What are the tax obligations for expats living in Budapest?

Tax obligations for expats living in Budapest, Hungary, depend on several factors, including your residency status, the source of your income, and the duration of your stay. Here’s a general overview of tax obligations for expatriates in Budapest:

1. Residency Status:
   • If you are considered a tax resident of Hungary, you are typically subject to Hungarian taxation on your worldwide income. Tax residency is determined based on factors like the number of days you spend in Hungary and your primary place of abode.
2. Types of Income:
   • Employment Income: If you work in Hungary, you are generally subject to Hungarian income tax on your salary. Your employer is responsible for withholding and remitting taxes on your behalf.
   • Business Income: If you operate a business in Hungary, you are subject to taxation on your business income. Hungary has a corporate tax rate for businesses.
   • Investment Income: Income from investments, such as dividends and interest, may also be subject to Hungarian taxation, depending on your residency status and the applicable tax treaties.
   • Rental Income: If you own property in Hungary and earn rental income, this income is generally subject to taxation.
3. Tax Rates:
   • Hungary has a progressive income tax system, with tax rates ranging from 15% to 33%. The exact rates depend on your income level.
   • For businesses, the corporate tax rate is 9% for income up to a certain threshold, and 15% for income exceeding that threshold.
4. Tax Treaties: Hungary has tax treaties with many countries to prevent double taxation. These treaties determine which country has the primary right to tax specific types of income. It’s essential to consider the tax treaty between Hungary and your home country if applicable.
5. Tax Filing:
   • If you are a tax resident in Hungary, you are generally required to file an annual tax return by May 20th of the following year.
   • Non-residents may also need to file a tax return, depending on their income sources and tax treaty provisions.
6. Tax Deductions and Credits:
   • Hungary offers various tax deductions and credits that can reduce your overall tax liability. These may include deductions for education expenses, mortgage interest, and more.
7. Social Security Contributions: As a worker in Hungary, you are typically required to contribute to the Hungarian social security system. Your employer deducts these contributions from your salary.
8. Value Added Tax (VAT): Hungary has a VAT system that applies to the sale of goods and services. The standard VAT rate is 27%, but reduced rates apply to specific categories of goods and services.
9. Residency and Documentation: Ensure that your residency status is correctly documented, and you comply with Hungarian immigration and tax regulations.

Taxation can be complex, and the rules can change, so it’s advisable to consult with a tax professional or seek advice from the Hungarian tax authorities to ensure compliance with the latest regulations and to optimize your tax situation based on your specific circumstances.