Personal Income Tax in Hungary

In Hungary an individual pays tax on his income as a wage-earner or as a self-employed person. Tax for an individual who meets the criteria of a “permanent resident” in Hungary will be calculated on his income in Hungary and abroad. Individuals are subject to income tax on all items of income. The personal income tax law distinguishes the following categories of income:
• Aggregate income taxed
• Incomes taxed separately at flat rates (dividends, capital gains…)
An employer is obligated to deduct, immediately on a monthly basis, the tax payable on an employee’s salary. A self-employed person must prepay income tax that will be offset on filing an annual return. 

Tax due date
Taxpayer is obliged to make advance payments of personal income tax during the tax year. Income tax returns for a tax year must be filed by 20 of May of the year following the tax year.

Tax rate
The Hungary has partly a progressive tax rate. There are two rates: 18 % and 36 %. But in Hungary is an additional 4 % solidarity tax for salary income above 7 137 000 HUF.

Exemption
The following are the most significant types of exempt income, for instance:
• certain child allowances paid by the state
• interest on deposits, including savings
• certain subsidies for the acquisition of dwellings
• interest on government securities and securities of companies
• food vouchers to an employee, up to a limit
• gains from Hungarian or EU stock exchanges
• insurance payments, subject to conditions
• scholarships, subject to certain conditions
• gain from sale of real estate held for 15 years or more

Deductions
The following are the most significant types of deduction income, for instance:
• The credit for children – up to 4 000 HUF per child per month, only for families with at least 3 children
• The credit as a resident – a credit for employment income up to 18 % of wages, on condition that the annual income does not exceed 1 million HUG

Income from capital gains and rental income
Capital gains on immovable property, securities are taxed separately at a 25 % rate. Rental income derived from immovable property is subject to tax at a 25 % rate too.

Dividends
In the case of dividends distributed by resident companies, tax is levied at a rate of 25 % on the amount of dividends.

Bc. Petr Gola