Recently, the Hungarian Tax Authority has published a press release to remind everyone that Hungarian tax residents must be aware if their income generated abroad is taxable in Hungary too. Relevant data are typically communicated between national tax authorities, and if someone misses declaration, they can expect a payment notice, or even a fine.

Tax residency in Hungary

Tax residency refers to the fact whether you have to pay taxes in a certain country. Citizenship, or even residency, does not automatically make you a tax resident – this depends on various factors, such as what kind of income you generate, or what kind of double taxation agreements are in place between the relevant countries. When in doubt, you should always ask for help from a tax advisor – you can learn about the basics of tax residency here.

Paying taxes in Hungary

If you generate income in Hungary, that is most probably taxed in Hungary.

• If you are an employee, your employer is supposed to forward your taxes to the Tax Authority, so you only receive your net salary. When tax season comes in May, the Tax Authority already knows everything they should know, and you only have to confirm their data – or make any adjustments as necessary.
• If you operate a business, you are supposed to have an accountant who can guide you regarding when and how to pay what taxes. Since taxes are to reported and paid throughout the year, at the end of the fiscal year, the Tax Authority already knows most of your data, and only minor adjustments are to be made.

At the same time, Hungarian tax residents are responsible for declaring and paying their taxes in time to the right authorities. Whenever in doubt, ask for help from your employer, your accountant, or from a tax advisor.

National Tax Authorities communicate with one another

The Hungarian Tax Authority manages not only data submitted by taxpayers in Hungary. It also regularly receives data from the tax authorities of other countries, which normally forward data of Hungarian tax residents.

A recent example cited by the Hungarian Tax Authority in their press release involved a Serbian-Hungarian dual citizen, who was employed by the Dubai subsidiary of a German parent company, and was performing work in China for them. Considering all the data and the relevant double taxation treaties, it turned out that this income should be taxed in Hungary. The person in question received EUR 150,000 in salary, after which they were supposed to pay ca. EUR 40,000 (HUF 15 million) in taxes – which they did upon notice.

Ask for tax advisory from the experts

If you fail to declare and pay your taxes, the relevant tax authority will contact you sooner or later. Normally they just send a notice, and impose a fine only if you do not comply within a given deadline. However, to ensure you do not spend the amount that is due in taxes, it makes sense to consult an expert of international taxation in due course.

The accounting team of Helpers Finance offers not only precise bookkeeping and reporting, but also international tax advisory on demand. Most of our clients are small or medium-sized businesses in Hungary, but we do our best to find solutions for any issue.

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