How can an Umbrella Company Help with Contracting in Hungary?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Hungary. Even better, most are experts in Hungary and expat tax law, meaning they’ll also help you optimise your earnings in Hungary.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Hungary.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Hungary, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Hungary and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Hungary
One of the most consistently challenging aspects of contracting in Hungary is complying with the country’s tax system. As well as paying tax in Hungary, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Hungary
If you’re working in Hungary under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Hungary for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Hungary, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Hungary through PAYE is left with the prospect doing everything themselves.
Do you know much about Hungarian Tax Law? Does Hungary have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Hungary can range from 0 to 15 percent, and you need to be sure you are placed in the correct tax brackets.
Tax Filing as a Contractor in Hungary
|When Do You Need to Lodge Your Tax Return?||20 May (with an extension to 20 November in some cases)|
|Tax Filing Deadline||20 May (with an extension to 20 November in some cases)|
|Can you file it online?||Yes, https://en.nav.gov.hu/|
How to File Taxes in Hungary as a Contractor
Step 1: Register for a Tax Identification Number (TIN)
Register for a TIN by completing form ‘T34’ which can be accessed here(link is external). Submit the completed form to the nearest tax office if you are a resident, and the Large Taxpayers Directorate if you are a non-resident. Detailed instructions on filling the the form can also be found here on the bottom of the webpage.
Upon successful registration, the National Tax and Customs Administration will issue you a tax card.
Step 2: Obtain a Draft Personal Income Tax Return
The draft personal income tax return is a statement on the income you have acquired during the income tax year, compiled on the basis of data provided by your employer. The Hungarian tax authority calculates your income tax on your behalf, taking into account advance tax payments and any tax benefits. The draft tax return indicates taxes still payable by you, or amounts to be returned to you.
From 15 March onwards, you can obtain a draft tax return on the NTCA website here(link is external). Alternatively, you can SMS 06 70/717-7878 the following:
SZJA [space] TIN [space] date of birth
Step 3: Verify Your Draft Income Tax Return
If you agree with the draft prepared for you by the NTCA, you do not need to do anything. This will be your official tax return.
If you do not agree with the draft, you can modify it online on WebNYK, or by completing and mailing form ‘SZJA’ to:
Post Office Box 137
Paper forms can be accessed here(link is external). You may also submit your forms in person to the nearest tax office, the addresses of which can be found here on the bottom of the webpage(link is external).
WebNYK is an tax-filing software which can be downloaded from the NTCA website here(link is external). The program will assist you in filling out your tax return.
Tax Figures in Hungary
|Currency||Hungarian Forint (HUF)|
|Tax-free Threshold in Hungary||None|
Employment income is taxed at a flat rate of 15%.
Tax Residency in Hungary
When do you become a tax resident in Hungary
You become a tax resident in Hungary when:
You become a tax resident in Hungary when:
You are a Hungarian citizen;
You have dual citizenship in Hungary and another country, and you are domiciled or usually reside in Hungary in the calendar year;
You are a EEA Member State citizen and you exercise your right to free movement for at least 183 days in Hungary in the calendar year;
You are a third country national permanently settled in Hungary or a stateless person;
You have a permanent home solely in Hungary;
Your centre of vital interests is in Hungary; or
You spend at least 183 days in Hungary in a calendar year i.e. you have a habitual abode there.
Does the 183 day rule apply in Hungary
Am I taxed on my global income in Hungary
Residents are taxed on their worldwide income in Hungary. Non-residents are taxed on their Hungary-sourced income only.
Can you set up your own Limited Company in Hungary?
|How long does it take to set up||7 days|
|How much does it cost||HUF100,000-260,000 (depending on complexity of legal services) + HUF5,000 annual fee|
|Is it easy?||Starting a Business Rank: 79/190 (Source: World Bank)|
Tax Calculator in Hungary
If you are a contractor and want a calculation on your tax and net retention in Hungary, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Hungary
Contractors in Hungary are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Hungarian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Hungarian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Hungarian tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Hungary
We work with numerous umbrella companies in Hungary, many of whom are experts in tax and immigration laws. If you have any questions about tax in Hungary, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Hungarian work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Hungary but without the overhead of directly dealing with the Hungarian tax authorities. Get in touch with us today for some reliable advice on tax in Hungary!
A Contractor’s Guide to Work Permits in Hungary
Immigration is one of the primary concerns for any contractor hoping to start working in Hungary. Permanent employees will find it easy to get their Hungarian work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Hungarian work permit, known more commonly as the Hungarian Work Visa, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Hungary is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Hungary (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Hungary. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Hungary and match contractors with the right company for them. If you’ve already secured a contract in Hungary, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).