Paying taxes as a white card holder in Hungary

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Paying taxes as a white card holder in Hungary

The white card is a new residency option in Hungary targeting digital nomads: third country citizens employed by foreign companies who perform their job online and like always being on the go. But how does paying taxes work as a white card holder? Let us help you find out!

White card: residency for digital nomads

Thanks to the continuous advances in digitalization and the development of telecommunication, you can perform more and more types of work remotely or online. In line with this, there are more and more people who would like to take advantage of remote working, and travel the world while doing their regular job. Those who achieve this are referred to as digital nomads.

If you travel frequently, easy entry to various countries is fundamental. Now, starting from 2022, Hungary offers residency to digital nomads in the form of a “white card”, which is valid for 1 year and can be renewed once for another year. While it lets holders stay in Hungary without any connection to the country, it also doubles as a Schengen visa, granting visa-free stay in any Schengen country for up to 90 days. You can learn about the benefits and conditions for the white card here.

Tax residency of white card holders

But if you are always on the go, where do you pay taxes? And if you become a resident of Hungary, will you be required to pay taxes in here? Which taxes? The answer to these questions is: tax residency.

Tax residency is where you pay taxes. Where you are a tax resident depends on various factors, the most important of which are where you have a permanent home, and where the center of your interests is. The governing rules are very precise, but this precision also adds up to complexity. Moreover, in order to protect people from paying taxes in more than one country for the same income, there are double taxation treaties in place between individual countries, which should also be considered.

“Will I have to pay taxes in Hungary if I get the white card?”

The answer will depend on how much time you are spending in Hungary. The rule of thumb is that you become a tax resident in Hungary if you physically spend at least 183 days in a given calendar year in the country. After that, you will be required to pay personal income tax and social contributions here. Whether your employer also has to pay payroll taxes in Hungary will depend on the double taxation treaty between Hungary and the country where your employer is registered, and whether your stay in Hungary creates an official location for your employer.

However, if you are planning to travel often, spending a month here and another month there, you might not become a tax resident in any of those countries. Instead, your permanent home, or your center of interests might be considered.

Accordingly, before you ask the above question, you must consider how much time you are planning to spend in Hungary, and how much you want to travel. If you are not sure, you can still come up with scenarios that sound feasible or seem attractive to you, so you can ask more specific questions. When you ask for consultancy, your advisor will probably have to check the existing double taxation treaties between your center of interest and the countries you are planning to visit, so they can only answer your questions if you have an idea of how much time you want to spend where.

Precision and planning are at the heart of paying taxes

Providing consultation related to taxes and tax residency is possible based on the right information. If you are planning to apply for the white card in Hungary to get visa-free access to all Schengen countries as a digital nomad, you should have an approximate idea regarding how much time you intend to spend where in order to determine where you will become a tax resident.

Helpers Finance provides accountancy and relevant advisory services to foreigners bringing their business to Hungary. At the same time, the Helpers Team has 15+ years of experience supporting all processes relevant for residence permit application and renewal in Hungary. Let us help you on your residency journey, wherever your destination is!

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