Hungary Taxation – Accountancy quick guide
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June 19, 2014In Hungary, taxation can be a complex matter, and if you want to be sure that you fully understand what to expect when you want to set up a company in Hungary, the best solution is to prepare (or ask us to prepare) a simple business and financial plan before you get started. We will do our best to make sure you are not faced with any surprises – in order to best assist you, however, we need to understand the basics of your business operation.
List of basic corporate taxes in Hungary
- Local business tax: 2% on net revenues (meaning: your income minus any direct costs such as cost of goods or services that are re-sold)
- Corporate tax (also known as profit tax): 9%; applies to profits after the deduction of all expenses including direct and general expenses
- Dividend tax: the company’s taxed profits can be retained in the company’s budget or paid out to shareholders are dividend; in Hungary, dividend tax is 15% and there is an additional 14% health insurance contribution payable which is maximized in HUF 450,000 – however, this only applies to Hungarian residents; in the case of non-local residents, specific bilateral agreements between Hungary and your country of residence may apply. Learn more about the dividend tax here.
- VAT (value added tax, or also known as sales tax in some countries) is 27%; you will charge VAT only towards individual (retail) buyers or corporate EU-based buyers who are not registered for VAT, meaning that if you are an international trader, you may not charge VAT at all. When declaring VAT (monthly or quarterly, based on the volume and activity of your company), we will calculate the difference between VAT that you have received from your buyers (if any) and VAT that you have been charged by your suppliers or when purchasing products/services (if any). If the balance is positive, you’ll need to pay the difference to the state. If the balance is negative (e.g. if you are not charging VAT but still have expenses that contain VAT), you can reclaim this difference. In the case of international trade, there are some additional specific regulations pertaining to VAT, especially if you are going to be reclaiming VAT regularly; please bring this up with your accountant. Learn about the 2017 changes to Hungarian VAT regulations here.
- Payroll taxes: when you have employees on payroll, you will need to pay various taxes (including taxes deducted from the employee, like income tax, and also contributions payable by the company, like health insurance and pension) monthly. These taxes will be calculated by your accountant. Payroll taxes are quite high in Hungary, and may amount to 50% of the total spending by the company (with the other 50% being the net salary that the employee actually receives). Read more on how you calculate salary and contributions here.
As such, it is important to calculate these in advance, before entering into salary negotiations with future staff members. Also, please bear in mind that in most cases it is obligatory to employ the managing director at least at a minimum wage level and pay the taxes/contributions on this salary, and even if the director does not actually take a salary (e.g. at the start of the company’s operation) some taxes are still obligatory. Only directors who are already registered, employed and insured elsewhere in the EU and can provide official verification of this can be exempted from this requirement. Please discuss this with us in advance, so we can make sure these taxes are included in your calculations.
For more information or assistance in Hungarian accountancy or paying taxes in Hungary, please visit our accountancy department, or contact your English speaking accountant at finance@helpers.hu.
