Double Tax Treaties in Hungary

The double tax treaties signed by Hungary

The double tax treaties signed by Hungary were designed with the purpose of avoiding the double taxation of incomes in the country were the foreign investor have residence and in the country were he has invested capital, Hungary in this case.

In present, Hungary has signed double tax treaties with more than 60 countries: Albania, Armenia, Australia, Austria, Azerbaijan, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Germany, Great Britain, Greece, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Kazakhstan, Korea, Kuwait, Latvia, Lithuania, Luxembourg, Macedonia, Malaysia, Malta, Moldova, Mongolia, Montenegro, Morocco, Netherlands, Norway, Pakistan, Philippines, Poland, Portugal, Romania, Russia, San Marino, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Taiwan, Thailand, Tunisia, Turkey, Ukraine, Uruguay, United States of America, Uzbekistan, Vietnam.

In 2012, treaties were signed with United Kingdom, Qatar, Georgia, Denmark and Bahrain.

Taxation in Hungary

The incomes are exempt from taxes in Hungary and are taxed in the country of origin. The dividends, interests and royalties are also subject to a lower taxation.

Even though there are no withholding taxes on dividends, interests and royalties paid to a legal entity in Hungary, there are withholding taxes on paid to individuals. The taxes are usually 16% but for treaty countries are much lower (not more than 15%).

The model used in the elaboration of most of the treaties is the OECD model.

Treaties regarding the exchange of information in Hungary

Most treaties signed by Hungary also regulate the exchange of information between two countries. The exchanged information is secret and cannot be disclosed to a third party. If the special provisions regarding the exchange of information are missing from the treaty, there are special agreements that can be signed separately, called protocols of exchange of information.

In the past, many entrepreneurs used to take advantage from the regulation of the double tax treaties and didn’t pay the taxes in Hungary and neither in the country of residence. 

Nowadays, if an entity wants to claim the refund for a tax, based on the treaty’s agreements it must provide a proof that is resident in another country and another proof that is already paying taxes in that country.

Besides tax services, you can always rely on our team of accountants in Hungary for accounting services.  These will be necessary for any company that sets up its tax residency in this country. 

In certain cases, the company may also need an audit and this is generally the case of large companies or when the company’s revenue reaches a certain level. The auditor must be registered with the Chamber of Hungarian Auditors. 

Please contact our company formation specialists in Hungary for more information regarding double tax treaties and their benefits.