• Expat Services

Tax Consulting

It has become relatively easy for foreign private persons to enter employment in Hungary since the beginning of the 90ies. Since 1996 there has been a slow increase in the number of work permits issued to foreigners. The real breakthrough took place with Hungary’s accession to the EU and as a result of the first partial and then full opening up of the labour markets.

In the case of the employment of foreign private persons in Hungary, essentially two cases are possible in tax terms.

  • The person is only subject to personal income taxation or
  • The person is subject to an income tax payment obligation and at the same time. the obligation to pay social security contribution.

Thanks to the already existing conventions on the avoidance of double taxation, the regulations concerning the income tax payment obligation were clear, but with effect from 1 May 2004, the EU’s harmonised social security system, Council Regulation (EEC) No. 1408/71, also became statutorily applicable in Hungary, establishing uniform conditions and replacing the former social security conventions.

The harmonised social security system ensures the avoidance of double insurance and the lack of insurance as well. By virtue of the regulations of the harmonised system, a private individual may only be subject to a single social security system, so contributions need only be paid in one country only.

The regulations recodified in 2004 took effect under the name Regulation (EC) No. 883/2004. The provisions which entailed no essential changes in the earlier regulations had to be first applied with effect from 31 May 2010.

WHAT QUESTIONS MAY ARISE IN CONNECTION WITH THE WORK OF FOREIGNERS IN HUNGARY?

  • Is there a convention for the avoidance of double taxation in effect between Hungary and the home country?
  • What income does the activity qualify?
  • Does income tax payment obligation arise in Hungary?
  • When and in what amount is tax payable and when is the deadline for tax returns?
  • Which convention/regulation is to be applied in connection with the social security contribution payment obligation?
  • In which country does the social security payment obligation arise?
  • Is it possible to apply any simplification?
  • What kind of documents and certificates are required for the certification of the insurance relationship?

HOW CAN OUR TEAM HELP YOU?

  • To give opinion with respect to the legal relationship in terms of tax law and contributions on the basis of the planned transaction (and contract)?
  • Help with the elaboration of a cost-efficient solution
  • Help with the elaboration of the arrangement in order to minimise the task risk
  • Preparation of preliminary gross-net calculations to facilitate cost planning
  • Complete administrative measures in relation to registration and reporting in Hungary
  • Application for a tax identification number
  • Preparation of temporary tax and contribution calculations and the communication of the detail transfer data
  • Preparation and submission of interim returns
  • Representation in the case of Tax Authority audit and legal dispute

INTERNATIONAL BACKGROUND

Being part of the 5th largest consulting network of the world, we maintain close relationship with our partner offices, which enable us to carry out quick consultation and cost efficient cooperation with respect to international transactions.