Filing Requirements in Hungary

Filing Requirements in Hungary | Bestar

Hungary Tax Filing Requirements Explained

Filing Requirements in Hungary

The filing requirements in Hungary vary depending on the type of tax and the entity or individual responsible for filing. Here's a breakdown of the key areas:

Corporate Income Tax (CIT)

• Taxable Period: Generally the calendar year, but a company can elect a different financial year.   

• Tax Returns:

  • Due by the last day of the fifth month following the end of the accounting year (typically May 31st for calendar year taxpayers).   

  • Submitted via self-assessment.   

  • Can be filed electronically or in paper format, but those obligated to file monthly tax and contribution returns (e.g., employers) must file electronically.

  • Entities subject to Local Business Tax (LBT) file their returns with the national tax authority, which then forwards them electronically to the relevant local municipality.

• Payment of Tax:

  • CIT installments are usually paid quarterly or monthly (if the expected annual tax exceeds HUF 5 million).

  • The final payment is due by the tax return deadline (May 31st for calendar year taxpayers).

  • The tax advance top-up liability was abolished in 2019.

• Minimum Tax Base: In certain situations, if the profit before tax or the general CIT base is lower than 2% of the adjusted total income, the company may opt to pay tax based on this minimum tax base or provide a statement with additional financial details.   

Individual Income Tax (PIT)

• Taxable Period: The calendar year.

• Tax Returns:

  • Due by May 20th of the year following the tax year.   

  • Individuals file their own returns; joint returns for married couples are not permitted.

  • A draft tax return is usually prepared by the National Tax and Customs Administration (NAV) based on available data and becomes available online around March 15th. Taxpayers should review and amend it if necessary.

  • A hard copy of the draft can be requested by March 17th and should be received by April 30th.

  • An extension to November 20th for filing may be granted under specific circumstances (e.g., income from foreign sources).

  • Returns can be filed electronically (recommended) or in paper form. Entrepreneurs are generally required to communicate electronically with the tax authorities.

• Payment of Tax:

  • Generally, PIT is withheld at source by employers for employees and by Hungarian payers for most investment income.   

  • Individuals with income not subject to withholding (e.g., from non-Hungarian sources) typically make quarterly tax advance payments.

Value Added Tax (VAT)

• VAT Returns:

  • Filed monthly, quarterly, or annually depending on the taxpayer's status. New taxpayers usually file monthly for the first two years.   

  • Monthly and quarterly returns are due by the 20th day of the month following the reporting period.

  • The annual VAT return is due by February 25th of the following year.   

• Real-time Invoice Reporting (RTIR): Businesses registered for VAT in Hungary must electronically report all invoices to the NAV, regardless of the amount, within 24 hours of issuance. This includes B2B, B2G, and since January 1, 2021, B2C, intra-community transactions, and exports.   

Other Reporting Requirements

• Financial Statements: Must be filed annually via the Ministry of Justice's online system by the end of the fifth month after the balance sheet date. Listed companies on the Budapest Stock Exchange have a four-month deadline. The format depends on the company size.   

• Transfer Pricing Documentation: Required for transactions exceeding HUF 50 million (€167,000). This includes a Master File and a Local File.   

• ESG Reporting: Phased implementation started in 2024 for large public-interest entities. By 2025, it extends to other large companies meeting certain balance sheet, net turnover, or employee thresholds.

• EU Sales Lists: Must be filed by the last day of the month following the reporting period (monthly or quarterly).

Important Considerations:

• Tax Identification Number (TIN): Individuals and entities subject to tax in Hungary must obtain a TIN from the NAV.   

• Record Keeping: Accounting records must be maintained in a comprehensible manner for at least 8 years.   

• Penalties: Failure to comply with filing and payment deadlines, as well as RTIR obligations, can result in significant penalties and interest charges.   

• Currency: Tax liabilities are generally assessed in Hungarian Forints (HUF), but companies may elect to pay CIT and LBT in EUR or USD.

• Electronic Filing: While some filings can be done on paper, electronic filing is increasingly common and sometimes mandatory. The "Client Gate" registration simplifies online communication with the tax authorities for individuals.

It is recommended to consult with a tax advisor in Hungary to ensure full compliance with all applicable filing requirements, as regulations can be complex and subject to change.

How Bestar can Help

Bestar can provide a wide range of valuable services to individuals and businesses, ensuring compliance, optimizing tax positions, and navigating the complexities of the tax system. Here's how Bestar can help:   

For Individuals:

• Tax Planning and Optimization:

  • Identifying Deductions and Credits: We can help you understand and claim all eligible deductions (e.g., mortgage interest, charitable donations, education expenses) and tax credits, potentially reducing your overall tax liability.   

  • Investment and Retirement Planning: We can advise on the tax implications of different investment strategies and retirement savings plans (e.g., IRAs, 401(k)s) to maximize after-tax returns.   

  • Estate and Gift Tax Planning: For individuals with significant assets, we can help plan for estate and gift taxes to minimize future tax burdens for heirs.   

  • Tax-Efficient Income Strategies: We can suggest ways to structure income to minimize tax obligations.

• Tax Compliance:

  • Preparing and Filing Tax Returns: We can accurately prepare and file your annual income tax returns, ensuring all forms are completed correctly and deadlines are met, reducing the risk of errors and penalties.

  • Handling Complex Tax Situations: We can assist with more intricate tax scenarios, such as self-employment income, rental property income, foreign income, or stock options.   

  • Dealing with Tax Authorities: If you receive a notice or are audited by the tax authorities, Bestar can represent you, communicate on your behalf, and help resolve any issues.   

• Life Event Tax Implications:

  • We can provide guidance on the tax consequences of significant life events like marriage, divorce, having children, buying or selling a home, or job changes.   

• Understanding Tax Laws and Regulations:

  • Tax laws are constantly evolving. Bestar stays up-to-date on these changes and can explain how they affect your specific situation.   

For Businesses:

• Tax Planning and Strategy:

  • Choosing the Right Business Structure: We can advise on the most tax-efficient legal structure for your business (e.g., sole proprietorship, partnership, LLC, S-corp, C-corp).

  • Identifying Deductible Business Expenses: We can help you understand what business expenses are deductible, maximizing tax savings.

  • Tax Credits and Incentives: We can identify and help you claim relevant tax credits and incentives available to businesses.   

  • International Tax Planning: For businesses with international operations, we can provide guidance on cross-border tax issues.   

  • Transfer Pricing: We can assist with establishing and documenting transfer pricing policies for related-party transactions.   

  • Mergers and Acquisitions: We can advise on the tax implications of business mergers, acquisitions, and restructurings.   

• Tax Compliance:

  • Preparing and Filing Business Tax Returns: We can prepare and file various business tax returns, including corporate income tax, payroll taxes, sales tax, and excise taxes, ensuring accuracy and timely submission.   

  • Managing Tax Audits: We can represent your business during tax audits, helping to navigate the process and minimize potential liabilities.   

  • Ensuring Compliance with Changing Regulations: We keep abreast of changes in tax laws and regulations that affect businesses and ensure your company remains compliant.   

• Operational Efficiency:

  • Setting up Tax-Efficient Accounting Systems: We can advise on setting up accounting systems that facilitate accurate tax reporting.

  • Cash Flow Management: We can help optimize tax payments to improve cash flow.   

In essence, Bestar acts as a knowledgeable partner who can:

• Save you time and reduce stress by handling complex tax matters.   

• Minimize your tax liability through strategic planning and accurate compliance.   

• Help you avoid costly errors and penalties.

• Provide peace of mind knowing your tax affairs are in order.

• Offer valuable insights and guidance on financial decisions with tax implications.   

Whether you are an individual with a complex tax situation or a business owner looking to optimize your tax strategy, engaging Bestar can be a significant asset.   

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