About the personal Income Tax

Every private person resident in Hungary is subject to tax liability in respect of all their income earned in Hungary or comes from abroad.

In Hungary the tax year is equal the calendar year.

Taxable income in Hungary:

Except some exemptions provided by law, all types of incomes of private individuals are subject to income tax. In the case of private individuals, the Hungarian Personal Income Tax Act (PIT) separates the following categories of income:

• incomes to be consolidated; these are incomes from self employment, employment and other incomes to be consolidated
• separately taxed incomes (benefits, capital gains, income derived from private business or rental income).

In Hungary the personal income tax is flat-tax, the rate of it is 16%, since 2011.

Tax-exempt incomes

The tax-exempt benefits are listed in the PIT. Among others such incomes and benefits include:

• some forms of state support for fostering and raising a minor,
• scholarships paid by non residents to students studying in a foreign educational institution or researchers working abroad,
• certain services of insurance companies,
• pension.

Income from activities other than self-employment

Income derived from non-independent activity can be salary from employment, income from activity of acting as leader of an economic organisation, and activities of the private individual who is an owner of a company.

Income from activities other than self-employment includes salary and remuneration received by private individuals in payment for such activities, and income paid as personal participation and for activities as senior officers and elected office-holders.

As rule, these costs cannot be deducted from the tax base.

Income from self-employment activities

As a main rule, outside the framework of one-man businesses, income from independent professional activity shall be calculated as the difference of all revenues and expenditures. Private individuals with an independent professional activity including primary agricultural producers, lessors of property, appointed auditors as well as members of the European Parliament, the Parliament and of local authorities.

The taxpayer can choose between the two options of cost accounting:

• actually arising costs,
• 10% of revenues can be regarded as cost accounting

  Within one fiscal year only one way of cost accounting can be applied. Income from royalties at its original holder is taxed in accordance with the rules applicable to income from self-employment activities. Primary agricultural producers can, just like individual entrepreneurs, choose flat rate taxation.

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