Expatriate tax ebook - Hungary

What taxes?

Capital gains tax
Inheritance, estate and gift taxes
Investment income
Local taxes
Real estate taxes
Social security taxes
Stock options
Wealth taxes
Other specific taxes

Capital gains tax
Capital gains arising from Hungarian sources are subject to personal income tax when realised. A flat rate of 16% on any capital gains arises on the disposal of securities or shares in a limited liability company.

16% tax is levied on stock exchange gains.

Gains from the transfer of property, rights of property value related to real estates are taxed at a rate of 16%. When an individual sells an immovable property owned for more than five years the tax base is reduced by 10% points per year of ownership. Special rules apply to transfers of houses and flats.

Inheritance, estate & gift taxes
Inheritance and gift tax are levied between 11% and 40%, depending on the relationship between the deceased or donor and the beneficiary as well as the value of the object. Beneficiary rates are applicable on the transfer of flats and houses for accommodation between 2.5% and 30%.

The portion of legacy inherited by a child, the spouse or the parent of the testator and by the grandchild having lived in the same household without parents will be exempt from inheritance duty up to HUF 20 million net value of the object. Tax exempt is any gift or inheritance acquired by the next of kin of the testator or donor (including where relationship is based on adoption.)

Investment income
Dividends
Dividends paid to individuals are subject to 16% withholding tax.

Interest
Tax on interest income from Hungarian sources is subject to withholding tax at a rate of 16%. If the interest income comes from long-term investments ( under special conditions with an investment service provider or a credit institution) the tax can be 0% after 5 years holding period.

These rates are reduced by the double taxation agreements.

Local taxes
Personal cars are subject to automobile tax, which is payable to the local government by the owner of the car stated in the registration of the authority. The tax is levied between 345 HUF/kW and 140 HUF/kW depending on the age of the car. Special rules are applicable on cars having temporary number-plates.

A company car provided by a Hungarian company  is taxed at the hands of the Hungarian company.

Real estate tax
The owners of buildings, beneficiary of rights of property value are obliged to pay building tax.
The annual maximum rate of tax can be 1,100 HUF per metre square or 3.6% of the adjusted market value, depending on the local government’s decision.
The municipalities may exceed the legally stipulated upper limit by up to the inflation rate. The maximum rate is 143.71% in 2011.
Expatriates do not need to pay personal income tax on the real estate rented if the fees are paid by their employer. 

Social security taxes
Foreign employees of Hungarian companies, as well as their employers, are obliged to pay Hungarian social insurance. Hungarian social insurance contains two elements: old age pension and health insurance.

EU citizen expatriates may decide not to be subject to Hungarian social security for one year, based on permission, this period can be extended. Third country citizen expatriates are not subject to the Hungarian social security system, except where there is a social security agreement between Hungary and the third country in question. From 2012, the third country citizen expatriates become subject to the Hungarian social security system if their delegation exceeds two years.

Stock options
The grant of stock options is not taxable. When the employee exercises the right, the difference between the beneficiary’s option price and the market price is valued according to the relation between the parties (in most cases as an employment income). The difference between the market price at the time of the realisation and the sales price is taxed as a capital gain. The tax advantage of an approved employee’s stock option is that up to 1.000.000 HUF of the realisation of the option is a tax free income.

Wealth tax
Not applicable

Other specific taxes
There is a standard 4% duty on property transfer in general, which must be paid by the customer (2% of the amount above HUF 1.000 million but maximum 200 million HUF/property). The rate is 2% for housing units up to 4 million HUF value and 4% for the portion of the market value above 4 million HUF.

Information about Hungary:

• introduction
• facts and figures
• basis of taxation
• what taxes?
• tax planning opportunities