Taxes and Tax Schemes in Hungary | What You Need to Know in 2025

Hungary, a Central European country known for its rich cultural heritage, strategic location, and growing economy, operates a comprehensive tax system that affects both residents and non-residents. Located in the heart of Europe, Hungary combines a competitive business environment with a relatively low tax burden, making it an attractive destination for international professionals and businesses.

Hungary's economy, one of the fastest-growing in the European Union, has shown resilience despite global economic challenges. The country's tax system is designed to support economic growth while maintaining social welfare. Recent reforms have focused on simplifying tax procedures and enhancing digital tax filing for foreign residents.

The expat community in Hungary is growing, with many professionals drawn to sectors like manufacturing, technology, and finance. The tax system, while detailed, offers various benefits and deductions that can significantly impact an expat's financial planning.

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Hungarian Income Tax

Hungary employs a flat income tax rate for individuals, which simplifies the tax system. Resident taxpayers are subject to taxation on their worldwide income, while non-residents are taxed only on Hungary-sourced income. The system includes social security contributions, which fund public services like healthcare and pensions.

Tax residents face the following income tax rate (as of 2025):

• Flat Income Tax Rate: 15%

Additionally, social security contributions are generally calculated at around 18.5% of gross income, split between the employer and employee. The employee's share is typically 7% of gross income.

If you want to have a better understanding of the taxes you should pay on personal income in Hungary, you can use the personal tax calculator in the Taxation section of the Hungary page.‍

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Hungarian Tax on Overseas Income

‍Hungary's treatment of foreign income depends on residency status. The country recognizes two main categories of taxpayers:

1. Residents: Taxed on worldwide income
2. Non-residents: Taxed only on Hungary-sourced income

This system particularly benefits non-residents, who are only taxed on income earned within Hungary. However, residents must declare and pay taxes on their worldwide income, with potential relief through double taxation treaties.‍

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Hungarian Tax on Investments

‍Investment income in Hungary receives specific tax treatment. Dividends and capital gains from listed stocks are typically taxed at a flat rate of 15%. The system includes:

• Dividends: Taxed at 15%
• Capital Gains: Taxed at 15%
• Interest Income: Taxed at 15%
• Rental Income: Taxed at 15%, with deductions for expenses

Real estate investments face both federal and municipal taxes, with potential deductions for depreciation, maintenance, and other expenses.‍

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Hungarian Corporate Taxation‍

Corporate tax in Hungary is one of the lowest in the European Union:

• Corporate Tax Rate: 9%
• Value Added Tax (VAT): 27% standard rate, with reduced rates for certain goods and services
• Local Business Tax: Varies by municipality, typically around 2%

The effective corporate tax rate typically ranges from 9% to 11%, depending on the company's location. Small and medium-sized enterprises may qualify for certain tax reliefs and incentives.‍

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Special Tax Regimes‍

Hungary offers several special tax arrangements beneficial to international professionals and businesses:

1. KATA (Small Business Tax): A simplified tax regime for small businesses with a flat tax rate.
2. Research and Development (R&D) Incentives: Tax credits and deductions for companies engaged in R&D activities.
3. Foreign Income Tax Relief: Available to prevent double taxation on overseas income for residents.
4. Investment Allowances: Deductions for investments in certain regions or sectors.

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Regional Comparison

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Tax Planning for Hungary

‍Effective tax planning in Hungary requires attention to several key areas:

1. Residency Status Management: Strategic planning of residency status can optimize tax treatment of foreign income.
2. Investment Strategy: Utilizing tax-advantaged accounts and long-term holding periods can optimize investment income.
3. Documentation: Maintaining clear records of overseas assets and income sources is crucial.
4. Professional Advice: Engaging with tax professionals to navigate the complexities of the Hungarian tax system.

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