In Hungary the tax year is the calendar year. Generally, income is taxed in the year in which the payment or non-cash benefit is actually received.
Returns must be filed for each tax year by 20 May of the following year. In some cases, the taxpayer can request a quasi extension up to 20 November. However, it is necessary to send this request to the Hungarian tax authorities by 20 May.
All individuals must file separate returns (i.e. husbands and wives cannot file joint returns).
Hungary operates a system of self-assessment of tax. Consequently, individuals can prepare and file their tax returns themselves or review the draft tax returns prepared by the Hungarian tax authority and amend it if necessary.
The Hungarian tax authority prepares draft tax returns based on the date available for them. We note that these draft tax returns may not necessarily include all income that the persons concerned are required to declare. This is because the draft tax returns will be based on data (e.g. on wages paid by a Hungarian-based employer) that is reported to the tax authority during the year. However, not all items of income are subject to interim reporting. Consequently, the draft tax returns should be carefully reviewed and corrected or supplemented if necessary.
Payment of tax
Under the general rules, income tax is withheld from salaries and most investment income received from Hungarian payers. For income from non-Hungarian sources, individuals must pay income tax themselves. Taxpayers with income that is not subject to withholding must generally make quarterly tax advance payments (for employment income). Payers are required to report total payments, including benefits and expenses paid or reimbursed (employment income), to the tax authority.
The taxable income and the tax liabilities should be determined and declared in Hungarian forints. There are specific rules to determine the Hungarian forint exchange rate against other currencies.
Late payment penalty is charged on overdue payments if the tax payments are made after the deadline. The annual rate of interest is twice the official rate of the National Bank of Hungary (currently 2 x 0.9% per annum). The late payment penalty is calculated by the Hungarian tax authority on a daily basis.
The tax authority may also levy a tax penalty on taxpayers who claimed any subsidies or tax refunds without eligibility. Penalties in these cases are levied based on the amounts claimed without eligibility.
Statute of limitations
The statute of limitations for tax returns (i.e. the period during which they can be audited by the tax authority) is five years, starting on 31 December of the year when the return has to be filed (i.e. the period for 2018 Hungarian tax returns, due by 20 May 2019, expires on 31 December 2024).