Individuals taking up employment in Hungary will be subject to a comprehensive set of tax rules. The liability for Hungarian income tax depends on whether an individual is a resident or non-resident individual. This determination is made based on the specific facts and circumstances of that individual. Following is an overview of the Hungarian tax system for employees working in Hungary.
Please contact Grant Thornton Hungary, a member firm of Grant Thornton International to discuss your specific situation.
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The Hungarian tax residents are taxable on their worldwide income. Planning advice should be sought prior to arrival if the taxpayer has appreciated assets that may be sold, deferred income that may be received during a residency period, or certain pre-assignment incentive compensation payments.
The tax year runs from 1 January to 31 December.
Both residents and non-residents should file the YYSZJA form (YY means the last 2 digits of the tax year). If the taxpayer receives income from domestic entities, then the tax authority prepares a draft return for them electronically.
Individual income tax returns are due on 20 May in the following year.
Taxpayers may obtain an extension of time to file their returns to 20 November by filing a separate request together with the return. Tax should be paid throughout the year through wage withholding and/or estimated tax payments. This extension is only an extension of time to file and not an extension to pay any balance due on 20 May.
Taxpayers may be subject to interest and penalties if tax is not paid throughout the year and if balances due are not paid by the 20 May deadline (penalties are not applicable if the late filing is until 20 November was supported).
The personal income tax has a flat rate of 15%, which is applicable for both residents and non-residents.
Please note that tax base allowances are available: family allowance, allowance for young couples in first marriage, allowance granted to mothers raising 4 or more children, personal allowance (for several diseases), allowance for young people under the age of 25 years, allowance for young mothers under the age of 30 years.
Allowances are available for resident taxpayers without limitation, for non-residents certain criteria should be met.
(for HU residents only)
Assume a married individual with two children (both under 17 years old) and all family members considered tax residents of Hungary for the entire tax year.
HUF
Base salary 15,000,000
Bonus 2,000,000
Dividend income and capital gain 1,200,000
Total income 18,200,000
Family allowance
From 1 Jan 2025 until 30 June 2025 -1,599,960
From 1 July 2025 until 31 December 2025 -2,400,000
Total allowance for the year -3,999,960
Taxable income 14,200,040
Total income tax 2,130,006
Social contribution tax on interest and dividend
Total social contribution taxes The salary is higher than 24 times the minimum wage, thus no social contribution tax is payable by the individual concerning his/her income from dividends and capital gains.
Interest incomes are subject to social contribution tax without the above- mentioned limit.
Resident taxpayers are subject to tax on worldwide income.
Non-resident aliens are taxed only on Hungary source income, which is categorized under two distinct definitions: part of the consolidated tax base and separately taxable income.
According to the Hungarian Personal Income Tax Act, ‘Resident private individual’ shall mean:
a) any citizen of Hungary (with the exception of dual citizens without a permanent or habitual residence - provided for in the Act on Keeping Records on the Personal Data and Address of Citizens - in Hungary);
b) any natural person who exercises his/her right of free movement and the right of residence for a period exceeding three months in the territory of Hungary in the calendar year in question for at least 183 days, including the day of entry and the day of exit;
c) who falls under the scope of the Act on the Admission and Residence of Third-Country Nationals and has permanent residence status, or is a stateless person; furthermore
d) any natural person, other than those mentioned in Paragraphs a)-c):
da) whose only permanent residence is in Hungary;
db) whose center of vital interests is in Hungary, if there is no permanent residence in Hungary or if Hungary is not the only country where he/she has a permanent residence;
dc) whose habitual residence is in Hungary, if there is no permanent residence in Hungary or if Hungary is not the only country where he/she has a permanent residence, and if his/her center of vital interests is unknown.
Generally, all earnings connected to an employment relationship, occasional or regular, are taxed as income from employment provided. All earnings from an employer to an employee are reportable and taxable as income from employment, i.e. wages, fees, sickness allowances, severance pay as well as benefits in kind i.e. free meals, a company car, interest-free loans, travel benefits, and expense allowances, e.g. subsistence allowances and travel compensation.
The taxation of an individual on stock option and equity-based compensation is generally taxable when they are vested from a tax point of view (sometimes earlier than from the legal point of view) as salary/employment-related income.
These are also subject to the flat rate of 15% personal income tax.
The source of employment is generally determined by the place where services are performed. However, some fringe benefits attached to compensation such as housing, education, certain relocation costs, and local transportation are sourced purely on a geographical basis.
Generally, an individual is liable to pay tax on any benefits (in kind) received similar to salary. In some special cases, if the income is paid by a so-called ‘payer’, the entity bears all tax obligations.
Depending on the length and terms of the Hungarian assignment, tax relief may be available under the provisions of a bilateral tax treaty between Hungary and the home country. Generally, treaty relief for compensation is only available if the individual is not present in Hungary for more than 183 days (including the days of both entry and exit) during that year or any 12-month period and the compensation is paid and borne by an offshore, (i.e. a non-Hungarian) entity and the compensation is not re-charged to a Hungarian entity either. It is critical that the treaty provisions of each particular country should be examined.
Hungary has an extensive income tax treaty network with more than 80 countries as of 1 January 2025.
Please note that Russia suspended the treaty with Hungary, nonetheless from Hungarian side it is still applicable.
Lastly, we would like to draw your attention to the fact that the double taxation treaty between Hungary and the US is terminated as of 2024.
Resident aliens are also allowed either a deduction or credit against income taxes paid or accrued during the tax year if there is no tax treaty in place.
As a Hungarian resident, a number of deductions may be taken against gross income to arrive at an individual’s taxable income. Unlike non-resident taxpayers, who have limited deductions as their deduction depends on the proportion of their income taxable in Hungary, in some cases their citizenship and the benefits’ source country.
Deductions available (per month):
Family allowance:
We would like to draw your attention to the fact that the family allowances’ amounts will be increased from July 2025. The applicable tax base amounts are the followings:
Until 30th of June 2025
Between the 1st of July 2025 and the 31st of December 2025
Allowance of young couples in first marriage: HUF 33 335 / month
Mothers raising 4 or more children: salary and similar income
Personal allowance (for several diseases): one-third of the minimum wage, (HUF 96 900 / month in 2025)
Tax base allowance for Young People Under the Age of 25 Years: the salary, but maximum the average salary in the previous year’s July, (HUF 656 785 / month in 2025)
Tax base allowance for Young Mothers Under the Age of 30 Years: the salary, but maximum the average salary in the previous year’s July, (HUF 656 785 / month in 2025)
Capital gains from the sale of investment assets are taxed at the ordinary income tax rate, of 15%. In the case of the sale of real estate, the tax base can be deducted by a certain amount of income and can also be tax-exempt.
General rules of the real-estate sale are applicable.
The inheritance and gift taxes are independent of the income taxation. It does not distinguish the residency; the taxability depends on the location of the asset. In the case of inherited immovable properties, tax may occur abroad as well.
Generally, investment income such as interest, rents, and royalties received by a resident of Hungary is taxed at 15%.
In Hungary, there are no local taxes on the income.
Certain assets can be subject to local taxation, like immovable property, land.
Real estate (property) taxes are generally assessed at the local level. The scope and the rate of the real estate (property) taxes vary among the municipalities.
In general, being part of the Hungarian social security system is mandatory for every Hungarian national and for everybody carrying out the activity in Hungary, unless an international regulation overwrites this.
Individuals having certain working relationships (for example: employment, and private entrepreneurship) are insured by default, and healthcare contributions are withheld. This also includes pension contributions as well. Individuals who do not have such a relationship are required to pay additional contributions to be eligible for healthcare services.
A foreign national employed in Hungary may be subject to the social security laws of both Hungary and their home country. Totalisation agreements are designed to alleviate this double taxation by allowing foreign nationals to be covered under only their home social security system for a period of time. Hungary has a network of totalisation agreements and each specific country agreement should be reviewed to determine the social security system that claims coverage as well as the duration of the exemption. Within the European Union the rules of the corresponding EU –Decree should be applied, which is similar to the totalisation agreement.
Cars and motorcycles having Hungarian license plates are subject to taxation. The tax rate depends on the age and performance of the vehicle.
Local taxes can also be applicable.
Not applicable for Hungary.
Hungarian tax residents have to report their foreign, in Hungary non-taxable income in their yearly tax return, but no further reporting obligations arise.
Primary planning opportunities exist around a duration of stay in Hungary, whether that be long-term (an ‘indefinite’ assignment of more than one year) or short-term (one year or less). With proper planning, potentially costly and unforeseen tax burdens can be mitigated, particularly with respect to fringe benefits, assignment allowances, and pre-assignment income. Planning is also available for individuals concerning incentive compensation, unrealized gains, and other foreign financial assets that may become vested or sold during time spent in Hungary.
Borbála Bodó - Director
T - +36 1 455 2000
Email: borbala.bodo@hu.gt.com
Ádám Pataki - Manager
T - +36 1 455 2000
Email: adam.pataki@hu.gt.com