In Hungary, there is a flat tax system, that is, taxes are a fixed proportion of income. As of 2017, the rate of income tax is 15%.
As a foreign employee you are obliged to pay income tax in Hungary even if you receive your salary from abroad. In case of permanent residence (that means staying in Hungary for more than 183 days a year) you have to pay tax on all income. In the case of temporary residence, tax has to be paid only on the income received in Hungary.
Social security contributions and taxes
It is not necessary to pay Health Care payroll tax for people who do not receive a salary in Hungary. In this case, it is advisable to hold private health insurance. If you do not have cover you’ll have to pay for each and any medical treatment you require when in Hungary.
As long as you pay payroll tax in Hungary, you will be issued a Social Security card which entitles you to public medical treatment. In this case it is advisable to also apply for the European Health Insurance Card (which you become eligible for as soon as you start paying social security contributions under the Hungarian system). The EU Health Card entitles you to free emergency treatment in all European countries.
As of 2017, social security contributions are paid by both employers and employees. Employers pay 22% of the gross monthly salary (above the employees' salary, which won't be impacted), while employees pay the follow amounts:
- Pension contribution: 10%
- Health care contribution: 7%
- Unemployment contribution: 1.5%
The base of the monthly contributions is the employee’s income. The Hungarian social insurance system contains the following elements:
- Health service (although there is a public healthcare system, private health insurance is considered very important by Hungarians. Many foreigners living/working in Hungary invest in private healthcare cover or negotiate cover as part of their employment conditions.)
- Social care
- Family and Child welfare
- Pensions and assistances
- Unemployment assistance
Who is covered?
- Persons in full or part time employment
- Members of cooperatives
- Self employed, private entrepreneurs and family members
The social insurance pension system provides retirement benefits to the insured in the case of:
- old age (65 (man), 62 (woman) with a minimum of at least 20 years of work)
- death leaving a widow or widower and/or dependents
- disability and accidents leading to disability
The amount of the pension you will receive depends on the approved service time and the amount of the average monthly earnings. In Hungary there are some special advantages for elderly people, such as free public transport (for people over 65 years of age) and lower entrance fees in museums, libraries, cinemas, public swimming pools etc.
Supplementary private pensions
Private pension funds can offer a supplementary pension, you may find this necessary to consider, especially if you aim to retire in a country with a higher cost-of-living than Hungary. Anybody who pays in a monthly amount will receive a supplementary monthly pension. Participation in a private pension is not obligatory; it is optional and up to each individual to decide if they want it, which company to use and how much to contribute.