Taxation in Hungary
Taxation in Hungary is levied by both national and local governments. Tax revenue in Hungary stood at 38.4% of GDP in 2017. The most important revenue sources include the income tax, Social security, corporate tax and the value added tax, which are all applied at the national level. Among the total tax income the ratio of local taxes is solely 5% while the EU average is 30%.
Income tax in Hungary is levied at a flat rate of 15%. Additionally there are two others contributions levied on income, a "social security contribution" of 18.5% and an "employer's tax" of 13%. Thus the effective income tax is a flat rate of 46.5%. A tax allowance is given through a family allowance, which is equal to the allowance multiplied by the number of "beneficiary dependent children". For one or two children the allowance is HUF 62,500 per child, for three or more HUF 206,250 per child. The allowance can be split between spouses or life partners.
In 2025, young people will be exempt from personal income tax until the age of 25, which can mean an annual maximum of HUF 1,146,000 in income tax contributions. The same relief applies to mothers under 30. Mothers who have raised or are raising at least four children and have been entitled to family allowances for a minimum of 12 years will benefit from a lifetime exemption. On 22 February 2025, the government announced that mothers with two or three children would receive a full lifetime income tax exemption.
The standard rate of value added tax is 27% as of January 2012 — the highest in the European Union. There is a reduced rate of 5% for most medicines and some food products, and a reduced rate of 18% for internet connections, restaurants and catering, dairy and bakery products, hotel services and admission to short-term open-air events.
In January 2017, corporate tax was unified at a rate of 9% — the lowest in the European Union. Dividends received are not subject to taxation, provided that are not received from a Controlled Foreign Company. Capital gains are included in corporate tax, with certain exemptions.
Capital gains are taxed at a flat rate of 15%.