Doing Business in Hungary

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. The IMF lists Hungary as the 58th-largest economy in the world by GDP, while the country also ranks one of the world’s largest importers and exporters. More than 80% of Hungary’s economy is privately-owned: the agricultural industry remains important (accounting for around 4% of GDP), but inconsistent yields have eroded its profile in recent years. The service sector also plays a prominent economic role, currently accounting for around two-thirds of GDP. Major industries in Hungary include auto-manufacturing, pharmaceuticals, chemicals, IT, and electronics, while private services - in trade, tourism and finance - are also highly developed. Hungary is one of the world’s leading destinations for foreign investment, while its capital, Budapest, has become a regional and international business hub with one of the fastest-developing urban economies.  Hungary is part of the European Union, the World Trade Organisation, the World Bank and the Visegrad Group. The World Bank ranked Hungary 41 on its Ease of Doing Business Survey 2017.

Why invest in Hungary?

Interested financiers may discover a range of reasons invest in Hungary, including:

  • Economic growth: In 2015-2016, Hungary experienced one of the region’s highest economic growth rates. The outlook remains positive: future growth is estimated to be around 2% with consumers buoyed by relatively low interest rates of around 1.2%, and low gas prices.
  • Investment support: The Hungarian government is engaged in an ongoing effort to attract investment, and provides a range of financial benefits including tax exemptions of up to 50% for certain financial ventures.
  • Highly-trained workforce: Businesses in Hungary benefit from a pool of highly-skilled, well-educated employees. Educational spending in Hungary is high, with a strong focus on technology and science - meaning businesses do not have to look far to find talent.
  • Geographical advantage: Hungary lies at the heart of Central Europe and, beyond its domestic market, is an ideal platform for businesses looking to expand into the continent. Hungary’s strong transport infrastructure includes road, rail and air links to the rest of Europe and indeed the world.
  • Political stability: Hungary has been a parliamentary republic since 1989, and has enjoyed a period of political and economic stability ever since. Membership of the EU reinforces those frameworks. 

Foreign Direct Investment 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 automobile industry was estimated to be worth €8 billion by the Association of Hungarian Automotive Industries. 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.

Registering a Company and Establishing an Entity in Hungary

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.

Business Banking in Hungary

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

Working Days And Working Hours in Hungary

The working week in Hungary is Monday to Friday. The working day for commercial offices is usually eight hours, typically from 0800 or 0900 to 1630 or 1800. Lunch breaks range from half an hour to one hour.

Basic Facts about Hungary

General Information

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.

Full Name: Hungary

Population: 9.8 million (UN, 2015)

Capital: Budapest

Major Language: Hungarian

Major Religion: Christianity

Monetary Unit: Forint

Main Exports: Machinery and transport equipment, foodstuffs, chemicals

GNI per Capita: US $12,990 (World Bank, 2015)

Internet Domain: .hu

International Dialling Code: +36

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 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).

Income Tax & Social Security in Hungary

Income Tax & Social Security In Hungary The tax year runs from 1 January to 31 December.

Detailed information is available via the following government departments:

National Tax and Customs Administration of Hungary: Nemzeti Adó- és Vámhivatal 1054 Budapest Széchenyi u. 2. Hungary

National Health Insurance Fund of Hungary: Országos Egészségbiztosítási Pénztár 1139 Budapest Váci út 73/A Hungary.

Income Tax in Hungary

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.
  2. 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.

Social Security in Hungary

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

Occupational rehabilitation contributions:

Taxpayers shall pay the advance on contributions for rehabilitationpurposes, 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.

Vocational Training contribution:

The basis of assessment for vocational training contribution shall be the health insurance and labour market contribution base of the person subject to contribution obligations.  The rate of vocational training contribution shall be 1.5 % of the base of the social security tax.

The person subject to the contribution obligation shall pay a vocational training contribution advance for the first eleven months of the year.  The balance between the advance paid up and the annual net liability shall be paid by the 12th January of the following year, and applications for refund may be submitted from this time, if applicable.

Reporting Tax In Hungary 

Monthly:

  • 1608 - Monthly total 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 contribution certificate

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

Járulékigazolás - Yearly contribution certificate

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

Kifizetői igazolás - Payment Certification

  • Reports should be filed by the 20th May.
  • They can be submitted electronically to the National Tax and Customs Administration of Hungary.

All yearly submissions require a signature.

New Employees in Hungary 

A new start will require to be registered with the tax authorities.

Registration has to be made at the latest on the day the employee starts at the new workplace but before the commencement of his/her work.

The following information is required when setting up a new start: -

  • Full name
  • Address Card
  • Bank account details
  • Identity Card Number
  • Social Contribution Number
  • Tax number
  • Salary components such as pension etc.
  • Employment  contract
  • First date of employment
  • Leaver papers issued by the previous employer
  • Education, vocational training and skills documents providing in proof thereof

The following documents are required when setting up expat employees:

  • Passport
  • Tax number
  • Address card
  • Employment contract
  • 4.Work permit (Except EU Citizens)
  • Permanent residence permit
  • Social Contribution Number
  • A1 or similar certificate (from EU Citizens if they have it)

Leavers in Hungary 

Upon termination of the employment relationship by notice, the employee shall be paid their wages and other emoluments from the last day of work, in any case on the fifth working day after the termination of employment relationship, and shall be supplied the statements and certificates prescribed by employment regulations and other relevant legislation.

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

Payroll in Hungary

Employers in Hungary must comply with certain withholding requirements when processing payroll. In principle this involves withholding income tax and social security contributions from employee salaries, and submitting them to the relevant authorities.

Income tax in Hungary is taxed at a flat rate of 15%, and must be paid by all employees. The ‘residency’ status of employees in Hungary may affect the amount of income tax due - ‘tax residents’ will be charged for all worldwide income, while ‘non-residents’ will only be charged for income sourced within Hungary.

Employee social security contributions in Hungary cover unemployment insurance, health insurance and pension funds - and are calculated as a percentage of salary ( is currently set at 18.5 %). Employer social security contributions are currently set at 22% of gross monthly salary.

Employers in Hungary may provide payslips online and must keep payroll reports for at least 7 years.

The full guide is available in PDF format for registered users.

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