax is assumed, the tax base is 100% of the fair market value of the options at the exercise date.
• If the employee’s stock option income is paid through a local Hungarian company, the local company must withhold personal income tax and employee social security contributions and pay employer social tax on the income.
Capital gains. Capital gains are taxed at a flat rate of 15%. In determining taxable capital gains, substantiated transaction expenses may be deducted. Fifteen percent of the capital losses derived from transactions carried out on controlled capital markets can be offset against capital gains arising from other transactions conducted on such capital markets in the previous or next two years. The following are transactions that fall into this category:
• Transactions regulated by the Hungarian National Bank
• Transactions performed in other EEA Member States or in states with which Hungary has entered into a tax treaty, and a mutual agreement on information exchange has been entered into by the Hungarian National Bank and the other country’s respective financial supervisory body
Deductions
Personal tax credits and deductions. The most significant personal tax benefit is the family tax allowance. The family allowance applies without an income limit, even for one dependent. The allowance reduces the tax base. Effective from 1 January 2019, it results in a monthly reduction of tax of HUF10,000 per dependent for families with one dependent, HUF20,000 per dependent for families with two dependents and HUF33,000 per dependent for families with three or more dependents. It is possible to take into consideration the fetus as an eligible dependent from the 91st day of pregnancy. The utilized family tax allowance may not exceed the total tax base. Generally, the taxbase allowance can be shared between spouses or cohabitants.
The number of tax credits is low and their amounts are insignificant. Total tax credits claimed may not exceed the total tax payable (that is, credits are not refundable).
Business deductions. An individual may deduct a 10% standard deduction, or the actual and documented deductible expenses recognized by the income tax law, from income from independent activities.
Rates. The taxation of Hungarian residents and foreign individuals is described below.
A 15% flat personal income tax rate applies to both the consolidated tax base and investment income.
with an excuse letter. In this case, the tax authorities cannot impose a default penalty and late payment interest if the tax return is filed by 20 November.
E. Double tax relief and tax treaties
Most of Hungary’s treaties follow the OECD model convention. Hungary has entered into double tax treaties with the following jurisdictions.
Albania Indonesia Philippines
Armenia Iran Poland
Andorra Iraq Portugal
Australia Ireland Qatar
Austria Israel Romania
Azerbaijan Italy Russian
Bahrain Japan Federation
Belarus Kazakhstan San Marino
Belgium Korea (South) Saudi Arabia
Bosnia and Kosovo Serbia
Herzegovina Kuwait Singapore
Brazil Kyrgyzstan Slovak Republic
Bulgaria Latvia Slovenia
Canada Liechtenstein South Africa
China Mainland Lithuania Spain
Croatia Luxembourg Sweden
Cyprus Malaysia Switzerland
Czech Republic Malta Thailand
Denmark Mexico Tunisia
Egypt Moldova Türkiye
Estonia Mongolia Turkmenistan
Finland Montenegro Ukraine
France Morocco United Arab
Georgia Netherlands Emirates
Germany North Macedonia United Kingdom
Greece Norway Uruguay
Hong Kong SAR Oman Uzbekistan
Iceland Pakistan Vietnam
India
The Hungarian Trade Office in Taipei and the Taipei Representative Office in Hungary have entered into an agreement on the avoidance of double taxation and the prevention of fiscal evasion.
Hungary will negotiate double tax treaties (negotiating mandate has been granted) with Algeria, Argentina, Chile, Cuba, Ecuador, Ethiopia, Jordan, Lebanon, Panama and Sri Lanka.
Hungary has entered into tax information exchange agreements with Guernsey, the Faroe Islands, Jersey, Kenya, Liberia, Monserrat, Papua New Guinea, Thailand, and Ukraine.
The United States has terminated the double taxation treaty with Hungary. The termination entered into effect on 1 January 2024.
The Russian Federation has suspended application of Articles 5-22 and Article 24 of the double tax treaty from 8 August 2023. Regardless, Hungary still applies all articles of the double tax treaty. Hungarian tax residents with foreign-source income from non-treaty jurisdictions that is part of the consolidated tax base
(for example, employment income) are entitled to a credit equal to 90% of the foreign taxes paid on the income but not more than the tax calculated for this income at the relevant tax rate. If the foreign-source income from non-treaty countries does not form part of the consolidated tax base (for example, investment income), tax resident individuals are entitled to a credit up to the foreign taxes paid on the income, but at least 5% of personal income tax is payable on the gross tax base. Non-tax resident individuals are not entitled to apply the tax credit, and the tax credit cannot not be applied on Hungarian-source income from 1 January 2024.
F. Entry visas
Foreign nationals entering Hungary must have valid travel documents (for example, passports) and, in certain cases, visas. Citizens of EEA countries and Switzerland can enter Hungary without visas and with a personal identification card instead of a passport. Based on international treaties, citizens of some non-EEA countries may enter Hungary without visas.
Visas may be obtained for official, private or immigration purposes for either short-term (up to 90 days) or long-term (longer than 90 days) periods.
Hungary issues the following types of temporary visas:
• Airport transit visa (Category A), which is for entering the international areas of the airport and remaining there until the departure of the flight to the destination country
• Transit visa (Category B), which is for single or repeated transit through the country, with a maximum stay of five days on each occasion
• Visa for short-term residence (Category C), which is for single entry or multiple entries within 6 months and a maximum of 90 days’ presence in Hungary
• Single-entry visa for the purpose of collecting the combined residence permit (Category D) (see Section H; the visa is valid for 30 days after the entry date)
The Category A, B and C visas are so-called Schengen visas. A visa issued by a Member State of Schengen is valid in Hungary. In addition, a Schengen visa issued by Hungary is valid in the entire territory of the Schengen area. Territorial restrictions may apply.
G. Work permits
Short-term work permits. The Hungarian government opened the Hungarian labor market for EEA countries on 1 January 2009. Under the current law, a work permit is not required for EEA and Swiss citizens to work in Hungary. For such citizens, the local sponsoring company must notify the competent Labor Office by the date on which the EEA citizen begins working.
Individuals who are not nationals of EEA countries or Switzerland and who are assigned to Hungary for less than 90 days need to have a valid short-term work permit before beginning working in Hungary even if they are not employed by the local sponsoring company. The sponsoring company is responsible for filing a workforce demand and a separate work permit application at the regional or metropolitan Labor Office. A legalized or apostilled
When the application of the visa-liable non-EEA citizen is approved, the applicant receives a single-entry visa, which entitles the applicant to enter Hungary and pick up his or her residence permit from the local Immigration Office. The singleentry visa is valid up to three months; the applicant must enter Hungary within this period (see Section F).
Visa-exempt non-EEA citizens have the right to stay in the Schengen Member States, including Hungary, for up to 90 days in any 180-day period without permission. If they intend to stay and work longer in Hungary, they can apply for the residence permit either from abroad, as described above, or through the online system of the Immigration Office in Hungary.
Family members must prove their family relationship (that is, a marriage certificate for a spouse and birth certificates for children). A legalization or apostille stamp shall be obtained on such certificates.
Any documents in a foreign language must be translated into Hungarian. The Hungarian Office for Translation and Attestation is the only approved translation office.
The Immigration Office adjudicates the application within 70 days of a complete submission. The permit cannot be issued retroactively, and working in Hungary is not allowed before the approval document on the permit is issued.
An application for a permit extension must be submitted no later than 45 days before the expiration of the authorized period of stay and for a period longer than 90 days.
The applicant must be a local hire in Hungary. Workforce demand is necessary for the residence permit for purpose of employment.
During the residence permit for purpose of employment application process, applicants must prove the following:
• They have valid passports.
• They have the necessary and relevant qualification to the specific work in Hungary that they wish to perform.
• Their Hungarian employer filed a workforce demand with the Labor Office.
• They receive sufficient income to live in Hungary.
• They have comprehensive health insurance or sufficient funds to use medical services.
• They have a property rental agreement or proof of ownership of property in Hungary.
Categories of permits in implementing regulations to the new immigration bill. On 29 February 2024, the Hungarian government published implementing regulations to the new immigration bill. Pursuant to these regulations, effective from 1 March 2024, eligible individuals can apply to obtain the categories of permits described below.
Highly qualified workers. Highly Skilled Worker Permits are valid for three to four years depending on the permit type. Holders can bring in dependents and apply for permanent residence if they meet the relevant criteria. The following are two examples of this category of permits:
EEA citizens must support their residence card application with the following:
• A valid travel document (passport or identification card)
• A completed application form
• Documents confirming the purpose of their stay in Hungary
• Sufficient income to live in Hungary
• Official medical certificate or health insurance card or contract (for example, certificate of coverage or EU card)
• A property rental agreement or proof of ownership of a property in Hungary
Family members must prove their family relationship (that is, marriage certificate for spouse and birth certificate for children).
Any documents in a foreign language other than any of the official languages of the EU must be translated into Hungarian. The Hungarian Office for Translation and Attestation is the only approved translation office.
An application for an EEA residence registration card has to be submitted on the Immigration Office’s website, Enter Hungary, if all required documents are available. The Immigration Office processes the application within approximately one to three weeks of a complete submission. On approval, the authority sends the EEA residence registration and Hungarian address card to the individual’s Hungarian address.
The EEA residence registration card is valid until the EEA or Swiss national leaves Hungary permanently without intending to return. In this case, the residence registration card must be given back to the Immigration Office.
I. Deregistration
When foreign citizens leave Hungary permanently without the intention of returning, they should be deregistered at the Hungarian authorities. Accordingly, they should return their residence permits and address cards to the Immigration Office together with a declaration that they are permanently leaving Hungary. The Hungarian employer also must notify the Immigration Office about the termination of the foreign citizen’s employment in Hungary. For EEA and Swiss citizens, the Labor Office notification should be made, at the latest, on the following day; for non-EEA citizens, the Immigration Office should be notified within three days after the foreign citizen’s employment terminated.
J. Family and personal considerations
Family members. The spouse or children of an expatriate may obtain visas, permits and residence registration cards on the basis of family reunification. If entering the country as dependents, their documents are valid for the same duration as the expatriate’s documents. If family members wish to engage in paid employment, they must also follow the procedure outlined in Section G.
Expatriates working in Hungary and their family members may import a car and their personal belongings without paying import duties and value-added tax (VAT). These belongings must be registered with the Customs Office.