Hungary

The history of Hungary dates back millennia, and involves a diverse heritage which reflects the successive rule of Celtic, Roman and Slavic societies.

In the 9th century, the sovereign state of Hungary was founded by Grand Prince Arpad, and was subsequently ruled by a range of powers, including the Ottoman Empire, and the Hapsburg dynasty, which later established the Austro-Hungarian Empire.

Modern Hungary was governed by the Soviet Union in the latter half of the 20th century, but became a democratic, parliamentary republic in 1989, and subsequently a member-nation of the European Union,. NATO and the United Nations. 

Complementing its cultural history, is Hungary’s diverse geography: two major rivers, the Danube and the Tisza define much of the country’s landscapes, cutting through a spectrum of environments including flat, grassland, plains, lakes, and low, rolling mountains.

Hungary enjoys a continental climate: hot summers attract holidaymakers and tourists, while winters can be extremely harsh, with cold temperatures and heavy snowfall.

General Information

• Full Name: Hungary
• Population: 9.643 million (World Bank 2022)
• Capital: Budapest
• Major Language: Hungarian
• Major Religion: Christianity
• Monetary Unit: Forint
• Main Exports: Machinery and transport equipment, foodstuffs, chemicals
• GNI per Capita: US $19010 (World Bank, 2022)
• Internet Domain: .hu
• International Dialling Code: +36

How Do I Say?

• Hello: Helló
• Good morning: jó reggelt
• Good evening: jó estét
• Do you speak English?: Beszélsz angolul?
• Good bye: búcsú
• Thank you: köszönöm
• See you later: viszlát

Dates

Dates are usually written in the day, month and year sequence. For example, 1 July 2015 or 1/7/15.

Numbers are written with a period to denote thousands and a comma to denote fractions. For example, HUF 3.000,50 (three thousand Forint and fifty fillér).

Hungary is a gateway to Central and Eastern Europe, sharing borders to the north and east with Slovakia and Ukraine, to the south with Romania, Serbia and Croatia, and to the west with Slovenia and Austria.

In 2019, the IMF listed Hungary as the 54th-largest economy in the world by GDP - which stood at an estimated $170 billion with 4.9% growth.

Hungary’s agricultural sector is historically important to its economy, accounting for around 4.8% of GDP in 2019, while its service sector also plays a prominent role, currently accounting for around two-thirds of GDP.

More than 80% of Hungary’s economy is privately-owned: major industries in Hungary include auto-manufacturing, pharmaceuticals, chemicals, IT, and electronics, while private services - in trade, tourism and finance - are also highly developed.

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 in its own right.

Hungary is part of the EU, the WTO, the World Bank and the Visegrád Group and, in 2019, was ranked 52 on the World Bank’s Ease of Doing Business Survey.

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. 

It is not mandatory to make payment to employees and authorities from an in-country bank account. 

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 organisations with the so-called “Company Gate” (in Hungarian “Cégkapu”) service. The company gate is a free storage space that allows contact between the organisations and state organisations providing electronic administration, as all deliveries are sent to the secure, authentic storage space as required by the economic organisation. 

The company gate is actually a common electronic mailbox for companies/economic organizations where all concerned and authorised individuals can have access to the official correspondence/tax account extract/submitted returns of the given company or organisation. 

In Hungary, the process of obtaining authorisation to work varies based on the individual's citizenship.

Non-EU citizens

Non-EU citizens must acquire a residence permit, which is a multi-step process involving the submission of a detailed application to the National Directorate-General for Aliens Policing.

This application typically requires proof of employment, or a job offer from a Hungarian employer, evidence of accommodation, and a valid passport. Additional documents, such as a clean criminal record and a health insurance policy, might also be required.

Upon approval, the residence permit grants the individual the right to live and work in Hungary.

EU citizens

EU citizens (Switzerland is an exception), on the other hand, are entitled to a more streamlined process due to the right to free movement within the EU. They must apply for a registration certificate if they plan to stay longer than three months. This involves reporting to the local district office of the Office of Immigration and Nationality, where they must present a valid identification document, proof of employment or sufficient resources, and a Hungarian address. The registration certificate is usually issued on the same day, simplifying the process for EU citizens to work and reside in Hungary.

The tax year runs from 1 January to 31 December. 

The employer deducts income tax and social contributions from employee wages, daily allowances, or other remuneration. 

The employee needs to complete a tax return only if he/she earns income from other sources.  

The tax authority (NAV) supports the duty of individual annual Personal Income Tax (PIT) declaration with a PIT Declaration Draft. This PIT Declaration Draft prepared by the authority (NAV) will be available on the NAV client platform (personal access: Client Gate). 

The private person who does not have personal access to the NAV platform can ask for the PIT Declaration Draft via post and SMS. 

Individuals pay a flat rate of 15%.  Two types of income are taken into account: - 

1. Income to be consolidated - income from activities other than self-employment, income from self-employment and other income to be consolidated. 

1. Income taxed separately: e.g. in-kind benefits, capital gains, income from private businesses and income from rental properties. 

Take into account any: 

• Tax allowances (available to all taxpayers, but the amount depends on employee’s personal situation)  
• Deductions the employee is entitled to for certain types of expenditure. 

Deductible expenses include: 

• Some forms of state support for raising minors  
• Scholarships paid by non-residents to students studying in a foreign educational institution or researchers working abroad  
• Some forms of support related to the purchase of real estate  
• Services of insurance companies. 

Tax returns are due by 20 May of the year following the tax year. 

Tax for an individual who meets the criteria of a "permanent resident" in Hungary, will be calculated on their income in Hungary and abroad.  A foreign resident who is employed in Hungary pays tax only on his/her income earned in Hungary. 

All employees and anyone who is self-employed is obliged to pay tax advances.  In case of employment, the employer is obliged to deduct and pay the tax advance from the gross salary of the employee. 

Personal Income Tax Advance 

Employers shall pay the income tax advances they have deducted by the 12th day of the following month.  Payers shall pay the income tax advances they have deducted by the 12th day of the month following the month of payment. All taxes and contributions are paid rounded to the thousands. 

Monthly social security contribution is paid on the 12th of the following month.  

Contributions: 

CONTRIBUTIONS PAID BY EMPLOYEES:
Social security contribution	18.5%

 

CONTRIBUTIONS PAID BY EMPLOYER:
Social security tax	13%

 

Occupational Rehabilitation Contributions 

Taxpayers shall pay the advance on contributions for rehabilitation purposes, calculated as defined by the relevant legislation, in the first three quarters by the 12th day of the month following the quarter.  The difference between the advances paid and the annual contribution shall be paid for the tax year by 25th February of the following tax year. 

Monthly

• 2408 template - Monthly tax liability
• Reports should be filed by the 12th of the following month
• They can be submitted electronically to the National Tax and Customs Administration of Hungary

Yearly:

M30 - Yearly Personal Income Tax Certificate

• Report should be given to the employee by 31st January
• This document is for the employee only

Járulékigazolás - Yearly Contribution Certificate

• Report should be given to the employee by 31st January
• This document is for the employee only

All yearly submissions require a signature.

A 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  

The T1041 document, which is an official registration form for leavers and new hires, must be completed and returned to the National Tax and Customs Administration of Hungary. 

The employer has 5 workdays from the last day of work to pay the leaver employee’s last salary and other benefits, and to mail the exit documents package. 

It is legally acceptable to provide employees with online payslips in Hungary. 

Reports 

Personal Income Tax related payroll reports and documents must be kept for at least five years. The start of the five-year retention period is the last day of the calendar year in which the taxes should have been declared, reported or paid. 

The employer is required to retain all employment and social security documents associated with each current and former employee for a period ending five years after the employee reaches retirement age. For example, the documents pertaining to an employee who was born in 1990 will have to be retained until 2060, provided that the employee retires at the age of 65. 

The double taxation conventions related documents must be keep for 10 years from the last day of the year in which the tax return should have been submitted or in the lack of the tax return, from when the tax payment would have been due. 

Working time records 

Employers shall keep records of 

1. the duration's of regular working time and overtime;
2. the duration's of stand-by duty;
3.  periods of leave.

The records aforementioned shall be updated on a daily basis and shall contain facilities to identify the time of commencement and ending of any regular and overtime work and stand-by duty. 

In the case of flexible working arrangements: the working time record does not need to be kept. 

Payslip example:

 

Holiday accruals

If an employee takes one day’s holiday, this entitles them to one day’s pay, which is calculated according to the salary and paid as absentee pay. The number of holidays / years depends on the age of the employee, and the number of own children and on statutory rules.

The Labor Code makes it clear that the allocation of vacation is the responsibility of the employer’s (Sections 122-125). The main rule is that the vacation must be granted to the employee in the year of maturity. However, the law specifies some exceptions for example:

• If the employment relationship began on or after October 1st (int his case the employer may grant the vacation until March 31st of the following year)
• Based on an agreement concluded between the parties the days based on age could be carry over to the next year

Maternity Leave

In Hungary, maternity leave is 168 days long. Maternity leave is paid, however, the calculation will depend on the employee’s income. The income that can be taken into consideration when reporting the benefit is a maximum of 180 calendar days income, before the last day of the period of maternity leave. It is measured in the following way; the period starts from the first day of the insured period, or from the first day of the year prior to the entitlement for the benefit whichever comes first. It ends on the last day of the third month before being entitled for the service. After the expiry of this period, there are different types of maternity benefits until the child turns three years old.

Maternity allowance may be granted to persons living in the Republic of Hungary, if they:

• Are Hungarian citizens.
• Have an immigration license or a settlement permit, or are recognised by the Hungarian authority as refugees.
• Are persons subject to Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (citizens of countries belonging to the European Economic Area), provided that they have a valid residence permit at the time of filing the request for the allowance, with the exception of cross-border commuters.

The amount of the one-time payment maternity allowance per child is:

• 225% of the minimum amount of old-age pension as of the date when the child is born (HUF 64.125 in 2023).

Paternity Leave

The paternity leave regulation entitles the employee to ten additional holiday days per year. Payment is the same as absence pay for the first 5 days, which will be calculated the same way as a normal holiday. The other 5 days the father is eligible for 40% of the absence pay.

The Hungarian State Treasury refund the first 5 days mandatory paternity leave pay to the employer if the employer fills in the appropriate form and submits it to the authority.

Sickness

 A person is eligible for sick pay if he/she becomes incapable of work while being enrolled in the national social security system. A person that has fallen ill is entitled to get 15 working days of sick leave annually.

The first 15 working days are declared as sick leave. The employee is entitled to get 70% of their salary during the sick leave, which is paid by the employer. An insured person eligible for sick leave will get sick-pay as from the day following the expiry of sick-leave.

From the 16th day, the National Health Insurance Fund of Hungary provides the payment for the employee, which is declared as long-term sick pay (Health Insurance Benefit). The employer has to reimburse one-third of the amount to the fund.

If the number of employees exceeds 100, the employer has an administrative obligation to establish a Social Security Payment Office.

National Service

National military service in Hungary was temporarily suspended as of 2004.

In Hungary the national minimum wage in 2024 for full-time employees has been increased to HUF 266,800 gross per month. This increase is approximately a 15% rise from the previous year. The minimum wage for skilled laborers has been set at HUF 326,000 gross per month. This increment in the minimum wage took effect from December 1, 2023

There are multiple statutory holiday schedules within Hungary. Below are the statutory national holidays in Hungary for 2024.

Holiday Name	Date	Day of the Week
New Year's Day	Jan 1	Monday
1848 Revolution Memorial Day	Mar 15	Friday
Good Friday	Mar 29	Friday
Easter Monday	Apr 1	Monday
Labor Day/May Day	May 1	Wednesday
Whit Monday	May 20	Monday
Hungary National Day	Aug 20	Tuesday
1956 Revolution Memorial Day	Oct 23	Wednesday
All Saints' Day	Nov 1	Friday
Christmas Day	Dec 25	Wednesday
Second Day of Christmas	Dec 26	Thursday

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. 

Expenses

• Employer must reimburse travel expenses, if the employee travels to work from the countryside.
• Employer must reimburse travel expenses, if the employee uses his/her car for business purposes. The rate is given by the norms of the National Tax and Customs Administration of Hungary.
• Employer must pay company car tax.

In Hungary, various tax benefits are designed to support individuals and families, as well as to incentivise certain economic activities. Here is a list of some notable tax benefits, including family tax benefits and their key thresholds:

Family Tax Benefit (Családi adókedvezmény)

This benefit aims to reduce the tax burden on families with children. It allows for a direct reduction in the tax base depending on the number of children.
Thresholds:

• For one dependent child: HUF 66,670 reduction per month.
• For two dependent children: HUF 133,330 reduction per child per month.
• For three or more dependent children: HUF 220,000 reduction per child per month.

If the employee cannot use the full amount on taxes, 15% of the remaining amount can be deducted from their social security contributions

 

Tax Benefits for Young Persons Under the Age of 25

Individuals under 25 are exempt from paying personal income tax up to a certain amount.
An exemption from PIT, with a tax saving of approximately HUF 86,490 (around EUR 227) per month​.

 

Tax Benefits for Mothers Under the Age of 30

Available to mothers under 30 who are entitled to the family allowance for their biological or adopted child.
The allowance amount is the same as that for young persons under 25​.

 

Children’s Tax Benefits for Mothers of Four or More

Applies to women entitled to family allowances for at least four children, or who have been entitled for at least 12 years, or whose entitlement has ceased due to the death of a child.
 These mothers do not have to pay any personal income tax under the Personal Income Tax Act without an upper limit to the benefit​.

 

EKHO (Egyéni Különleges Hozzájárulás)

This is a special tax regime for individuals with creative or certain specified professions.
Income above the minimum wage is taxed at a flat rate of 15% after taxes and contributions for the minimum wage have been accounted for

n Hungary, key legislative changes regarding income tax, social security, payroll, employment law, and employee benefits are set to take effect in 2024:

Income Tax and Social Security:

• The tax credit for labor market entrants will be available for the employment of nationals from non-EEA countries bordering Hungary, such as Ukraine and Serbia. This benefit equates to the amount of the wage, but not more than the minimum wage for the first two years, and in the third year, the amount of the wage but no more than half of the minimum wage will be exempt from the social contribution tax​.
• The taxation of interest income from the USA will change due to the termination of the US-Hungary double tax treaty. Interest income will generally be subject to a 15% Personal Income Tax (PIT) and a 13% social contribution tax. However, a derogation from 2024 will exempt interest income from the US from the 13% social contribution tax​.

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.