Hungary
A prominent importing and exporting economy, Hungary is one of the world’s leading destinations for foreign investment: its capital city, Budapest, has become a regional and international business hub and one of the fastest-developing urban economies.
Being a key player in global trade, Hungary attracts significant investment with its dynamic economy entered around automotive, manufacturing, & IT industries.
1. Introduction to Hungary
2. Setting Up a Business
3. Employment Practices
4. Taxation & Social Security
5. Payroll Operations
6. Hiring & Termination
7. Compensation & Benefits
8. Visas & Work Permits
9. Location-Specific Considerations
1. Introduction to Hungary
Investing in Hungary
The government welcomes foreign investment and has an array of financial incentives to attract foreign capital. Some of the major industries in Hungary include mining, metallurgy, construction materials, processed foods, textiles, chemicals, especially pharmaceuticals and motor vehicle production. One of the most important industries is automobile manufacturing and in 2005, the Association of Hungarian Automotive Industries estimated the automobile industry to be worth €8 billion.
Additionally, Hungary is one of the world's leading producers of information technology equipment with exports of more than $19 billion in 2006. This places Hungary behind only giants such as the US, China, France and a select few others that produce more in IT equipment each year.
Hungary has a highly educated workforce where nearly 70% of college-age individuals are enrolled in tertiary school. Additionally, Hungary’s is rated at a 4.2 out of 5 on the World Bank’s governance scale, meaning it is the most stable and least corrupt government in Eastern Europe.
Basic Facts about Hungary
| Full Name | Hungary |
| Population | 9.77 million (Eurostat, 2019) |
| Capital | Budapest |
| Major Language(s) | Hungarian |
| Major Religion(s) | Christianity |
| Monetary Unit | Hungarian Forint (HUF) |
| Main Exports | Machinery, transport equipment, foodstuffs, chemicals |
| GNI Per Capita | USD $29,860 (World Bank, 2018) |
| Internet Domain | .hu |
| International Dialing Code | +36 |
Common Phrases
Hello: Helló / Szia
Good Morning: Jó reggelt
Good Evening: Jó estét
Do you speak English?: Beszélsz angolul?
Goodbye: Viszontlátásra / Szia
Thank you: Köszönöm
See you later: Később találkozunk / Viszlát
2. Setting Up a Business
Registrations, Establishing an Entity and Company Gate
To employ an individual in Hungary, the company needs to register for a tax number for their legal entity in Hungary. However, the labour contract can be established between a company and employee in Hungary whilst this process takes place. The legal procedure for a company registration takes approximately 1–2 days.
It is mandatory for economic organizations in Hungary to communicate electronically with the state authorities as well as to arrange the pertaining submission and reception of documents via official platforms.
For the fulfilment of this obligation, the state provides the economic organizations with the so-called “Company Gate” (in Hungarian “Cégkapu”) service. The company gate is a free storage space that allows contact between the organizations and state organizations providing electronic administration, as all deliveries are sent to the secure, authentic storage space as required by the economic organization.
The company gate is actually a common electronic mailbox for companies/economic organizations where all concerned and authorized individuals can have access to the official correspondence/tax account extract/submitted returns of the given company or organization.
Banking
It is not mandatory to make payment to employees and authorities from an in-country bank account.
3. Employment Practices
Working Week
The working week in Hungary is Monday to Friday. The working day for commercial offices is usually eight hours, typically from 08:00 or 09:00 to 16:30 or 17:30. Lunch breaks range from half an hour to one hour.
Employment Law
Holiday Entitlement
Employees are entitled to a minimum of 20 days of annual paid leave. This increases according to age as follows:
| Age | Additional Days |
| 25–28 years | 1 day |
| 28–31 years | 2 days |
| 31–33 years | 3 days |
| 33–35 years | 4 days |
| 35–37 years | 5 days |
| 37–39 years | 6 days |
| 39–41 years | 7 days |
| 41–43 years | 8 days |
| 43–45 years | 9 days |
| 45+ years | 10 days |
Additionally, employees with children are entitled to extra leave days:
- One child: 2 days
- Two children: 4 days
- Three or more children: 7 days
Maternity Leave
Maternity leave is 24 weeks. The mother must take 4 weeks before the expected delivery date. During this time, she is entitled to 70% of her average earnings under the CSED (Child Care Fee) scheme.
After maternity leave, parents can take additional leave called GYED (Child Care Benefit), which is paid at 70% of average earnings, up to a monthly cap.
Annual Leave
Minimum of 20 working days per year
Age-based increases: from age 25, rising incrementally to a maximum of +10 days by age 45
Additional days for personal circumstances:
Under‑18s: +5 days
Parents with children under 16: +2 (1 child), +4 (2 children), +7 (3+ children) (
Scheduling rules:
Must allow at least 14 consecutive days per year and grant 7 days at the employee’s request
Leave generally expires in-year, but limited carryover is allowed under specified conditions
Paternity Leave
Fathers are entitled to 10 working days of paid paternity leave within 2 months of birth/adoption
1st–5th day: paid at 100% of salary.
6th–10th day: typically paid at 40%
If receiving multiple births (twins, etc.), fathers receive 7 days at 100%
Sick Leave & Pay
Employees are entitled to 15 working days of paid sick leave per calendar year
During this period, the employer pays 70% of the employee’s normal absence allowance (e.g. salary + allowances)
After 15 days, sickness benefits are covered by social security and/or employer, depending on the case
National Service
Hungary does not currently require mandatory military or national service.
4. Taxation & Social Security
Income Tax
The personal income tax rate in Hungary is 15%. Employers are responsible for withholding this amount on a monthly basis. All employees must have a Tax Identification Number (TIN) and must be registered with the Tax Authority.
Social Security Contributions
Employers are responsible for deducting and paying Social Security Contributions. The employer’s contribution rate is 13% and the employee’s contribution rate is 18.5%. This includes pension insurance, health insurance and labor market contributions.
Contributions are to be paid monthly by the 12th of the following month. Payments are to be made to the Hungarian State Treasury.
Summary:
- Income Tax: 15% (employee)
- Social Security: 13% (employer), 18.5% (employee)
5. Payroll Operations
Payroll
It is acceptable in Hungary to issue online payslips. Employees must receive a detailed payslip showing the gross pay, deductions and net salary.
Payroll records must be retained for a maximum of 3 years. Documents received prior to 31st December, 2024 can be retained for 5 years after the employee reaches retirement age.
Reporting
Monthly
Employers are required to submit a monthly tax return by the 12th day of the month following the payment. The report must include the withheld personal income tax and social security contributions.
Reports must be submitted via the electronic tax system.
Annual
At year end, employers are required to submit an annual tax certificate to both the employee and the tax authority by the 31st of January of the following year. This certificate includes the total income paid and tax withheld during the year.
6. Hiring & Termination
New Employees
New start will be required to register with the tax authorities. The registration will be done through NAV (National Tax Authority).
The new start must be registered at least one day before the commencement of his/her work, the earlier the better.
The following information is required when setting up a new start:
- Full name
- Address
- Date of birth
- Place of birth
- Mother’s full birth name
- Tax card number
- Social security (TAJ) number
- Social security booklet (Pink booklet)
- Pension number and declaration (only in case of a pensioner)
- Bank a/c
- Employer’s name
- Gross salary
- Starting date
- Type of contract
- Position
- Activity/Job code nr. (FEOR)
- Exit documents from the previous employer
Leavers
Upon termination of employment, the employer must:
- Prepare a termination document that includes reason and date of leaving
- Provide the employee with a certificate of employment
- Submit a report to the social security authority indicating the end of employment
- Provide the final payroll and ensure all outstanding amounts are settled
7. Compensation & Benefits
Employee Benefits
Fringe Benefits – Cafeteria System
Hungarian employers commonly use a “cafeteria system” to provide non-cash employee benefits in a tax-advantaged and flexible way. Employees select from a predefined menu of eligible benefits up to an annual employer-set budget.
Most Common Tax-Favoured Cafeteria Elements (2025)
- SZÉP Card (Széchenyi Recreation Card):
- Covers hospitality, accommodation, and leisure spending.
- Tax-advantaged annual limits:
- HUF 450,000 total (divided among sub-accounts).
- + HUF 120,000 for “Active Hungary” sub-account (new addition).
- Tax rate: 28% (15% personal income tax + 13% social contribution by employer).
- Above limit: Taxed at 33.04%.
- Cultural and Sports Event Tickets:
- Up to the amount of one monthly minimum wage per year.
- Must be provided directly by the employer.
- Fully tax-exempt.
- Public Transport Passes:
- 100% tax-free when directly paid or reimbursed by the employer.
- Remote Work/Teleworking Allowance:
- Tax-free up to 10% of the monthly minimum wage for remote work compensation.
- Vaccinations and Health Screenings:
- Some employer-funded health services (e.g. flu shots) remain tax-free if occupational health–related.
No Longer Tax-Privileged (Since 2019 Reform)
- Erzsébet Vouchers (for food)
- Voluntary pension fund contributions
- Voluntary health fund contributions
- Local travel reimbursement (non-pass)
- These are now treated as regular wage income and taxed at full rates (33.04% employer-side).
Reimbursement of Expenses
Reimbursement of work-related expenses such as travel and accommodation are not taxable if adequately documented and directly related to work purposes.
8. Visas & Work Permits
EU Nationals
Citizens of the EU, EEA and Switzerland do not require a work permit. However, if the employee remains in Hungary longer than 90 days, they must register with the Immigration Authority and obtain a registration certificate.
Non-EU Nationals
Foreign employees from outside the EU must apply for a combined residence and work permit (“single permit”) before entering Hungary, unless exempt. This is typically done via the Hungarian consulate or embassy in their country of residence.
The application must be supported by the employer and include:
- Employment contract
- Job description
- Certificate of education
- Proof of accommodation
- Health insurance
- Passport copy
- Visa application form
- Labour demand notification (if required)
Processing can take up to 70 days.
The work permit is typically valid for 2 years and can be renewed.
9. Location-Specific Considerations
Location-Specific Considerations
Company Gate (Cégkapu)
A mandatory, government-provided secure digital mailbox for communication between businesses and Hungarian authorities. All tax returns and official correspondence are managed through this platform.
Further Information
For more information, or assistance with Hungary tax enquiries please contact: gi@activpayroll.com
About This Payroll and Tax Overview
Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.
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