Value-added tax (VAT)
VAT is payable on sales of goods and the supply of services. VAT is also payable on the importation of goods, on the intra-Community acquisitions of goods, and on the purchase of certain services provided to Hungarian taxable persons by foreign taxable persons.
The general VAT rate is 27%.
A reduced VAT rate of 18% is applicable for some products (e.g. certain milk, certain dairy products, products made from cereals, flour, and starch). The 18% VAT rate is also applicable to services that grant admission to musical and dancing events.
A reduced VAT rate of 5% is available for new residential property, certain pharmaceutical products, audio books, printed books, newspapers, district heating services, certain live performance activities, commercial accommodation services, certain products of the animal sector (e.g. live and processed large animals, such as pig, sheep, goats, cattle, poultry, eggs), fresh milk, internet access services, local dining services (i.e. meals and non-alcoholic beverages prepared locally in bars and restaurants), fish for consumption purposes, and the edible by-products and meat offal of domestic swine.
The reduced 5% VAT rate on the supply of new residential property will be applicable until 31 December 2024, but under the transitional rule it will apply until 31 December 2028 for long-delayed construction projects for which the building permit has become final on 31 December 2024 or the construction has been notified by that date under the simple notification rules.
Immovable-property-related VAT matters
From 1 January 2023, the domestic reverse-charge mechanism is changing regarding construction services supplied in connection with immovable property. According to the new legislation, the reverse-charge mechanism rules are applicable in case the building or the modification of the immovable property must be declared to any (not only building) authority (or in case it requires an authorisation, notification of some sort from an authority).
In case of a real estate where there is a change of function (change of use or change of the number of units of the property), then it is regarded as a new real estate in terms of VAT. In such cases, its supply will be VATable, provided that no more than two years elapse between the issue of the official certificate and the sale.
Exempted, out of scope transactions
Certain services are exempt from VAT, including, but not limited to, medical, cultural, sporting, and educational services provided as public services. VAT exemption is also available for financial and insurance services. The intra-Community supplies of goods, services, and exports are also treated as exempt transactions.
Generally, the supply of a building or parts of a building, the land on which it stands, and the rental of real estate are VAT exempted. An option is available to apply VAT on the supply or rental of this real estate. VAT exemption cannot be applied to the supply of building plots.
There are some special transactions that may be out of scope of the Hungarian VAT, provided that special conditions are met. These include the acquisition of any contributions in kind, the acquisition of any assets by way of succession, and the transfer of business as a going concern. Regarding the agricultural sector, the conclusion of a farm transfer agreement constitutes a succession under the VAT Act. The predecessor is jointly and severally liable with the successor in title.
A domestic reverse charge applies between Hungarian taxable persons for the following activities:
- Services related to immovable property (e.g. construction, maintenance).
- Sales of certain steel products.
- Sales of waste materials.
- Sales of carbon quotas.
- Sales of real estate and land if the application of VAT was chosen.
- Sales of certain agricultural products (e.g. maize, wheat, barley, rye).
- Leasing staff or making available personnel and the use of student-work placement offices in relation to certain construction and other similar works.
VAT deduction is available only for the business-related element of purchases that were made partially for non-business purposes.
If a taxpayer has a negative VAT balance in a VAT period, the amount can be recovered, provided that the VAT balance reaches or exceeds an absolute value of HUF 1 million for monthly filers, HUF 250,000 for quarterly filers, or HUF 50,000 for annual filers.
As a general rule, the deadline for remitting VAT reclaims is 75 days, irrespective of the amount concerned. However, if all incoming invoices, regarding which the VAT was deducted in the VAT return, are settled (paid fully to the suppliers) by the due date of the related VAT return, a 30-day deadline can be applied, and a deadline of 45 days might be considered if the amount to be transferred exceeds HUF 1 million. The preferential deadline is applicable for taxpayers qualified as a ‘reliable taxpayer’ by the Hungarian tax authority.
Special VAT refund procedure
Taxable persons, first in 2020, may request a refund from the tax authority of the input VAT charged to them if they, for reasons beyond their control, are unable to recover it in any other manner, which is contrary to the principle of fiscal neutrality. Requests are possible to be submitted to the tax authority no later than six months prior to the end of the period of limitation concerning the tax to be refunded.
As of 1 January 2021, the rules for the special VAT refund procedure were extended to the output VAT as well if the conditions laid down in the VAT Act are met.
Further to the above, as of 1 July 2021, the rules of the special VAT refund procedure changed slightly as if the occurrence of the reason for the refund request is within six months to the end of the period of limitation or after the period of limitation has lapsed, the taxpayer is entitled to submit this request within one year from the occurrence of the reason for the request.
Deducting bad debts from the tax base
From 1 January 2020, taxable persons shall be able to retroactively deduct bad debts from their tax base through self-revision. Subject to certain conditions, it shall be possible to reduce the tax base by the net amount of receivables recognised as bad debt. The VAT Act shall specify in detail the claims that may qualify as bad debt under the VAT rules (i.e. the cases in which the above option could be invoked). Under the transitional provisions, taxpayers will first be able to exercise this option in cases in which the date of supply of the goods or services forming the basis of the claim falls after 31 December 2015.
As of 1 January 2021, VAT refunds on uncollectible debts extended to debts owed by non-taxable persons. However, an overly strict interpretation of the eligibility criteria for the VAT refund (e.g. if a debt settlement procedure for private individuals must also be carried out in order to collect the debt) might call into question the utility and cost-effectiveness of this provision.
Starting from 1 July 2021, if the occurrence of the reason for the deductibility of bad debts (e.g. the date when the dab debts become definitively irrecoverable) is after the period of limitation has lapsed, the taxpayer is entitled to deduct bad debts within one year from the occurrence of the reason for the request. As a transitional rule, if the occurrence of the reason for VAT deductibility of bad debts is prior to the entry into force of this rule (which will be 1 July 2021) and the one-year deadline has not been lapsed, the taxpayer can apply for deduction if one submits a request within 180 days after the date of entry into force of this legislation.
Additionally, as of 1 July 2021, the strict requirements in relation to the person receiving the invoices from the applicant of the bad debt deduction request (e.g. the non-paying receiver of the services or goods) will be abolished.
Directive for refunds of foreign taxable persons
Taxable persons with their establishment in an EU country, other than Hungary, or in Switzerland, Lichtenstein, Norway, Serbia, or Turkey can recover local VAT. The refund applications have to be submitted electronically. Reclaim requests should be submitted to the tax authority of the country where the EU-registered taxable person is established.
VAT refund reciprocity with the United Kingdom (UK)
Based on the principle of reciprocity, the VAT reclaim procedure is available for taxpayers established in the United Kingdom (taking into account the provisions of the Agreement on the withdrawal of the United Kingdom of Great Britain and Northern Ireland from the European Union and the European Atomic Energy Community and the Northern Ireland Protocol).
Administrative simplification to the VAT refund claims made by a foreign traveller
According to the new rules, the VAT reclaims made by a foreign traveller could be underpinned by a stamped electronic invoice. Going forward, this means that there is no need to present a paper-based invoice to the customs authorities in this procedure, thus the stamped electronic invoices serve as the electronic certificate.
All types of intra-Community transactions have to be reported in the periodic Intra-Community List in Hungary.
Taxpayers registered in Hungary have to submit domestic recapitulative statements regarding incoming B2B invoices. If a domestic recapitulative statement has to be prepared, the VAT return can only be submitted in electronic form. From 1 July 2020, the rules for the supply of data by taxpayers changed significantly, as the former HUF 100,000 reporting threshold was abolished. Under the new regulations, taxpayers’ recapitulative statements are required to include all invoices on the basis of which they exercise the right of deduction of input VAT as well as any document that relates to an invoice that is/was already indicated in the statement and qualifies in fact as an invoice whose effect is taken into account in the given period (e.g. modification or credit invoice).
As of 1 July 2018, taxpayers are required to report to the Hungarian tax authority certain data regarding B2B invoices that are issued by invoicing software and have a VAT content of at least HUF 100,000. Such reports have to be made electronically, through an online connection, using a specific XML file format. As of 1 July 2020, the HUF 100,000 threshold was abolished, and data shall be provided on all invoices issued by the company to a domestic taxable person for domestic transactions. As of 4 January 2021, the range of invoices to be reported further expanded, as the data of issued invoices for which the Hungarian invoicing rules are applicable shall be reported towards the tax authority. The above-mentioned amendment resulted in that Intra-Community and Extra-Community transactions will have to be reported and, with a few exceptions, invoices issued to non-taxable persons. Also, the scope of the data to be reported extended.
An Electronic Road Freight Control System (EKAER) number needs to be requested from the tax authority for specific road shipments. The taxpayers who do not fulfil this reporting obligation can face serious consequences (e.g. if a taxpayer fails to report or reports an incorrect weight or value data, the tax authority is entitled to levy a default penalty of up to 40% of the value of the incorrectly reported goods and also to seize the goods).
New rules regarding e-commerce
In line with Council Directive (EU) 2017/2455, additional simplification has been introduced regarding the VAT rules on electronically supplied telecommunication and broadcasting services (‘distance services’) for non-taxable private individuals. If certain conditions are fulfilled, the service provider taxpayer is allowed to determine its VAT liabilities according to the regulation of the member state where it is established instead of the member state of the service recipient, up to a threshold of EUR 10,000, which, as of 1 July 2021, is consolidated with the intra-Community distance sales performed by this taxpayer as well. As a result of this simplification, the service provider taxpayer is able to avoid VAT registration in each of the affected member states of the service recipients.
However, the regulation sets out that the service provider taxpayers still have the right to decide to determine their VAT liabilities according to the rules of the member state of their service recipients instead of applying the new simplification rules. In this case, taxpayers will remain bound to their decision until the end of the second calendar year subsequent to the calendar year of their decision.
The rules apply to supplies performed after 31 December 2018.
In accordance with the VAT Directive, the VAT Act defines 'intra-Community distance sales' and the 'distance sale of goods imported from a third country'. Both definitions stipulate that the goods must be supplied to non-taxable persons. Distance sale means a transaction in which a private individual resident in an EU member state buys goods at a distance from a taxable person in another EU member state or from a third country, and the goods are delivered directly to that individual.
The VAT on the supply of goods at a distance must be paid in most cases (i.e. for intra-Community distance sales above a certain threshold) in the member state of consumption (which, in practice, means that the taxpayer selling the goods must register for, declare, and pay VAT in that member state). Therefore, in order to reduce the administrative burden on taxpayers carrying out such activities, the following arrangements and special rules were introduced:
Extension of the One-Stop Shop (OSS)
The OSS, which previously applied to telecommunications, broadcasting, and electronically supplied services, is extended to include all other services provided to non-taxable persons in EU member states and also covers the obligation to declare and pay tax on intra-Community distance sales. The use of the OSS is optional, but many taxpayers are expected to opt in since it can significantly reduce the taxpayers’ administrative burden.
In the case of a Hungarian person who chose individual tax exemption status, they cannot act in this capacity in the case of intra-Community distance supplies in another EU member state or of import distance supplies, but they are entitled to deduct the input VAT in relation to these transactions. However, the value of the OSS transactions will be not included of the threshold for the individual tax exemption status. Taxpayers are able to use the system after 1 July 2021, subject to prior registration.
Introducing the Import One-Stop Shop (IOSS)
A separate IOSS has been introduced for declaring and paying tax on intra-Community distance sales of goods imported from a third country. In addition to reducing administrative burdens, another advantage of this system is that the goods concerned will be exempted from import VAT.
The conditions for using the IOSS system are stricter: it can only be used for the distance sale of low-value consignments of a value up to EUR 150 (i.e. the duty exemption threshold), and non-resident taxpayers must also usually authorise an intermediary. The intermediary must meet the same requirements as those imposed on financial representatives and will be jointly and severally liable with the taxpayer giving the authorisation for fulfilling the tax obligations.
However, it is important to note that the one-stop shops described above allow tax payments only.
Special rules for paying import VAT on low-value consignments
As of 1 July 2021, the VAT Act laid down simplified rules for the payment of import VAT on imports of low-value consignments worth less than EUR 150 if the seller does not use the IOSS.
Under this simplification, as a rule, the person initiating the release of the goods for free circulation should collect the import VAT from the consignee and pay it to the tax authority. However, the above simplification may only be used by taxable persons registered in Hungary who initiate the release for free circulation and hold an authorisation for deferred payment of customs duties.
Under the above simplified import VAT payment, the rate of import VAT is 27% in all cases, regardless of the VAT rate applicable to the imported goods.
In addition, the tax exemption of consignments of a value up to EUR 22 has been abolished.
Platforms as new quasi-taxpayers
The rules effective as of 1 July 2021 treat platforms and online marketplaces as taxable persons acting as intermediaries in the supply of goods. This change primarily affects platforms, and taxable persons selling through these platforms, rather than the customers.
If certain criteria are met, platforms will qualify for VAT purposes as 'both the buyers and sellers of the goods'. These criteria include facilitating the distance sale of goods imported from a third country with a value not exceeding EUR 150 or facilitating the sale of goods already in the territory of the Community, provided that the seller is not established in the Community.
Under the new rules, taxable online platforms are required to record transactions that have been carried out for non-taxable persons with their participation in the territory of the Community. The purpose of this obligation is to make sure that taxes are paid on supplies of goods and services in electronic commerce. These records must be retained for ten years.
Group taxation for VAT
The VAT Act allows all companies that have established business presences in Hungary and qualify as related enterprises to form a VAT group. The essence of a VAT group is that its members act under a single VAT number in their transactions (i.e. they issue invoices under a shared VAT number and submit a single, joint tax return) and the supplies of products and services between the members do not qualify as business transactions from a VAT perspective.
Hungarian customs legislation and policies have been fully harmonised with EU legislation.
As of 1 January 2018, the EU customs legislation comprises the following main regulations:
- Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code.
- Commission Delegated Regulation (EU) 2015/2446 supplementing Regulation (EU) No 952/2013 of the European Parliament and of the Council as regards detailed rules concerning certain provisions of the Union Customs Code.
- Commission Implementing Regulation (EU) 2015/2447 laying down detailed rules for implementing certain provisions of Regulation (EU) No 952/2013 of the European Parliament and of the Council laying down the Union Customs Code.
- Commission Delegated Regulation (EU) 2016/341 supplementing Regulation (EU) No 952/2013 of the European Parliament and of the Council as regards transitional rules for certain provisions of the Union Customs Code where the relevant electronic systems are not yet operational and amending Delegated Regulation (EU) 2015/2446.
- Council Regulation 1186/2009/EEC setting up a Community system of reliefs from customs duty.
- Council Regulation 2658/87/EEC on the tariff and statistical nomenclature and on the Common Customs Tariff.
New national customs regulation entered into force as of 1 January 2018 (Act CLII 2017 on Implementing the Union Customs Law). Some of the main changes compared to the previous legislation are as follows:
- Procedural regulation became an integral part of the national customs law.
- The procedure of customs audit (e.g. right to comment on the customs authority’s assessment) changed.
- By the main rule, information (such as declarations, applications, or decisions) will be provided and exchanged electronically between the customs authority and economic operators.
As a general rule, non-compliance resulting in a customs shortfall attracts a customs penalty of 50% of the customs duty deficit.
The following goods are subject to excise duty:
- Mineral oils.
- Alcohol and alcoholic beverages. Any product with an alcohol content of 1.2% or more by volume qualifies as an alcohol product.
- Still and sparkling wines.
- Other still and sparkling fermented beverages.
- Intermediate alcoholic products.
- Tobacco products.
- Energy products (electricity, natural gas, and coal).
As of 1 July 2023, the excise duty rates are as follows:
- Fuels (petrol, jet fuel, gas oil [diesel]): HUF 110,350 to HUF 129,200 per thousand litres, depending on the world market price of crude oil and on the type of product.
- Heating oil: HUF 5,375 to HUF 116,000 per thousand kilogrammes, depending on the purpose of the usage.
LPG: HUF 0 to HUF 95,800 per thousand kilogrammes, depending on the purpose of the usage.
- Electricity: HUF 358.50/MWh.
- Coal: HUF 2,905 /1,000 per kilogramme.
- Natural gas: HUF 0.3492/kWh or HUF 32/nm3 depending on usage.
- Alcohol products: HUF 565,840 per hectolitre of pure alcohol. Special rules are applicable to spirits manufactured in private distilleries (duty free up to 86 litres/year) and contract distillation (0 HUF/hectolitre up to 50 litres/year).
- Beer: HUF 1,800 per alcohol degree and per hectolitre, HUF 900 per alcohol degree and per hectolitre for beer produced in a micro-brewery.
- Still wines: HUF 0 per hectolitre.
- Sparkling wines: HUF 18,100 per hectolitre.
- Other still fermented beverages: HUF 10,900 per hectolitre for other fermented beverages, HUF 0 per hectolitre for still wine of an actual alcoholic strength by volume not exceeding 8.5% volume mixed with carbonated water without added flavouring, where the ratio of still wine exceeds 50%.
- Other sparkling fermented beverages: HUF 18,100 per hectolitre.
- Intermediate alcoholic products: HUF 28,100 per hectolitre.
- Cigarettes: HUF 29,500 per thousand pieces and 24% of the retail selling price, but not less than HUF 41,800 per thousand pieces. The tax base per cigarette also depends on the length of the cigarette (without filter). It is double if the length of the cigarette is 8 cm to 11 cm, triple if the length is 11 cm to 14 cm, and so on.
- Cigars and cigarillos: 14% of the retail selling price, but not less than HUF 4,840 per thousand pieces.
- Fine-cut and other tobacco: HUF 25,960 per kilogramme.
- Refill liquid: HUF 33 per millilitre.
- Other consumables that contain tobacco or are consumed with tobacco: HUF 35 per piece; HUF 70 per millilitre for liquid.
- Smokeless tobacco products: HUF 25,960 per kilogramme.
- Smoking-substitute, nicotine-containing tobacco products: HUF 25,960 per kilogramme.
- Heated products: HUF 35 per piece (from 1 February 2023).
The European Union’s excise duty and energy tax rules apply in Hungary.
Building and land taxes
Hungarian municipalities have the right to levy building tax and land tax at their own discretion up to the below caps.
Residential and other buildings may be subject to building tax, which is payable to the local municipality by the entity/individual owning the building on 1 January of the particular calendar year. The building tax should be paid in two instalments, on 15 March and on 15 September each year.
The local government can determine the tax base in either of the following ways:
- The net floor space of the building expressed in square metres, with a maximum tax rate of HUF 1,100 per square metre; however, the municipalities have the right to increase it by the annual cumulative inflation rate (i.e. the maximum tax rate is HUF 2,018 per square metre in 2021).
- The adjusted fair market value of the building, with a maximum tax rate of 3.6% of the adjusted market value.
In practice, the net floor space method is more commonly used since establishing the adjusted fair market value is usually problematic.
The owner of the land on the first day of the calendar year is subject to land tax liability. Undeveloped plots of land situated within the area of jurisdiction of a local government, including peripheries, are subject to this tax. The land tax should be paid in two instalments, on 15 March and on 15 September each year.
The local government can determine the tax base in either of the following ways:
- The actual area of the plot expressed in square metres, with a maximum tax rate of HUF 200 per square metre; however, the municipalities have the right to increase it by the annual cumulative inflation rate (i.e. the maximum tax rate is HUF 367 per square metre in 2021).
- The adjusted market value of the plot, with a maximum tax rate of 3% of the adjusted market value.
The most common types of stamp duties are gift duty and duty on transfers of property for consideration. Stamp duty is levied on movable and immovable property and property rights if they were acquired in Hungary, unless an international agreement rules otherwise.
In general, gift duty arises on the date when a contract concerning a gift is concluded or, if there is no contract available, on the date when the acquisition without any considerations takes place.
Transfers of movable property, immovable property, and property rights without consideration are subject to gift duty. In these cases, however, in general, gift duty is only incurred if the transaction was formally documented; except for movable property with a market value of more than HUF 150,000, where gift duty must be paid in any event.
The base of the gift duty is the net value of the gift, which is the market value minus any liabilities related to the gift. The general duty rates vary, depending on the type of property: 9% on residential property and 18% on other assets (except vehicles, where special rules apply). In general, the transaction shall be reported to the national tax authority within 30 days.
Transfer of movable assets without consideration and acquisition of claims without consideration, including waiver of claims and assumption of debts, are exempt from gift duty, provided that the recipient is a company. However, this exemption is conditional and subject to review.
Duty on transfer of property for consideration
The obligation to pay duty on the transfer of certain defined movable and immovable property for consideration arises on the date when the contract on the transaction is concluded.
The acquisition of real estate, property rights, and the acquisition of existing direct or indirect shareholdings in companies that own domestic real estate are subject to transfer tax. In this latter case, transfer tax only applies for acquisitions of existing direct or indirect shareholdings of at least 75% in a company that owns domestic real estate. When calculating this threshold, the book value of properties acquired between the latest balance sheet date up to the date of the transfer shall also be added to the figures of the latest balance sheet.
The transfer tax for the acquisition of real estate property and the direct or indirect acquisition of shareholdings in real estate holding companies is 4% of the fair market value of the real estate owned up to HUF 1 billion and 2% of the amount exceeding HUF 1 billion, up to a maximum of HUF 200 million per real estate (i.e. per plot number).
Reduced rates of 2%/3% apply if the company acquiring the property qualifies as a real estate trading company, or it deals with financial leasing, and the property is sold/leased out within two years. REIFs and REITs may also benefit from a reduced transfer tax rate of 2%. Note that in the case of REIFs and REITs the above HUF 200 million cap per plot number cannot be applied.
Special rules apply to the sale/acquisition of real estate properties rezoned as incorporated lands or the sale/acquisition of shareholdings in an entity owning such lands.
Stamp duties are also levied on certain court procedures (e.g. Court of Registration) and on submissions to certain authorities (e.g. appeals to the tax authority). Stamp duty is, for instance, levied in an amount of:
- HUF 100,000 on the registration of a private stock company
- Free of charge on the registration of a limited liability company
- HUF 600,000 on the registration of a European stock company
- HUF 100,000 on the registration of any other entity with legal personality (except from European companies)
- HUF 50,000 on the registration of a branch office, and
- HUF 50,000 on the registration of a representative office.
According to the new rules, the transfer of real estate between related companies is exempt from the duty on the onerous transfer of property. Under the previous rules, the exemption was subject to the main activity of the acquiring party being the rental or operation of own or rented real estate, or the sale of own real estate. Under the new rules, the exemption is subject to having 50% of the sales revenue from the above-mentioned activities, or from one of them, representing 50% of the total sales revenue, instead of just being the core activity of the acquiring party on a certain date.
Registration tax is charged on passenger cars, motor homes, and motorcycles before they can be registered and put into service in Hungary. The registration tax is also payable by fleet operators. The registration tax is payable with the first domestic registration via import or intra-Community purchase, or in the case of a conversion, provided that the vehicle is put into service.
The registration tax rate is applied as follows:
- Passenger cars: From HUF 45,000 up to HUF 4.8 million, depending on the technical features of vehicles (cc, engine type) and environmental classification.
- Hybrid cars: HUF 76,000.
- Purely electrical vehicles, plug-in hybrid electrical vehicles, increased range plug-in hybrid electrical vehicles, and zero-emission vehicles: HUF 0.
- Motorcycles: From HUF 15,000 up to HUF 230,000, depending on technical features of the motorcycles (cc).
- Electric and hybrid motorcycles: HUF 0.
The applicable registration tax rate shall be modified (i.e. decreased) as per special formula, depending on the age of the vehicle expressed in months.
The registration tax is levied by the Customs Body of the National Tax and Customs Administration.
Employment-related tax and social security contributions (social tax) payable by employers
The social tax base is the gross income paid to the employee. The tax rate is 13%.
Mineral resources and geothermal energy, at the places where they are found in nature, are state property and subject to concession.
The mining company must pay a mining royalty, based on the quantity of the mineral resources extracted under authority permit.
According to the regulation on the extra-profit tax, the rate of the mining royalty will be increased for tax years 2022 and 2023. The mining royalty is calculated based on the value generated after the quantity of mineral raw material extracted under the official permit. The applicable rate is:
- 48% for crude oil and natural gas extracted from hydrocarbon fields put into production before 1 January 2008 (with the exceptions included in the Government Decree).
- 42% for natural gas sold at market price and extracted from hydrocarbon fields put into operation before 1 January 1998 (with the exceptions provided for in the Decree on extra-profit taxes).
- 36% for crude oil and natural gas extracted during the test phase of production from hydrocarbon fields put into operation after 1 January 2008.
In the case of natural gas extracted from hydrocarbon fields put into operation before 1 January 1998 and sold for the supply of universal service providers, the calculation and the amount of the mining royalty remains unchanged. Moreover, the Government Decree includes further derogations from Act XLVIII of 1993 on Mining. We note that the amount of mining royalty paid in the tax year reduces the amount of energy suppliers’ income tax payable up to a maximum of HUF 1.5 billion (up to the amount thereof).
Public health product tax
The first domestic distributor of certain products, as well as the acquirer of goods that are brought from abroad and used for the domestic manufacture of own products that will be sold in Hungary, are liable to pay a product tax.
The duty rates from 1 July 2023 are as follows:
- Beverages (depending on sugar content and tariff number): HUF 8 or HUF 23 per litre* (HUF 105 or HUF 310 per litre* for syrups and concentrates).
- Energy drink (depending on tariff number, methyl-xanthine, and taurine content): HUF 65 or HUF 390 per litre.
- Cocoa powder with added sugar (depending on tariff number, sugar, and cocoa content): HUF 40 or HUF 110 per kilogramme*.
- Other pre-packed product with added sugar (depending on tariff number, sugar, honey, and cocoa content): HUF 65 or HUF 210 per kilogramme*.
- Salty snacks (depending on tariff number, ingredients, and salt and sugar content): HUF 65, HUF 90, or HUF 390 per kilogramme.
- Seasonings (depending on tariff number and salt content): HUF 390 per kilogramme or litre.
- Flavoured beer and alcoholic beverages (depending on tariff number and sugar or sweetener content): HUF 10 or HUF 33 per litre*.
- Fruit jam (depending on tariff number and sugar content): HUF 260 or HUF 780 per kilogramme*.
- Delicacies (depending on tariff number and sugar content): HUF 65 or HUF 210 per kilogramme*.
- Pre-packaged sweet or savoury pasta (depending on tariff number and sugar or salt content): HUF 65 or HUF 210 per kilogramme*.
* Depending on sugar and sweetener content.
Taxpayers are allowed to deduct up to 10% of their tax liability to finance ‘health promotion programs’. As of 1 January 2019, ‘health promotion programs’ only mean activity, promotional campaign, and program of the government body in charge of the healthcare system. Programs organised by a taxpayer cannot be a basis for deduction anymore.
Environmental protection product fee
The following products are subject to the environmental protection product fee: other crude oil products, tyres, packaging materials, batteries, commercial printing paper, other plastic products, other chemical products (soaps, detergents, cosmetics), printing or copy paper for office use, and electrical and electronic products (based on customs tariff numbers applicable on 1 January 2023).
The following entities are liable to pay the product fee:
- The first domestic distributor or user for own purposes.
- In the case of domestically manufactured other crude oil products, the first buyer from the first domestic distributor or user for own purposes.
- In the case of toll manufacturing, the party that orders the toll manufacturing.
- The first domestic supplier of imported intermediate packaging materials subject to product fee, or the first domestic holder of packaging waste from dismantled packaging.
- The obligor entering the taxable products into inventory.
Product fee rates from 1 July 2023 are as follows:
- Tyres: HUF 57 per kilogramme.
- Packaging materials: HUF 19 to HUF 1,900 per kilogramme.
- Other crude oil products: HUF 114 per kilogramme.
- Batteries: HUF 57 per kilogramme.
- Paper-based advertisement materials: HUF 85 per kilogramme.
- Electrical and electronic products: HUF 57 per kilogramme.
- Printing or copy paper for office use: HUF 19 per kilogramme.
- Other plastic products: HUF 1,900 per kilogramme.
- Other chemical products: HUF 11 to HUF 57 per kilogramme.
When calculating the environmental protection product fee liability from Q1 2023 the EPR fee rates (see below) will be deductible from the environmental protection product fee rates for products that are subject to both obligations.
The Tax Body of the National Tax and Customs Administration controls the payment and reporting of the product fee and carries out product fee inspections. The product fee is self-assessed. The product fee returns must be submitted quarterly to the tax authority via its electronic system. An advancement payment is payable for the fourth quarter.
The product fee penalty is generally 100% of the product fee shortfall in cases of non-payment or underpayment.
Extended Producer Responsibility (EPR)
In the framework of EPR, as a general rule, the obliged entities must pay an EPR fee to finance the management of waste from ’circular economy products‘ they put on the market or use for their own purposes (‘collective fulfilment’).
EPR fee rates from 1 July 2023 are as follows:
- Plastic packaging: HUF 219 per kilogramme.
- Paper and cardboard packaging: HUF 173 per kilogramme.
- Metal packaging: HUF 186 per kilogramme.
- Other packaging: HUF 129 per kilogramme.
- Wooden packaging: HUF 19 per kilogramme.
- Textile packaging: HUF 67 per kilogramme.
- Glass packaging: HUF 77 per kilogramme.
- Composite packaging: HUF 168 per kilogramme.
- Single-use and other plastic products: HUF 113 per kilogramme.
- Temperature exchange equipment: HUF 116 per kilogramme.
- Screens, monitors, and equipment containing screens with a surface area greater than 100 cm2: HUF 362 per kilogramme.
- Lamps: HUF 306 per kilogramme.
- Large equipment (any external dimension more than 50 cm): HUF 124 per kilogramme.
- Photovoltaic panel (any external dimension more than 50 cm): HUF 63 per kilogramme.
- Small computer and telecommunications equipment (no external dimension more than 50 cm): HUF 261 per kilogramme.
- Portable battery, accumulator: HUF 160 per kilogramme.
- Industrial battery, accumulator: HUF 239 per kilogramme.
- Vehicle battery, accumulator: HUF 238 per kilogramme.
- Vehicle: HUF 21 per kilogramme.
- Tyre: HUF 137 per kilogramme.
- Office paper: HUF 128 per kilogramme.
- Paper-based advertisement: HUF 94 per kilogramme.
- Frying oil and fat: HUF 36 per kilogramme.
- Textile products: HUF 145 per kilogramme.
- Wooden furniture: HUF 17 per kilogramme.
The regulation will set significantly higher rates than the current environmental protection product fee rates for almost all material and product streams. Although this will result in a significant reduction (even to zero) of the product fee liability for the products concerned (as the per-unit EPR fee rate will be deducted from the per-unit product fee rate), the overall cost will be much higher.
The relevant ’circular economy products‘ are listed by customs tariff number for the last six product groups, while in the case of packaging, electrical and electronic equipment, batteries and accumulators, and motor vehicles, the products defined in a separate government decree for the given product group will fall under the scope of EPR.
The obligation also extends to ’circular economy products‘ placed on the market or used for own purposes as accessories or components of other products.
Transactions subject to the obligation
The obligation to pay the EPR fee is triggered by the following activities:
- The first domestic sale and free transfer.
- Sales from abroad to domestic households or other users via distance selling.
- Removal from a VAT warehouse or product fee warehouse to the domestic territory.
- Own use (including the final separation of packaging from the product brought into Hungary from abroad, except for reusable packaging brought back from abroad owned by a domestic entity, if the EPR fee has not yet been paid for the packaging).
Sales abroad are not subject to the EPR obligation.
Manufacturers established abroad who place a ’circular economy product‘ on the market by means of distance selling are required to fulfil their obligations through an authorised representative with a Hungarian tax number.
Besides the EPR fee payment, the responsible entities will have administrative obligations, such as registration, record-keeping, data submission, and invoice text requirement.
Environmental load charges
Environmental pollution charges were introduced to protect the natural environment, to reduce its impairment, to encourage the users of the environment to engage in activities aimed at the preservation of the natural environment, and to provide funding from the central budget for environmental protection and nature preservation.
Emitting entities liable to pay charges include those who operate air point-source emitters that are subject to registration, pursue activities subject to a water right permit, or who do not use available public drainage systems and dispose of their sewage water under a water right permit or a permit from the local water management authorities.
Qualifying materials include sulphur dioxide, nitrogen oxides, mercury, phosphorous, cyanides, and others.
The load charge is calculated on the basis of the quantity of emitted materials multiplied by the fee rate (and, in certain cases, by vulnerability and sludge disposal factors, taking into account average concentration). Basically, the amount of the fee payable depends on the hazard level of the emitted material (e.g. HUF 50 per kilogram for sulphur-dioxide).
Food chain supervision fee
The purpose of the food chain supervision fee is to raise revenue for the operation of a regulatory body tasked with the official supervision of the food chain.
The supervision fee is payable by the following natural persons, legal persons, or unincorporated organisations:
- Persons who place animals on the market that are kept for food production, breeding, or experimental purposes.
- Persons who place food or fodder crops, seeds, plant products, and planting material on the market.
- Registered or authorised food businesses.
- Registered or authorised feed businesses.
- Persons who manufacture or place on the market veterinary medicines or veterinary medicinal products.
- Persons who manufacture or place on the market ‘EEC fertiliser’ or other products subject to authorisation.
- Persons involved in the handling, use, further processing, and transport of animal by-products or placing derived products on the market.
- Businesses engaged in the transport of live animals.
- Persons operating facilities for the cleaning and disinfection of vehicles used for transport of live animals, isolation facilities for receiving animals from different stocks, livestock loading ramps, assembly centres, trading sites, feeding and watering stations, rest stations, and livestock fairs.
- Persons manufacturing and storing plant propagation material.
- Persons operating a registered or authorised laboratory.
- Persons placing devices on the market that are used for marking animals.
As of 16 June 2017, any person who is not established in Hungary, but nevertheless engaged in the pursuit of the activities defined by the Food Chain Act, has a FELIR identifier, and is registered by the state tax authority as a taxpayer liable for payment of VAT, is liable to declare and pay the supervision fee.
As the main rule, the annual supervision fee is 0.1% of the total trading revenue (excluding excise duty and public health product tax) derived in the preceding year from these activities.
The taxpayers concerned have to comply with their reporting obligation by 31 May. The annual supervision fee is payable in two equal instalments: the first instalment by 31 July, and the second by 31 January.
The telecommunication tax applies to telecommunications service providers. The telecommunication tax rate for private individuals is HUF 2 per minute for calls made and HUF 2 per message sent, and for parties other than private individuals is HUF 3 per minute for calls made and HUF 3 per message sent. The monthly cap for calls and sent messages together is HUF 700 per phone number for private individuals and HUF 5,000 per phone number for parties other than private individuals.
Pursuant to the relevant section of the Government Decree on extra-profit taxes, telecommunication service providers will become subject to telecommunication surtax payment in 2022, 2023, and 2024 based on their gross sales revenue (i.e. the tax base of LBT) using progressive scale rate. The amount of surtax in case of an HUF 100 billion tax base roughly equals the LBT, while for the exceeding amount it is more than three times that amount. Due to the progressivity, the gross sales revenue of the Hungarian affiliated companies shall be calculated together in certain cases. Taxpayers shall pay tax advance once a year; otherwise, the final amount of tax will be settled the same way as the CIT.
According to the legislation, telecommunication service provider is a natural person, legal entity, or other organisation entitled to provide publicly available telephone services in Hungary (including services enabling sending messages) provided through an electronic telecommunication network.
Tax on financial transactions
Payment service providers, credit institutions entitled to provide foreign currency services, special services intermediaries entitled to provide intermediated foreign currency services, and financial institutions that engage in the granting and negotiation of credit and cash loans but do not qualify as payment service providers with a registered seat or branch office in Hungary are subject to tax on financial transactions.
The financial transaction tax applies to the following payment services:
- Bank transfers.
- Direct debits.
- Postal cash payments.
- Cash payments from payment accounts (including cash withdrawals using a credit card).
- Cash transfers.
- Bank card payments.
- Letters of credit.
- Cashing cheques.
- Foreign currency exchanges.
- Debt repayments.
- Commissions and banking fees.
- Other transactions in which the amount of the transaction is deducted from the payment account credit balance.
If certain conditions are fulfilled, no tax will be payable for transactions such as:
- Technical transfers between accounts held at the same bank, provided that the owner is the same.
- For investment services, transfers between the payment account and the client account, provided that certain conditions are met.
- Payments from limited purpose accounts.
- Cash pool related payment transactions within the same financial service provider.
- Transactions between financial service providers (including, among others, financial institutions, investment companies, etc.).
- Payment transactions from social security and family allowance administrative accounts.
- Unapproved (or approved but incorrectly made) payment transactions and their corrections.
In general, the tax base is the amount of the transaction (debit amount, amount paid, amount of currency sold, etc.). In the case of private individuals, the tax base is the amount of the transaction exceeding HUF 20,000. In most cases, the tax rate is 0.3% of the transaction but the amount payable may not be more than HUF 6,000 per transaction. This cap is not applicable to transactions in which the duty is payable by Magyar Posta Zrt, or in case of cash withdrawal. In the case of (card) payment transactions initiated by the payer through the payee, a flat-rate tax of HUF 800 per year is payable. Also, if such payment includes transactions executed with the use of a contactless payment feature, the duty payable is reduced to HUF 500 per year.
The regulation on the extra-profit surtax expands the scope of transactions subject to the financial transaction tax. Investment firms, as well as credit institutions, will become taxable after the purchase of a financial instrument specified in Act CXXXVIII of 2007 on Investment Firms and Commodity Dealers, and on the Regulations Governing their Activities (“Bszt.”) Section 6 a) –c) with an ISIN code issued by KELER Central Depository Private Limited Liability Company for the benefit of a client account or own account. The tax base is the value of the financial instrument that is the subject of the transaction and has been credited to the customer's account, and the tax rate is the 0.3% of the tax base (maximum of HUF 10,000 per transaction). The tax liability arises upon the financial completion of the transaction, and taxpayers are required to declare and pay the tax by the 20th day of the month following the relevant month (for the first time by 20 September 2022). The purchase of a financial instrument is exempt from tax if the investment service is provided by the Hungarian State Treasury or the institution operating the Postal Clearing Center.
Persons performing money transmission service, credit and loan operation, currency exchange activity, and currency exchange intermediation services in Hungary as cross-border services will also be required to pay a financial transaction fee. If these persons become taxable persons by 1 July 2022, they must request their registration as taxpayers with the Hungarian Tax and Customs Authority by 1 September 2022. If the foreign person becomes a taxpayer after 1 July 2022, the application for registration will have to be submitted by the first day of the month following the month in which the foreign person became a taxpayer.
Special tax of financial institutions
In Hungary, there is a special tax levied of financial institutions. The tax base of credit institutions is the amended balance sheet total figure calculated from the financial statements of the second tax year preceding the current tax year. However, in the case of other financial institutions, the tax base comprises the interest income and income from fees, charges, and commissions. From 2019, the tax rate is decreased from 0.21% to 0.2% of the tax base exceeding HUF 50 billion in case of the credit institutions. Below HUF 50 billion, the tax rate is 0.15%. The applicable tax rate for financial enterprises is 6.5%.
With effect from 2022, venture capital fund managers and stock exchanges are exempted from the special tax liability of financial institutions.
According to the regulation on the extra-profit tax, credit institutions and financial enterprises will be required to pay surtax in 2022, 2023, and 2024 based on their net sales revenue specified in Act C of 1990 - on Local Taxes ('Act on Local Taxes'). The tax base should be determined in different ways depending on the tax year.
In 2022, the tax base of this tax liability is based on the net sales revenue of the preceding tax year of the tax year in question, meaning that the 2022 tax base will be the 2021 net sales revenue.
When determining the tax liability for the year 2023, a separate tax base must be created for the period from 1 January 2023 to 30 June 2023 and a separate tax base for the period from 1 July 2023 to 31 December 2023:
- For the period from 1 January 2023 to 30 June 2023, the taxable amount is the net sales revenue determined on the basis of the annual accounts for the tax year preceding the tax year (i.e. 2022), as defined in 'Act on Local Taxes', of which 50% must be taken into account.
- For the period from 1 July 2023 to 31 December 2023, the taxable portion of the tax base must be determined on the basis of the pre-tax profit of the tax year preceding the tax year (i.e. the tax year 2022) instead of the net sales revenue.
For the tax year 2024, the tax base must be determined on the basis of the pre-tax profit of the tax year 2022.
The tax rate will be 10%; however, the tax rate is also calculated differently for the two parts of the tax base. The tax rate for the part of the tax base determined for the first half of 2023 is 8%, while for the part of the tax base determined for the second half of 2023, a bracketed tax liability is introduced, which means that:
- the tax rate for the part of the tax base not exceeding HUF 10 billion is 13%, and
- the tax rate for the amount above this limit is 30%.
These regulations shall be applied by credit institutions and financial enterprises first for the tax year beginning after 31 December 2021 that includes 1 July 2022. In 2022, the surtax shall be declared by 10 October 2022. In 2023, the surtax shall be declared by 10 June 2023. The tax is payable in two equal instalments in 2022 and three equal instalments in 2023 (10 October 2022, 10 December 2022, 10 June 2023, 10 October 2023, and 10 December 2023). The accounting treatment of this tax liability could cause difficulties for taxpayers, especially for those who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS). The reason for this is that the tax base, the net sales revenue specified in the Act on Local Taxes, allows the deduction of several cost items, such as the interest liability, in addition to certain revenues. In case the taxpayers deem this new surtax as income tax, in lack of other provisions, the amount of tax liability will not be deductible from the CIT base, unlike the LBT and the innovation contribution.
The detailed rules regarding the special tax of financial institutions were published on 8 December 2022 in the Hungarian Official Gazette. According to the rules, the special tax of financial institutions does not have to be paid in the following two cases:
When one provided its services as a cross-border service from its registered office in Hungary in the two tax years preceding the tax year.
When at least two-thirds of one's annual net fee and commission income and net interest income in the second tax year preceding the tax year comes from foreign currency clients.
Insurance premium tax
Insurance premium tax is applicable on (i) voluntary vehicle liability insurance policies (CASCO), (ii) property and casualty insurance policies, and (iii) the mandatory vehicle liability insurance (former accident tax) in Hungary.
The insurance tax should be paid by the insurance companies after the gross insurance premium received on insurance policies insuring risks located in Hungary. Insurance companies subject to tax include:
- insurance companies headquartered in Hungary
- foreign insurance companies’ Hungarian branches, or
- insurance companies providing cross-border insurance services if these entities, which are headquartered abroad, render taxable insurance services in Hungary.
The above-mentioned entities should apply three different tax rates. For voluntary vehicle liability insurance policies, the tax rate is 15%; for property and casualty insurance, the tax rate is 10%; and for the mandatory vehicle liability insurance, the tax rate is 23% (capped at HUF 83/day/vehicle).
In the case of the tax base deriving from insurances mentioned in points (i) and (ii), lower tax brackets may apply if the taxpayer’s tax base is less than HUF 8 billion.
We note that this tax should not be paid after life and health insurance.
According to the regulation on the extra-profit tax, insurance companies are required to pay additional insurance surtax between 1 July 2022 and 31 December 2024. The tax base of the surtax is the insurance fee of the various insurance services performed. The tax rates will be as follows over the next year and a half in respect of the insurance services specified in Act CII of 2012 on Insurance Tax ('Act on IT') and in Annex 2 of Act LXXXVIII of 2014 on the Business of Insurance ('Act on BoI'):
|Tax base (HUF)||Tax rate (%)|
|Activity based on Act on IT||Activity based on Act on BoI|
|Up to 1 billion||4||2|
|Between 1 billion and 18 billion||8||3|
|Over 18 billion||14||6|
|Tax base (HUF)||Tax rate (%)|
|Activity based on Act on IT||Activity based on Act on BoI|
|Up to 2 billion||2||1|
|Between 2 billion and 36 billion||4||1.5|
|Over 36 billion||12||5|
With the introduction of the new type of surtax, tax advance rules will also apply to insurance companies, in connection with which insurance companies will be required to file a tax advance statement by 30 November 2022 and 31 May 2023. The effective surtax must be declared and paid by 1 January 2023 and 1 January 2024. Taxpayers that become affiliates due to a spin-off or demerger after 1 July 2022 shall jointly determine their tax base, and then their tax liability shall be distributed among the individual taxpayers in proportion to their tax bases.