INDIVIDUAL TAXATION

Residents are taxed on their worldwide income. Married couples are taxed separately.

INCOME TAX

Income from all sources is distinguished into the following categories:

• Aggregate income including income from dependent personal services, independent personal services, and other aggregate income
• Entrepreneurial income
• Capital gains in movable and immovable property
• Income from capital, including dividends interest, and capital gains on securities
• Benefits in kind
• Income from the receipt of securities, options, and similar rights
• Miscellaneous income, like small receipts and rental income from immovable property

Aggregate income tax earned by residents is generally taxed at progressive rates.

Income from other categories is taxed separately at flat rates. Calculation of taxable income and applicable income tax rate varies, depending on the different categories of income.

Solidarity Surtax

Income exceeding the ceiling for social security contributions is subject to additional solidarity tax levied at 4%. In the case of sole entrepreneurs, the solidarity surtax is levied on the positive difference of gross entrepreneurial income and entrepreneurial expenses.

RENTAL INCOME TAX

Rental income is taxed at a flat rate of 16%. The taxable income can be computed by

• Deducting expenses actually incurred and documented in the renting process such as lighting, maintenance, administrative costs, etc.
• Or by deducting a 10% notional deduction from the gross income (10% expense ratio).

Under certain conditions, the income up to HUF50 million (€185,611) is taxed at 10%, while any excess is taxed at 16%.

CAPITAL GAINS TAX

Capital gains realized by resident individuals are taxed at 25%. Acquisition costs and related expenses, improvement costs, and cost of transferring the property can be deducted from the revenue to arrive at the net capital gains. If the deductible expenses are not documented and if the acquisition costs are not substantiated, the 25% rate will be applied to 25% of the gross proceeds.

The taxable gain is reduced by 10% every year after the fifth year, so that in the fifteenth year after acquisition, the taxable gain is reduced to zero (i.e. 10% reduction in the 6th year after the year of acquisition, 20% in the 7th year, 30% in the 8th year, 40% in the 9th year, 50% in the 10th year, etc.).

PROPERTY TAX

Local governments can decide whether or not to levy property taxes on their area of jurisdiction. The tax base and tax rates may vary for each municipality.

Building Tax

The building tax may be imposed by the local government, payable by the property owner each year. The rates and the tax base vary from each locality/municipality, subject to:

• A maximum of HUF900 (€3.34) on a per square metre basis or
• A maximum of 3% on the market value of the building

Land Tax

Land Tax may be levied on idle land on the portion classified as a “downtown area” by the local government council. The council either levies the tax as:

• Per square metre of the plot at the maximum rate of HUF 200/sq. m. (€0.75),
• Or on the adjusted market value of the property, in which case the maximum tax rate is set at 3%. Adjusted market value is generally 50% of the market value of the property.