Hungary - Tax Guide for Freelance Contractors

Tax residents in Hungary:          are liable to pay Hungarian tax on their worldwide income,
Non tax residents in Hungary:   are liable to pay tax on Hungarian-source income.

Individuals will be regarded as tax residents:

• if they have a permanent home in Hungary,
• if their centre of vital interests is in Hungary,
• if their habitual abode is Hungary,
• if they spend more than 183 days in Hungary.

Married persons are taxed separately.

Taxable income includes:

• income from employment including salary, bonuses, reimbursement of costs and most insurance policy premiums paid by the employer for the employee’s benefit,
• capital,
• receipt of securities,
• options and similar rights,
• benefits in kind (includes: costs of training and education of an employee for the employer's purposes, payments by the employer to a private pension fund as a supplement to the employee's premium, a voluntary mutual pension insurance fund up to 50% of the statutory minimum wage, a voluntary mutual health or self-support insurance fund up to 30% of the statutory minumum wage, an employer pension fund up to 50% of the statutory minimumwage, reimbursement of certain business travel costs received from the employer, subject to limitations, relocation allowances, cost of meals up to HUF 18'000 p/month, child care service and accomodation facilities provided, reimbursement of public transport and commuting costs, private use of a company car). 

Certain deductions are permissible for 2010:

• state pensions,
• payments received for providing social care (capped to HUF 120'000 per year),
• scholarships
• payments to students (under certain conditions).

Tax credit for 2010:

• employment tax credit of 17% for income not exceeding HUF 3'188'000 up to a maximum of HUF 15,100 per month of 12% if income exceeds HUF 3'188'000,
• a credit equal to 50% of the tax calculated by applying the highest progressive rate to the amount received from a private pension fund up to a maximum of the actual tax due,
• 30% of the voluntary contributions paid to a mutual pension fund and/or 30% of the voluntary contributions paid to a mutual health or self-support insurance may reduce the tax liability (limited amount),
• family tax credit up to a maximum of HUF 4'000 per child (under certain conditions).

Income tax rates for 2010:

• 17.00% up to HUF 5'000'000,
• 32.00% on the excess.

Miscelleanous

New Tax Calculation from 1st January 2010

Super gross system: The introduction of a new tax calculation method on the basis for personal income tax will be called "super gross system" which will take into account all dependent and independent income, other income and a "tax-base increasing element". The "tax-base increasing element" equals the total employer's social security contribution (27%, if up to the limit of the double wage minimum).

Non-taxable income will not be taken into consideration when calculating the tax-base increasing element.

Filing date:

By the 20th of May of the following year.