Expatriate tax ebook - Hungary

Basis of taxation

Charge to tax
Residence
Income from employment
Source of employment
Benefits (in kind)
Expatriate concessions
Relief for foreign taxes
Deductions against income

Charge to tax
Individuals resident in Hungary are subject to tax on their worldwide income. Non residents are subject to tax on their income earned in Hungary. (Hungarian Source income).

• Hungarian citizens (except dual citizens without Hungarian domicile or regular place of abode),
• individuals present in Hungary for at least 183 days in a calendar year,
• foreign nationals holding a residency permit, stateless persons, individuals maintaining their usual domestic residence in Hungary; or whose centre of vital interests is Hungary if they have no permanent residence or if Hungary is not the only country where they have permanent residence, or who are not domiciled in Hungary or if Hungary is not the only country where they are domiciled and the centre of vital interests is unknown.
  

Individuals who are not residents are considered non residents.

Income from employment
Hungarian personal income tax liability arises on employment income if the work is done in Hungary.

Income tax on the gross amount is deducted monthly from the employee’s salary by the employer, and paid to the tax authorities by no later than the 12h day of the following month.

Individuals receiving income that is taxable in Hungary from an employer other than a Hungarian taxpayer are obliged to pay a tax advance on a quarterly basis until the 12th day of the month following the quarter.

Source of employment
Remuneration received in respect of duties performed in Hungary is treated as income earned in Hungary and is subject to Hungarian income taxation, unless the regulations of a double taxation agreement restrict it.

Benefits (in kind)
Certain benefits in kind provided by the employer are taxable to the providing company. Other benefits, which do not belong to the scope of these benefits in kind, are considered as the employee’s income. There are separate regulations applicable for the taxation of company cars and phones.

Expatriate concessions
There are no specific expatriate concessions available in Hungary.

According to the tax authority’s interpretation, accommodation in kind can be provided tax free not only for a short term assignment but also for expatriates. Cash compensation for accommodation is taxable as employment income.

Relief for foreign taxes
A tax credit is available in general in respect of 90% of foreign taxes paid. This is limited to the amount of Hungarian average tax that would be due on the foreign income. Relief for foreign taxes is available based on double taxation agreements. Hungary has concluded double taxation agreements with 62 countries. These agreements are mainly based on the OECD model treaty.

Deductions against income
Employees’ expenses (travel, accommodation) can be compensated by the employer tax free if these expenses incurred in the interest of the employer’s business activity. Fuel compensation and HUF 9 per kilometre is tax free if the employee uses his own car for business purposes.

Information about Hungary:

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