Income from Independent Personal Services
Find out how the Hungarian tax system treats non-employment income, such as rental income, property transfer and savings...
All activities as a result of which a private individual receives income, and which are not included in the section of “income from employment”, are considered as independent personal services.
In particular, this category represents the activities of private entrepreneurs, agricultural producers, lessors and appointed auditors, the activities of Members of the European Parliament, Members of Parliament and representatives of municipalities.
Income from independent personal services is a part of aggregated income. The tax rate is 16 percent.
Expenses incurred in connection with the particular activity can be set against independent income to decrease the taxable amount. There are two types of cost accounting to which the private individual is eligible:
- Itemized settlement of expenses (all expenses must be proven by invoices)
- Lump sum cost ratio of 10 percent (incomes can be reduced by a fixed 10 percent)
Income from Rental of Own Property or Real Estate
If a private individual rents out their property, the income is considered as an income from independent personal services subject to personal income tax.
Some simplification rules are applied in the case of property rental:
- registration as a private entrepreneur is not necessary
- tax ID number is not required (if the VAT exemption was chosen)
- expense settlement and depreciation are applicable (such as overhead costs and maintenance)
- the general rules of advance tax are valid. If the lessee pays income tax directly to the authorities, the lessee is obliged to assess and pay the advance. If the lessee is a private individual, the lessor is obliged to assess and pay tax advances quarterly
Income from rental of agricultural land or private accommodation is taxed separately.
- For more information on property taxes in Hungary: Click here
All income which is not regulated differently in the Personal Income Tax Act is considered as other income (not dependent, not independent and not separately taxable income).
Two examples of "other income" are income from the disposition of the practice right (when a medical professional earns income through private medical activity) and lump sums refunded from the individual accounts of private pension fund holders.
Other income is a part of the aggregated tax base. No expense deduction from other income is allowed. The tax rate is 16 percent.
Certain Incomes which are Taxed Separately
There are certain incomes specified in the law which are taxed separately, such as entrepreneurial income, transfer of assets, benefits in kind and capital incomes.
Tax rate on these incomes is 16 percent.
Income from Savings and Securities
Tax is due on the full amount of such income. Capital gains on the withdrawal or realisation of securities (income from interest and foreign exchange gains) are, in principle, taxable as income.
It should be noted that the profit share of a partner in a partnership is regarded as a dividend. Partnership income is taxed at the level of the partnership.
This income is also taxable at the flat rate of 16 percent.
Income from the Transfer of Movable Property
All proceeds received by a private individual in connection with the sale of movable and tangible property are considered as income. The income is equal to the value which the private individual receives in exchange, typically the sale price or the market value of the property in exchange.
The income can be reduced by the cost of acquisition, cost of valuable investments and cost of sale. The tax base is equal to the income reduced by the costs above.
The tax rate is 16 percent.
Income from the transfer of movable property is considered as received on the date of the relevant contract.