Taxation in Hungary is levied by both national and local governments. Tax revenue in Hungary stood at 38.4% of GDP in 2017. The most important revenue sources include the

income tax An income tax is a tax imposed on individuals or entities (taxpayers) in respect of the income or profits earned by them (commonly called taxable income). Income tax generally is computed as the product of a tax rate times the taxable income. Tax ...

Social security Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specificall ...

corporate tax A corporate tax, also called corporation tax or company tax, is a direct tax imposed on the income or capital of corporations or analogous legal entities. Many countries impose such taxes at the national level, and a similar tax may be imposed at ...

and the

value added tax A value-added tax (VAT), known in some countries as a goods and services tax (GST), is a type of tax that is assessed incrementally. It is levied on the price of a product or service at each stage of production, distribution, or sale to the end ...

, which are all applied at the national level. Among the total tax income the ratio of local taxes is solely 5% while the EU average is 30%. Income tax in Hungary is levied at a flat rate of 15%. A tax allowance is given through a family allowance ( hu, családi adókedvezmény), which is equal to the allowance multiplied by the number of "beneficiary dependent children". For one or two children the allowance is HUF 62,500 per child, for three or more HUF 206,250 per child. The allowance can be split between spouses or life partners. The standard rate of value added tax is 27% as of January 2012 — the highest in the European Union. There is a reduced rate of 5% for most medicines and some food products, and a reduced rate of 18% for internet connections, restaurants and catering, dairy and bakery products, hotel services and admission to short-term open-air events. In January 2017, corporate tax was unified at a rate of 9% — the lowest in the European Union. Dividends received are not subject to taxation, provided that are not received from a Controlled Foreign Company (CFC). Capital gains are included in corporate tax, with certain exemptions. Employment income is subject to social security contributions for the employer at a flat rate of 17,5%. Capital gains are taxed at a flat rate of 15%. EU VAT Tax Rates

History

After the Ottoman conquest of central parts of Hungary, the most common tax was the Ottoman administration's levy on Christians the

dhimmi ' ( ar, ذمي ', , collectively ''/'' "the people of the covenant") or () is a historical term for non-Muslims living in an Islamic state with legal protection. The word literally means "protected person", referring to the state's obligatio ...

. Under

Austro-Hungarian Austria-Hungary, often referred to as the Austro-Hungarian Empire,, the Dual Monarchy, or Austria, was a constitutional monarchy and great power in Central Europe between 1867 and 1918. It was formed with the Austro-Hungarian Compromise of ...

rule, taxes were mostly levied by Austria, but Hungary was later given more financial autonomy in the

Austro-Hungarian Compromise of 1867 The Austro-Hungarian Compromise of 1867 (german: Ausgleich, hu, Kiegyezés) established the dual monarchy of Austria-Hungary. The Compromise only partially re-established the former pre-1848 sovereignty and status of the Kingdom of Hungary ...

. In 1988, liberalization of the Soviet-influenced Kádár government introduced tax reform, establishing a comprehensive tax system of central and local taxes, consisting mainly of a personal income tax, a corporate income tax and a value added tax.

References

{{Taxation in Europe