PERSONAL INCOME TAX AND SOCIAL SECURITY SYSTEM
From 2013 there is a flat rate of personal income tax of 16%, generally applicable to active (e.g. employment, assignment fees) and passive income (e.g. capital gains, dividends and interest). Active incomes fall under the scope of the social security system. Individual social contributions are 18.5%; the employer’s contribution is a total of 28.5%. Passive incomes are subject to different rates of health care tax, depending on the source: e.g. 14% in case of dividends, capital gains, below threshold property rental; 6% on interest income; and 27% on sale of rights. Certain activities are exempt from health care tax (e.g. capital gains on stock exchange share investments).
The general corporate income tax rate is progressive in Hungary. The tax base up to HUF 500 million (cca. EUR 1,620,000) is taxed at 10%; above this amount the rate is 19%. The tax base is the pre-tax profit modified by several increasing and decreasing items. From 2015 losses can be carried forward for 5 years. The losses generated before 2015 can be carried forward until 2025. However, losses may be used for reducing the tax base by up to 50% of the tax base calculated without the loss carry forward.
OTHER DIRECT TAXES
Local business tax is maximum 2%, the innovation contribution is 0.3%, both paid on adjusted gross margin. A special surtax applies to certain sectors, e.g. the energy sector (31% in addition to the corporate income tax), the bank sector (the tax amount is based on the total assets), the telecommunications sector (on telecom services) and public utility tax (on the owners of public utility lines include water supply, natural gas, heat and electricity supply, etc.). In case of acquiring real estate or real estate holding companies, 4% stamp duty applies up to a real estate value of HUF 1 billion (cca. EUR 3,240,000), above the threshold the rate is 2%, but maximized at HUF 200 million (cca. EUR 648,000) per real estate.
The general VAT rate is 27%, reduced rates are 18% (e.g. bread, milk, accommodation services) and 5% (e.g. journals, books, medicines and central heating). VAT-exempt services are mainly banking services, insurance, investment-related services, sale and rental of real estate, certain services provided by medical doctors and dentists, certain types of education and training and certain other activities which are tax exempt with regard to their public interest or their special character.
OTHER INDIRECT TAXES
Other direct tax types in Hungary include excise duty, environmental protection charge, financial transactional tax, insurance tax and the ‘crisps tax’ (taxes on unhealthy foods and drinks).