Tax for individual remotely working in Budapest

If you're an employee, you'll pay at least 35% in taxes, unless get creative with your expenses, but that's risky. As a sole trader, though, you could get away with 10% if your income doesn't exceed 12mil HUF /year, otherwise you'd pay 40% for the part above 12mil HUF. The devil is in the details, you DO need an accountant to pick the right setup for you, good luck finding a competent one that also speaks english! 

Atomheart, thanks for the reply. To be honest they don't necessarily need to speak English as my wife is Hungarian though it would help. It's more they'd ideally know about how to handle overseas payment (of UK dividends) within the tax calcs.

Just want to get some known accountant details from people who've maybe gone from the UK and set up a sole trader business in Hungary.

Buffalotom99 wrote:

Can people recommend any accountants etc. that I could contact to discuss the specifics and get the ball rolling?

Contact one of the larger, international, tax attorney or accounting firms in Budapest. I did. Was worth the (very expensive) advice they provided. Would not waste your time on local accountants (I did, got too much conflicting (and wrong) information).

What you propose may quickly become more complicated than what "forum posters" lead you to believe. For example, if you are still the Director (or sole owner) of your UK company, and you live here your association with the UK company might give all what you do in Hungary for the UK company tax "nexus" in Hungary as well (point of vital interest is really in Hungary regardless of where the company if formed and headquartered on paper). That it, under such a scenario, it would be complicated to legally run both companies, and just get taxed on dividends from the UK company. You need to get arms length separation between the two companies.

xxxxxxxxx.  You can check Kata.

Hello,

I just moved to Hungary from California with my Hungarian husband and our baby.
The company I used to work for wants to hire me as a contractor. I would provide services (e.g. data analysis, technical writing services, scientific literature reviews, and so on). This offer is attractive, and I'd be happy to accept, but for all my adult life I have been a full time employee and it seems like a daunting task to navigate the self-employment or "freelancer" ways in a new country. I freaked out when I read a previous thread in this website, where someone was told the taxes were 88%. That would not work at all!

What is more appropriate in this case, do I need to set up a small company for this or can I call myself "freelancer"?

I need to familiarized myself with the lingo. My SIL mentioned KATA.

Any advise is welcome!

MMix wrote:

where someone was told the taxes were 88%

The highest personal total income tax would be if you started a company (e.g. a KFT), where you are the only employee and you pay yourself a salary. Then you have to pay income tax + social taxes of about 35%. And the company (which is also really just you) has to pay its half of your social taxes, so total income tax would be about 55% (last time I checked -- it may be more depending on circumstance of employment, current law, etc.). This seems high, but if the company makes a lot more income than it needs pays you, then it is smart to employ yourself, at a "reasonable" salary, and let the rest be taxed at the company rate of just 9%.

MMix wrote:

The company I used to work for wants to hire me as a contractor.

Just be aware:

As an employee, it is very difficult to "let you go" outside of your contract time. Often the process takes months.

As a contractor, they can call you up one morning and say "your services are no longer required", and that ends it.

MMix wrote:

I need to familiarized myself with the lingo. My SIL mentioned KATA.

With KATA you pay a fixed amount each month (50,000 HUF to 75,000 HUF) as your entire tax. But this is only good up to 5,000,000 HUF (last time I checked -- the laws here change frequently) in income (about $20,000). If you make more, then KATA is not really much of an option as after that your taxes do become quite high.

Of course, the best plan is to talk to an accountant here in Hungary to help you decide the best option for you.

klsallee wrote:

then it is smart to employ yourself, and let the rest be taxed at the company rate of just 9%.

That depends on how you can invest that money, you're just postponing the payment of the rest of taxes. As a natural person, for instance, you can put your money into a long-term investment account, where you don't have to pay any taxes on income from dividends or sale of securities. This is not available to companies.

klsallee wrote:

But this is only good up to 5,000,000 HUF (last time I checked -- the laws here change frequently) in income (about $20,000).

They changed the limit to 3 millions AFAIK.

atomheart wrote:

That depends on how you can invest that money, you're just postponing the payment of the rest of taxes.

Depending on when and how the company uses or distributes the money. If done smartly (e.g. distributing a dividend as capital gains if possible (lower tax rate), rather than personal income), personal income is maximized and a tax savings is usually achieved.

atomheart wrote:

As a natural person, for instance, you can put your money into a long-term investment account, where you don't have to pay any taxes on income from dividends or sale of securities. This is not available to companies.

The company can invest its income in a variety of ways. The company can create a private retirement account for the (one) employee for example, or invest in stock for a similar payout plan. Some income investments can bring even more income as working capital for the company (i.e. buy share in other companies) or can avoid taxes (such as re-investing into the company).

Again, one should talk to a competent accountant. There are plenty of ways for a company to legally use it's income to minimize taxes.

atomheart wrote:

klsallee wrote:

But this is only good up to 5,000,000 HUF (last time I checked -- the laws here change frequently) in income (about $20,000).

They changed the limit to 3 millions AFAIK.

Thanks. Good to know.

Thank you for your advise! I appreciate you taking the time to pitch in.

I did take some finance classes back in college and it's all coming back to me now
For sure will need to hire professional advise.

As a side note: The original plan laid out for me was an international inter-company transfer (given that a separate division of the corporation has presence in Hungary), but even when I gave a 4-month notice of my departure, and with approval of all incumbent higher ups, HR didn't get their act together, time ran out and as a last resort the consultant route was brought up. I've seen the typical master contract agreement and it has a clause of termination by either party with a 5 day-notice. So yeah, it is risky.

I'll try to make it work, at least as I settle in.

Thanks again!

MMix wrote:

As a side note: The original plan laid out for me was an international inter-company transfer (given that a separate division of the corporation has presence in Hungary), but even when I gave a 4-month notice of my departure, and with approval of all incumbent higher ups, HR didn't get their act together, time ran out and as a last resort the consultant route was brought up.

Just a thought -- why can not the HU division simply contract you for 3 or 6 months of a "trial period" for an employed position, while the local HR sorts out your transfer correctly and hire you properly?