How Hungary’s tax system works for expats
If you are planning to move to or reside in Hungary, there are a few key aspects of the tax system worth considering. Understanding these will help you navigate the local regulations more efficiently.
Tax residency status. You become a tax resident if you spend more than 183 days in Hungary during a year. In some cases, tax residency is granted if you have strong ties to the country, such as having a family living in Hungary or owning a permanent home here.
One of the fastest ways to gain Hungarian residency, which can eventually lead to tax resident status, is to invest at least €250,000 and obtain the Hungary Golden Visa.
Dual taxation. Expats should be aware of the risk of dual taxation when earning income from their home country. Hungary has double taxation treaties with many countries, such as the United States, the United Kingdom, and Germany. These treaties help prevent being taxed on the same income twice.
Local tax filing process. Expats must keep careful records of income, expenses, and deductions, which will help them with tax filings.
Employees and freelancers should also be aware of how Hungary’s system differs from their home country, particularly in areas such as income taxation and social security contributions.
First steps for new expats. Once you relocate to Hungary, it is important to follow certain steps to ensure compliance with the tax system. Here’s what you need to do:
- Visit the National Tax and Customs Administration (NAV) and register as a taxpayer.
- Fill and submit an application form for a Hungarian Tax Identification Number (TIN) to the NAV. You will need this for tax filings and employment purposes.
- Keep track of the tax filing deadlines that depend on the employment or self‑employment status.
These steps should be completed as soon as possible after your move to avoid penalties or processing delays.
The distinction between residents and non‑residents affects taxation. Non‑residents are only taxed on income earned from Hungarian sources, such as employment within the country. Residents, however, are taxed on their global income, including foreign earnings.
Residents vs. non-residents taxes comparison
| Tax category | Residents | Non-residents |
| Income tax | Taxed on worldwide income | Taxed only on Hungarian-sourced income |
| Social security contributions | Required on all employment income earned globally | Required only on Hungarian-sourced employment income |
| Capital gains tax | Taxed on both Hungarian and foreign capital gains | Taxed only on Hungarian-sourced capital gains |
| Dividends tax | Taxed on dividends from all companies | Taxed only on dividends from a Hungarian company |
| Double taxation treaties | Can claim relief for foreign income under applicable treaties | Applicable to Hungarian-sourced income where treaties exist |
Can expats avoid double taxation in Hungary?
One of the main concerns for expats is the risk of being taxed on the same income in both Hungary and their home country. Fortunately, Hungary has established double taxation treaties with numerous countries to address this issue.
Double taxation treaties outline which country has the right to tax specific types of income, such as employment income, dividends, or capital gains. Depending on the treaty and the nature of the income, expats may avoid double taxation either by being taxed solely in their home country or by receiving tax credits in Hungary for taxes already paid abroad.
For example, an expat who earns income in their home country may only need to pay taxes in that country, or they could receive a credit to offset taxes paid in Hungary.
Key countries with double taxation treaties. Hungary has signed double taxation treaties with more than 80 countries, including the US, the UK, Australia, Canada, China, Germany, France and other EU countries.
To benefit from Hungary’s double taxation treaties, expats must provide the appropriate documentation to both Hungarian tax authorities and their home country. This often includes submitting tax residency certificates and completing specific forms to claim tax credits or exemptions.
Personal income tax rate for expats in Hungary
Hungary has one of the lowest personal income tax rates in the European Union, set at a flat 15%. This flat tax rate applies to all forms of income, including employment wages, freelance earnings, investment income, and capital gains. Hungary’s income tax system applies to both residents and non-residents.
Tax filing for employed and self-employed expats. Employees typically have taxes withheld by their employer, making the filing process straightforward. Freelancers and self-employed individuals, however, are responsible for calculating and paying their own taxes, including quarterly payments.
Freelancers should also be aware of additional obligations, such as social security contributions and local business taxes, depending on the nature of their work and income structure. Understanding these requirements helps ensure full compliance with Hungary’s tax regulations.
Hungarian tax residents are generally required to pay social security contributions regardless of their nationality. Non-residents may be subject to contributions if they have income sourced from Hungary. Contributions are calculated based solely on income earned within Hungary, not on global income.
Employees do not need to handle the contribution process themselves, as employers manage all payments and filings. However, self-employed expats must calculate and submit their contributions through the tax authorities.
Social security contributions for employees. Employees contribute 18.5% of their income toward social security, which covers healthcare, pensions, and other benefits. Employers contribute an additional 13% of the employee’s income. Together, this totals 31.5%, but employees only have the 18.5% deducted directly from their salary, while the employer is responsible for the 13%.
Social security contributions for the self‑employed. Self-employed expats, including freelancers, must pay both the employee and employer portions, contributing the full 31.5% themselves. It provides access to Hungary’s social benefits, including state-funded healthcare and pension rights.
Social benefits for expats:
- state-funded healthcare with free basic services and co-payments for additional treatments;
- paid maternity leave, which typically lasts up to 24 weeks;
- expats can claim unemployment benefits if they meet the eligibility criteria, including sufficient social security contributions during employment;
- state pension upon reaching retirement age, which is 65 in 2024.
How does VAT work in Hungary?
Standard VAT rate. The standard VAT rate in Hungary is 27%. It applies to most goods and services, including groceries, dining out, healthcare, electronics, and other common purchases.
Reduced VAT rates. Hungary offers reduced VAT rates for specific goods and services:
- 18% — certain food products like dairy, baked goods and hotel services;
- 5% — medicines, medical equipment, books, and services like internet access.
Impact on cost of living. VAT is already included in the prices displayed in stores and restaurants, so the price shown is the final amount you pay. While the standard rate of 27% affects the cost of most purchases, essential items like prescription medications are subject to the lower VAT rate, providing some financial relief.
Self-employed expats and business owners in Hungary are required to charge VAT on their services and remit the collected tax to the government to remain compliant with local tax laws.
Taxes for self-employed and entrepreneur foreigners in Hungary
Self‑employed expats and entrepreneurs in Hungary are subject to the same tax rates as salaried employees but are responsible for handling their own tax filings. Additionally, there are certain benefits, such as simplified tax regimes, available to help manage tax obligations more efficiently.
Tax registration and filing. Self-employed expats must register with the Hungarian tax authorities and obtain a tax identification number. They are required to submit quarterly tax payments and file annual returns, detailing all income, expenses, and deductions.
Income tax and social security. Self‑employed expats are subject to a 15% flat personal income tax on all earnings, including income from self-employment. In addition, they must contribute to social security, which covers healthcare and pensions.
KATA taxation for entrepreneurs. Hungary offers a simplified tax regime called KATA, which is popular among freelancers and small business owners.
Under KATA, private entrepreneurs pay a fixed monthly fee instead of calculating separate income tax and social security contributions. This option is available for those earning up to HUF 12 million, or €30,000 annually.
To participate in the KATA system, entrepreneurs must apply for it when registering with the tax authorities. It is not automatically assigned based on income; eligible entrepreneurs need to specifically opt for this regime.
Standard taxation for entrepreneurs. Entrepreneurs who do not qualify for or opt out of the KATA system must follow standard taxation rules. This involves paying:
- 15% — income tax;
- 31.5% — social security;
- local business taxes that depend on the municipality.
VAT obligations. Self-employed expats whose annual turnover exceeds HUF 12 million must charge VAT on their services and remit the collected VAT to the government.
Do expats pay property tax in Hungary?
Foreigners moving to Hungary are not required to purchase or rent property to live in the country unless they are applying for specific residence programs, such as the Golden Visa, which requires property rental or ownership.
Otherwise, expats may choose to stay with relatives or friends without a formal rental agreement. However, certain tax obligations apply to those who decide to rent or buy property.
Property transfer. When purchasing real estate, a property transfer tax applies. The rate is 4% of the property’s market value, capped at HUF 1 billion, or €2.7 million. The buyer pays this tax, which must be settled after the purchase.
Hungary does not have an annual property tax.
Capital gains tax. Expats selling property may be subject to a 15% capital gains tax on any profit from the sale. However, the percentage of taxable income depends on the period of ownership of the property:
- if the property is sold in the first year of ownership, 100% of the income is taken into account;
- the second year — 90%.
- the third year — 60%.
- the fourth year — 30%.
- the fifth year onwards — 0%.
Rental property. Expats renting out property in Hungary must declare rental income and pay a 15% income tax on earnings from rental activities. Additionally, if the monthly rental income exceeds €2,500, or HUF 1 million, landlords are required to charge VAT on the rental income.
Tenants are not responsible for property‑related taxes.
Wealth, inheritance and gift taxes. The inheritance tax is 18%, with a preferential rate of 9% for residential properties. Direct descendants and spouses are exempt. Gift taxes follow similar rules, with the same rates applying to property or asset transfers.
Hungary does not impose a wealth tax.
Features of corporate taxation in Hungary
Hungary offers an appealing corporate tax environment for expats starting a business. With one of the lowest corporate tax rates in Europe, the country supports entrepreneurship and investment, making it a prime destination for expat business owners.
Low corporate tax rate. Hungary’s corporate tax rate is a flat 9%, the lowest in the European Union. This rate applies to all company profits, regardless of the size or sector.
Tax incentives for key sectors. Hungary offers various tax incentives for businesses in sectors such as technology, research and development (R&D), manufacturing, and renewable energy. These can include tax deductions, grants, and subsidies. For example, companies investing in R&D can claim tax deductions.
Favourable tax schemes for SMEs. Expats running small and medium-sized enterprises (SMEs) can benefit from Hungary’s special tax regimes. One of them is KATA, under which entrepreneurs pay a fixed monthly fee instead of calculating separate income tax and social security contributions.
Another special regime for SMEs is KIVA, which replaces traditional corporate tax and social contributions with a 10% flat tax on cash flow.
Business-friendly environment. Hungary offers streamlined procedures for company registration, as opening a startup online takes as little as one or two business days. Expats can also benefit from simplified processes for obtaining work permits and residence permits.
The country is situated in Central Europe, providing easy access to both Eastern and Western European markets. The legal framework is largely aligned with EU standards, offering stability and predictability for investors.
Hungary tax benefits for expats
Hungary’s tax system offers several key advantages for expats. Here is a quick overview of the main benefits:
- Flat personal income tax rate. A flat 15% rate applies to all income types, including employment, self‑employment, and investments.
- Low corporate tax rate. Hungary has the lowest corporate tax rate in the European Union, set at 9%.
- Double taxation treaties. Hungary has treaties with over 80 countries, preventing expats from being taxed twice on the same income.
- Tax deductions. Expats can claim deductions for donations to registered charities, healthcare costs not covered by the national system, and certain education or relocation expenses.
- Tax relief and credits. Depending on Hungary’s agreements with their home country, expatriates may qualify for specific tax credits or exemptions, particularly for foreign-sourced income or international assignments.
Filing taxes in Hungary as an expat
Hungary’s tax filing process is straightforward, but expats must be aware of deadlines, required documents, and penalties for errors or late submissions.
Filing deadline. Expats must file their taxes annually, with a typical deadline of May 20th of the following year. Residents must declare income from all sources, including global income, while non-residents only need to report Hungary-sourced income.
Online tax filing. Taxpayers can submit their returns online via the National Tax and Customs Administration, or NAV portal, Hungary’s official tax authority platform.
Required documents. Expats need the following documents to file taxes:
- income statements, like salary slips or reports of self-employment and freelance earnings;
- tax identification number (TIN);
- proof of residency;
- relevant expense receipts for deductions like healthcare costs, charitable donations, or relocation expenses.
Maintaining accurate financial records throughout the year simplifies tax filing and ensures compliance with Hungarian tax regulations.
Penalties for late or inaccurate filings. Hungary imposes penalties for late filings or errors on tax returns. Missing the May 20th deadline can result in fines or interest on unpaid taxes. Inaccurate reporting, whether intentional or not, may lead to additional penalties and further scrutiny by tax authorities.
How to move to Hungary and become a resident
Hungary offers several pathways for expats to obtain residency, including options through investment, employment, family reunification, and education.
Hungary Golden Visa. The Hungary Golden Visa is a popular option for high‑net‑worth individuals seeking residency through investment. Expats can obtain a residence permit by making an investment of at least €250,000 in Hungary.
There are three investment options, each with specific minimum requirements:
- €250,000+ for investment in local real estate funds;
- €1+ million donation to an institution of higher learning.
To qualify, applicants must meet the following requirements:
- make an eligible investment;
- provide proof of financial stability;
- submit a clean criminal record;
- have valid health insurance.
The process of obtaining the Golden Visa typically takes at least five months, providing a fast and straightforward route to residency.
The Golden Visa grants residency for an initial period of 10 years, with the option to renew it once for an additional 10 years. It also provides access to Hungary’s healthcare, education, and social services, making it a comprehensive option for expats.
Alternative residency options:
- work visa requires a valid work contract with a Hungarian company, proof of income, and supporting documents;
- family reunification visa, for expats with family members who are already residents or citizens of Hungary;
- student visa grants residency to expats pursuing higher education in Hungary for the duration of their studies.
Choosing the right residency pathway depends on one’s personal or professional circumstances. The Hungary Golden Visa remains a popular choice for those seeking a fast track to residency, while other options cater to different needs, such as employment, family, or education.
In summary: taxes in Hungary for expats
- Expats become tax residents in Hungary after living in the country for more than 183 days within a calendar year.
- Hungary taxes global income but has over 80 double taxation treaties to prevent double taxation.
- Key tax rates for expats include 15% personal income tax, 9% corporate tax, 31.5% social security contributions, and 27% VAT.
- Entrepreneurs are responsible for their own tax filings but can benefit from simplified schemes like KATA to reduce the tax burden.
- The Hungary Golden Visa is a fast and straightforward way to become a Hungarian resident.
