If you're living in Hungary, you are subject to paying taxes in the country for all the income you may have earned during the tax year, both in Hungary and abroad. The good news is that the tax rates in Hungary are particularly low in contrast to other countries, especially when it comes to businesses.
How the Hungarian tax system works
The process of becoming a taxpayer varies slightly depending on your nationality. EU/EFTA citizens need to start paying taxes in Hungary if they've stayed more than 183 days in the country in a given year. Third-country citizens, on the other hand, are considered taxpayers the moment they acquire their residence permit if they intend to settle. However, the 183-day rule remains the standard benchmark for tax residency.
Once you are considered a taxpayer, you are obliged to deduct taxes and tax advances from your wage (if you're an employee, your employer will be doing the deduction) or other payments. At the end of each tax year, you'll need to complete your tax returns, the filing of which is based on self-assessment. However, the National Tax and Customs Administration (NAV) calculates your income tax on your behalf via the online eSZJA system. They do that by taking into account the tax advance payments that have been subtracted from your salary throughout the year, as well as any tax benefits you may be entitled to.
That calculation of your tax indicates if you have to pay more money, have the money returned to you, or if it is simply nil. If you don't agree with the calculation of your tax return, you can modify the draft either online via the Client Gate interface or the Digital Citizenship "DÁP" mobile app or by submitting a 16SZJA tax return form via post. Find out more here.
Good to know:
There are some types of income and benefits that are exempt from taxes. These can include pension benefits (though US citizens should note the continued absence of a double-taxation treaty in 2026), some services from insurance companies, state support for fostering and raising children, as well as any scholarships for studying or research.
Business and corporate taxes in Hungary
The KATA (small business tax) regime used to be a good option for self-employed digital nomads, but the system has been heavily restricted, and it is only a viable alternative for B2C service providers. KATA comes with a fixed 50,000 HUF tax that covers all tax and Social Security obligations, with an annual revenue cap of 18 million HUF (above which a 40% penalty applies and a future obligation of a VAT cap). You can also opt for a flat-rate taxation regime, which is the standard approach for freelancers working with companies, like contractors and consultants. Here, you only pay tax on a portion of your income, with the rest calculated as a “deemed expense”, with the ratio in 2026 rising to 45% and to 50% in 2027. You cannot choose KATA if you have a single corporate client anymore, which is a huge cause of consternation among Hungarians.
Meanwhile, corporate tax in Hungary is one of the lowest in Europe at a 9% rate.
Good to know:
Some art, media and sports-related professions can be tax exempt up to a point (if your annual income is less than 60 million HUF for artists and journalists, or 250 million HUF for athletes). Mothers with four or more children, and as of 2026, mothers under 40 with two children, are fully exempt from personal income tax.
Income, VAT and other tax types in Hungary
The most significant tax in Hungary is the income tax, deducted as a flat rate of 15% from your salary. Along with that 15%, there are several social tax contributions (both national and local) that are also deducted, bringing the total tax at 33.5% (in the form of an added Social Security contribution), which practically means that your net salary is the 66.5% of your gross salary. Note that employers pay an additional 13% social contribution tax on top of this sum, too.
Hungary significantly taxes consumption (with much smaller corporate and savings-related taxes). The value-added tax, or VAT, is the highest in the European Union at 27%, but reduced rates apply for things like medicine and food products. Services such as the internet, catering, admission to events and restaurants come with a VAT rate of 5 and 18%. You can submit VAT returns on a monthly, quarterly, or yearly basis when applicable.
Other types of taxes include transfer tax for real estate purchases (4% up to HUF 1 billion and 2% for the remaining amount), local taxes if you have a brick-and-mortar business (which typically amounts to 0-2% of your net revenue), building taxes (divided amongst building owners) and land taxes, that are calculated by the local government.
Useful link:
We do our best to provide accurate and up to date information. However, if you have noticed any inaccuracies in this article, please let us know in the comments section below.
