If you are running a business in Hungary, you must pay a local business tax to the municipality where your business is registered. Even if you don’t need to pay, you must submit a report every year. Read on to learn how to report HIPA – and why it makes sense to have an accountant take care of it.
Report HIPA for 2022 by 31 May 2023
The local business tax (or HIPA in Hungarian) is at most 2% of your business revenue (reduced by various items), to be paid to the local municipality where your business is registered. If you have premises at various municipalities (e.g. your registered seat in one town and your shop in another), taxes are split between those. Every year you must pay advances on HIPA twice a year, and then file a report and top up your payment as necessary after the year is closed.
The report and the adjustment for 2022 is due by 31 May 2023. You can learn more about HIPA and the relevant deadlines here.
How to report HIPA for your business?
If you have an accountant working for your Hungarian business, you have nothing to do: they will report HIPA on behalf of your business, and you will only receive a report about how much you have to pay and how you can complete that payment.
If you do not have an accountant, for example, because you are a flat-rate taxpayer with a fairly simple business structure, you can submit the report on your own (or you can still decide to find an accountant). Reporting is possible through ÁNYK, the software developed by the Tax Authority to submit forms. (While there is also an online tool for form submission called ONYA, unfortunately it does not support the form 22HIPAK currently.)
Since Hungarian companies should have an accountant, below we will focus on submitting the local business tax report as a flat-rate taxpayer with one place of operation, as that is now the most popular tax regime and the most wide-spread structure for those self-employed in Hungary.
Download ÁNYK and form 22HIPAK
Both ÁNYK and form 22HIPAK can be downloaded from the website of the Hungarian Tax Authority. Once you have downloaded and installed both, you will be able to fill in the form within the program. Once the form is ready, you can connect to the database of the Tax Authority using your Ügyfélkapu access (the Client Gate), and submit the form directly there.
The form to report HIPA has two main sections, one for the main data and income of your business, and one for the data relevant to the municipalities where your business operates.
Start at the beginning: load form 22HIPAK
Once you load ÁNYK, you will need to load form 22HIPAK from its database. For this, click the little form icon that is the first item in the top left menu. There you will be able to select 22HIPAK from the list.
You will see that the form has several pages, displayed as various tabs in the program. You do not have to fill in all of them, only those relevant to you. As you go through the HIPA report form, relevant pages become active based on the data you add. If somewhere along the way you realize that you made a mistake before, delete all the data you added after the mistake before going back to fix it, otherwise you might not be able to complete the form properly.
The first section of the form is called 22HIPAKA: this will include the data of your business that are relevant regardless of the municipality you are paying taxes to. On the first tab, you see the main tab, where you must indicate the data of yourself and your business in Section A. Make sure to indicate both your personal tax number (“adóazonosító”) and your business tax number (“adószám”) as well as your other data.
In Section B, you must indicate the reporting period. If you started your flat-rate taxation business in September, you need to indicate September as your starting date, and the end date will be 31 December. (If you were a KATA taxpayer before September, you need to submit a separate report for that period.) The rest of the section lists the other pages filled, and it will be populated automatically as you progress with the form.
Section C is where the form is “signed”. You only have to indicate the date you are submitting the form; the rest of the section is relevant only if the form is submitted with an authorization instead of personally.
The next tab of the form concerns the tax regime under which you want to pay HIPA.
Section A is about some special circumstances, of which you can mark multiple.
- Mark Option 1 if you started your business in 2022. (If you had a KATA business before, leave this box empty.)
- Mark Option 4 if you are operation a small or medium-sized business: this is the case if you are paying taxes under flat-rate taxation.
- Mark Option 9 if you wish to pay HIPA in 2023 in a tier system (more on that here). If your income is very low, you might want to leave the box empty and go for regular HIPA payment. (For example, in Budapest you do not pay HIPA if your yearly income is under HUF 1.5 million.)
Section C is about calculation your HIPA tax base. While freelancers under regular taxation should mark Box 21, flat-rate taxpayers should use Line 22, and select “1” for flat-rate taxation. This will open tab “EGY” for you (see below).
In Section I, you must indicate how many municipalities are relevant for your HIPA report. It might be just one if your operation takes place in the same municipality where your seat is registered. In the dropdown menu of Line 81, “1” stands for 1 location, and “2” for more.
Tab “EGY” for a simplified calculation
Calculating the HIPA tax base is simplified for flat-rate taxpayers, and it is done on tab “EGY” for “egyszerűsített” (that is, simplified), in Section A. Start with writing your revenue in Line 2, then calculate your income based on your expense rate, and type the result in Line 1. Line 3 will indicate your tax base.
This will open up the “ALAP” (“tax base”) tab, which displays a summary of your calculations; you do not have to write anything here.
The other sections are for other types of calculations, which you may ignore.
Phase two: report HIPA to your municipality
Now that you have added your basic data, it is time to do the calculations for your municipality. For that, you will need the second big section of the form. Find the field saying 22HIPAKA in the top left section of the screen, and switch it to 22HIPAKM. Then click the form icon next to it to start a new document. (If you have premises at several municipalities, repeat this process as many times as needed.)
On the first tab of this form, you will see your core data pulled in from the fields you have filled in previously.
In Section A, you must indicate the name of the relevant municipality. Start typing, and select your municipality from the dropdown menu. For Budapest, the name will be Budapest Főváros Önkormányzata. Once done, the next field with the tax number of the municipality will be filled automatically.
Section B will indicate the reporting period, which should fill in automatically, just like Sections D and E, which concern the tax to be paid to your municipality. Section D, Line 1 shows the share of this municipality of your tax; if you are paying to only this one municipality, it will be 1. Line 2 shows your tax base calculated before. Section E, Line 11 displays the tax rate, and Line 12 the tax calculated. The tax payable in Line 13 might actually be only 1% of your tax base, due to a pandemic-related benefit provided to small businesses in 2022. (Learn more about that here.)
Now, several municipalities offer tax exemption up to a certain income limit (at most HUF 2.5 million). In Budapest, you do not have to pay HIPA if your income is below HUF 1.5 million. If your income in 2022 was below that, indicate your income in Section D, Line 3, and the calculated tax in Section E will become 0.
Please note: according to information from the Tax Authority customer service, if you were paying taxes under the KATA tax regime up till last September, your income generated there does not count here; only your income generated in your flat-rate taxation business in 2022 should be considered.
Advance payments for 2023
Since normally you are supposed to make advance payments for HIPA throughout the year (just like for the personal income tax), you must report on the advance payments you will pay in the following year based on your 2022 income (learn more about that here). This can be done on the tab marked as “EL” for “előleg” (advance payment). The data here will depend on whether you have chosen the tier system back in Section A, Box 9 of 22HIPAK-A-NY-01.
The advance payment period should be 1 July 2023 – 30 June 2024.
- If you chose the tier system, you pay HIPA only once for 2023, by 31 May 2023, and its sum must be indicated according to the tier relevant to you. You can leave the second row empty.
- If you did not choose the tier system, both rows must be filled in. The two deadlines are 15 September 2023 and 15 March 2024, and the two sums are normally half of the previous year result. Since last year a tax benefit was available, that should be disregarded for the advance payment. Click here to see how advances are calculated depending on how long you have been in business. The sum might even be zero if you are exempt; in any case, you will have the chance to top up your payment when you report HIPA for 2023 by 31 May 2024.
Finalize and submit the HIPA report for 2022
Now if you go back to the first page of the form by using the switch under 22HIPAKM in the top right section, you will see that Section B, listing the pages filled and the number of relevant municipalities will be propagated. If this is not the case, find the little orange icon with number in the top right section that will recalculate automatic fields.
You are done with filling in form 22HIPAK! Before you submit it, make sure to run a check to see if everything is alright by clicking “Ellenőrzés” in the top menu. If there is a problem, it will be indicated in a popup window, so you can easily locate and fix it.
To submit the form, go to the top menu, and select “Kapcsolat az ügyfélkapuval” (“Connect to the Client Gate”), and select “Nyomtatvány megjelölése elektronikus beküldésre” (“Select form for e-submission”). That done, select “Nyomtatvány közvetlen beküldése az ügyfélkapun keresztül” (“Submit form directly through the Client Gate”), after which a popup will appear where you can log in to the Client Gate and submit the form to report HIPA for 2022.
If submission is successful, you should get a notification of this in your Client Gate Inbox, of which you should receive an email. Before you log out, make sure to save a PDF version of the form on your own computer too for future reference.
If the form has calculated taxes payable for you for 2022, make sure to pay them by 31 May 2023 to the relevant municipalities (as well as the advance payment for 2023 if your chose the tier system). Information can normally be found on the website of each municipality; for Budapest, you can find the relevant bank account number here.
How difficult does reporting HIPA sound?
As you can see from above, filling in and submitting the form for local business tax is not necessarily too difficult, but it is still a bit complicated, as the form has several intertwining sections (not all of which are listed here), and you should know what you are doing. The simpler your operation, the simpler the procedure becomes, but you still need at least some relevant Hungarian, since the program is not available in English.
Of course, you can save yourself all the hassle if you are working with an English-speaking accountant, who is your best ally in remaining compliant with Hungarian regulations. Helpers Finance offers just that, specializing in working with foreign business owners in Hungary. Should you need precise accountancy and bookkeeping for your Hungarian company or freelancing business, feel free to browse our blog or contact us for more information.
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