European Commission Taxes in Europe Database v2
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Act 117 of 1995 on personal income tax.
Hungary
Resident individuals are obliged to pay personal income tax.
Among others pension income, inheritance and most kinds of state scholarships are tax-exempt revenues.
Resident private individuals shall be subject to tax liability in respect of all their income (all-inclusive tax liability). The tax liability of non-resident private individuals shall apply to income that originates in Hungary as the place of gainful activity or is taxable in the Republic of Hungary by virtue of international agreement or reciprocity (limited tax liability).
The company has to pay tax after a company car under the Act LXXXII. of 1991 on vehicle tax. The use of a company car is not levied on the individual.
The employer pays tax after low interest loans, meal cheques, meals at cantine, IT and telecommunication services, public transport according to Act CXVII. of 1995 on Personal Income Tax. If meal cheques, meals at cantine, IT services exceed a limit, the excess is taxed be the employee.
If phone or computer devices are given in connection with the work of the employee, thay are taxed. If parking or accomodation is given in connection with a business trip, it is not taxed.
Day-care for children under 3 is tax free (day-care service), between 3-6 is taxable (kindergarten service).
Resident individuals' income.
Individuals are subject to income tax on all items of income. The personal income tax law distinguishes the following categories of income:
As of 1 January 2012 the tax rate is 16% in all categories of income.
1. Employment income
No deductions are allowed.
2. Self-employment income
The following may be deducted from the revenues from self-employment activities when determining income:
a) expenses actually incurred and substantiated during the tax year in connection with the activity, up to the amount of revenues produced by such activity (itemized expense accounting), or
b) 10 per cent of the revenues from the self-employment activity (10 per cent expense ratio).
Tax credits as of 1 January 2012:
- Credit of disabled persons: In respect of severely handicapped private individuals, on the basis of a statement verifying such condition, an amount equal to 5 per cent of the prevailing monthly minimum wage in effect on the first day of the tax year (personal allowance) may be deducted each month from the tax on the consolidated tax base, as of the first day of and for the duration of the disability.
- Tax credit of small-scale agricultural producers:
· Small-scale agricultural producers (including agricultural smallholders using flat-rate taxation) with revenues less than HUF 600,000 annually from such activities shall not be required to consider income from such revenues, while if revenues exceed the above amount, income shall be determined based on all revenues included.
· The collective amount of the tax of the annual income of a small-scale agricultural producer, using itemized expense accounting or 10 per cent expense ratio, earned by such activities and, if using itemized expense accounting, of the bookkeeper's fee allowance, but no more than 100,000 forints (small-scale agricultural producers' tax allowance), may be deducted from the tax of the consolidated tax base.
- On the basis of contributions to voluntary mutual pension health a tax refund of 20% is applicable. This tax refund (cash transfer) is payable to the taxpayer's individual account held with such mutual funds. The aggregate amount of all the transfers may not exceed HUF 120,000 (HUF 150,000 for individuals who will reach the retirement age before 1 January 2020).
Losses can be carried-forward and carried-back by private entrepreneurs and small-scale agricultural producers with a size limit of 50% of the tax base calculated without the losses.
- zero per cent on any time deposit interest established on the last day of the five-year term;
- 10 per cent, if the private individual did not renew the existing deposit, on any time deposit interest established on the last day of the three-year term, or e xtends the time deposit for only a part of the funds originally deposited, on any time deposit interest established on the last day of the three-year term as commensurate for the funds withdrawn, or terminates the deposit upon maturity of the two-year term, on any time deposit interest established on the day of termination;
- 16 per cent, if the private individual terminates the deposit before maturity of the three-year term, on any time deposit interest established on the day of termination.
The private individual is not required to declare his income from long-term investments if the applicable tax rate is zero per cent. In other cases the private individual shall assess the tax in his tax return, and shall pay it by the deadline prescribed for filing this tax return.
Interest from special savings accounts (Income from long term investment):
'Income from long-term investment’ shall mean the profit the private individual has realized through placing a sum under a long-term investment contract concluded with an investment service provider or a credit institution [“time deposit interest”]. The tax rate shall be:
Tax base of
- benefits in kinds (meal contribution, holiday contribution, schooling contribution, educational expenses contribution, public transport, contributions to supplementary pension funds, health funds) and
- non-monetary revenues from games activities
is 1.19-fold of the value of the income.
Taxpayers are obliged to make advance payments of personal income tax during the tax year receiving income from aggregate income category. Income tax returns for a tax year must be filed by 20th of May (in the case of entrepreneurs, by 15th of February) of the year following the tax year. If the amount of tax actually paid in the tax year differs from the final tax liability, the difference (i) is payable by 20th of May of the following year, or (ii) is refundable by the tax authorities within 30 days of the taxpayer's claim.
The tax is collected by the Tax and Financial Control Administration.
