Import Procedures

Many EU member states maintain their own list of goods that are subject to import licencing. In Hungary, import and export licences are issued by the Hungarian Trade Licensing Office (Magyar Kereskedelmi Engedélyezési Hivatal – MKEH).

The official model for written declarations to Customs is the Single Administrative Document (SAD). Goods brought into the EU customs territory are, from the time of their entry, subject to customs supervision until customs formalities are completed. Goods are covered by a Summary Declaration which is filed once the items have been presented to customs officials. The customs authorities may, however, allow a period for filing the Declaration which cannot be extended beyond the first working day following the day on which the goods are presented to customs.
The Summary Declaration must be filed by:

• the person who brought the goods into the customs territory of the Community or by any person who assumes responsibility for carriage of the goods following such entry; or
• the person in whose name the person referred to above acted.

The Summary Declaration can be made on a form provided by the customs authorities. However, customs authorities may also allow the use of any commercial or official document that contains the specific information required to identify the goods.  The SAD serves as the EU importer's declaration. It encompasses both customs duties and VAT and is valid in all EU member states. The declaration is made by the person clearing the goods, normally the importer of record or their agent.

European Free Trade Association (EFTA) countries including Norway, Iceland, Switzerland, Turkey and Macedonia also use the SAD. Information on import/export forms is contained in Council Regulation (EEC) No. 2454/93, which sets forth provisions for the implementation of the Community Customs Code (Articles 205 through 221). Articles 222 through 224 provide for computerised customs declarations and Articles 225 through 229 provide for oral declarations.

As part of the 'SAFE' standards advocated by the World Customs Organisation (WCO), the European Union has set up a new system of import controls, the 'Import Control System' (ICS), which aims to secure the flow of goods at the time of their entry into the customs territory of the EU. This control system, part of the Community Programme eCustoms, has been in effect since January 1, 2011. Since then, operators are required to pass an Entry Summary Declaration (ENS) to the customs of the country of entry, prior to the introduction of goods into the EU customs territory. The EU recently introduced a new import control system called ICS2 to implement the EU customs pre-arrival security and safety programme. L'UE a récemment introduit un nouveau système de contrôle des importations appelé ICS2 pour mettre en œuvre le programme de sécurité et de sûreté des douanes de l'UE avant l'arrivée.

For further information, please visit the website of the EU Customs Union.

Specific Import Procedures

Consult the website of the Hungarian National Tax and Customs Administration for further information on specific import procedures.

Distribution channels

Until recently, small, independent, family-owned shops dominated Hungary's retail sector, especially in the less populated parts of the country. Thousands of these shops continue to serve rural populations, posing logistical challenges for distributors and suppliers. However, medium-sized, financially well-established heavy-discount chains are making inroads in Hungary's retail sector with retail units in smaller villages and other settlements. The most successful distribution companies in Hungary are wholly-owned subsidiaries of international chains, such as Auchan, Tesco, Lidl, Aldi, DM, etc. The increasing share of discounters reflects the high price sensitivity of Hungarian customers and provides evidence of strong price competition leading to lower profit margins of grocery retailers. However, according to Euromonitor, supermarket chains are rationalising their networks, focusing on locations and outlets with the highest growth potential and less competition, resulting in a decline of total outlets in recent years. This also resulted in changes in the ownership of outlets.

Unlike the countryside, Budapest's retail sector has many prestigious superstores, shopping centres, hypermarkets, and supermarkets as well as large retailers such as Rossmann, OBI, Praktiker and IKEA. A typical distribution channel in Hungary is for importer-wholesalers to service retailers and end-users directly.

There are more than 120 shopping malls, and nearly 170 hypermarkets in the country (US Trade administration and Statista). The largest malls in Budapest are Arkad, KOKI Terminal, Westend, Arena and Mammut. Supermarkets and grocery stores generated EUR 11.7 billion in 2022, a 1.4% increase compared to 2020 (IBISWorld).

E-commerce has been growing in the retail sector, with a further jump due to the COVID-19 epidemic. Cash is still more dominant in Hungary but the number of retail transactions with bank or debit cards (Visa, Amex and Mastercard) has grown significantly in recent years. Online retail sales increased 32% to HUF 1.203 trillion in 2021 (Budapest Business Journal).

Distribution market players

Distribution networks for consumer goods are rapidly developing. Small and medium sized local businesses and especially small independent retailers are losing their marketshare to foreign competition.
According to the latest figures by the USDA, hypermarkets account for 24% of all turnover, discount stores for 21%, supermarkets for 17%, and the market share of retail chains is 13%.

The main international grocery retailers are (Trade Magazine):

•    Lidl with a turnover of HUF 922 billion in 2021
•    Spar (HUF 792 billion)
•    Tesco (HUF 765 billion)
•    Coop Hungary (HUF 674 billion)
•    CBA, Hungary main national retailer (HUF 569 billion)
•    Auchan (HUF 464 billion)
•    Réal (HUF 433 billion)
•    Penny (HUF 389 billion)
•    Aldi (HUF 384 billion)

Retail Sector Organisations

Hungarian Chamber of Commerce

Consumption Taxes

Nature of the Tax

VAT (Value Added tax - AFA: Általános Forgalmi Adó)

Tax Rate

27%

Reduced Tax Rate

A 5% rate applies to human medicines and specific medical items; printed books; live animals or processed meat (to a limited extent) of certain large species like pigs, cattle, sheep, and goats; poultry meat, eggs, and various types of milk (including fresh and UHT/ESL); internet services; prepared meals; freshly made non-alcoholic beverages; lodging services; the sale of new real estate for residual purposes, limited to 150 square meters for flats and 300 square meters for detached houses (from 1 January 2021); and the importation of artworks.
For new residential properties with an available building permit or notification until 31 December 2024, the reduced tax rate of 5% may be applied until 31 December 2028.

A reduced rate of 18% is applicable for some basic foodstuffs (e.g. milk, certain dairy products, products made from cereals, flour, and starch) and entrance to certain open-air public music festivals.

Effective from 1 January 2024, a zero percent VAT rate is implemented on journals published at least four times per week.

Other Consumption Taxes

Excise tax is levied on items such as mineral oils, alcohol and alcoholic beverages (products with an alcohol content of 1.2% or more by volume), beer, wine, other still and sparkling fermented beverages, intermediate alcoholic products, tobacco products, energy products (electricity, natural gas, and coal). The first domestic distributor of certain products, as well as the acquirer of goods that are brought from abroad and used for the domestic manufacture of products that will be sold in Hungary, are liable to pay a product tax at different rates according to the product. Starting January 1, 2024, the excise duty rates for fuels like petrol, jet fuel, and gas oil (diesel) rise from HUF 142,900 to HUF 157,550 per thousand liters, varying based on the global crude oil price and the specific fuel type.

Certain products are subject to the environmental protection product fee, including tyres, packaging materials, batteries, commercial printing paper, other plastic products, other chemical products, other crude oil products, etc.

A product tax must be paid by the initial domestic distributor of specific goods, as well as by those who acquire items from overseas to use in the production of their own goods sold in Hungary. The products subject to the tax include beverages, energy drinks, pre-packed products with added sugar, salty snacks, flavoured beer and alcoholic beverages, delicacies, fruit jams, etc.

An airline contribution shall be paid by the ground handling service provider entity after the air passenger transport activity based on the number of passengers on the aircraft served (rates vary according to the final destination of the passenger and the carbon dioxide emission value of the aircraft).

Registration tax is charged on passenger cars, motor homes, and motorcycles before they can be registered and put into service in Hungary; it is also payable by car fleet operators.

Telecommunications service providers are subject to a specific tax (HUF 2 per minute for calls made and HUF 2 per message sent for private individuals; HUF 3 per minute for calls made and HUF 3 per message sent for other entities).

Corporate Taxes

Company Tax

9%

Tax Rate For Foreign Companies

Corporations are residents for corporate income tax purposes if they are incorporated in Hungary or if their place of effective management is in Hungary. In determining the permanent establishment, Hungary follows OECD's model guidelines.

Capital Gains Taxation

In general, capital gains are part of the corporate tax base and are taxed at the standard rate of 9%. Capital gains arising from the sale of shares in Hungarian companies by non-resident companies are tax-exempt, with the exception of those of Hungarian property companies. Capital gains deriving from the disposal of investments may also be exempt provided that the taxpayer owns the Hungarian subsidiary (which cannot be a controlled foreign company) for at least a year and that the Hungarian authorities are kept informed of the acquisition of the investment within 75 days. Capital gains arising from the sale of intellectual property benefit from a similar exemption, yet the reporting period of the acquisition is reduced to 60 days.

Main Allowable Deductions and Tax Credits

All expenses incurred in deriving taxable business income may generally be deducted.

Grants, asset transfers, liabilities assumed, or services provided without charge may be recognized as business expenses if the taxpayer obtains a declaration from the recipient confirming that the benefit has been accounted for as income in their profit and loss statement. This declaration ensures that the recipient's pre-tax profit and tax base remain positive, and corresponding corporate income tax is paid on the income. Special regulations govern grants to charitable organizations and non-business entities. However, grants provided to foreign individuals or foreign resident companies are consistently treated as non-business expenses.
Bad debts can be deductible if supported by legally valid third-party documents stating that the receivable cannot be collected. Furthermore, 20% of eligible bad debts are deductible from the corporate income tax base if the debt was not settled within 365 days from the due date. Taxes are usually deductible (not for the corporate income tax and the recoverable VAT). Employee benefits and the fringe benefits tax payable on them are also tax-deductible.

R&D expenditure can be deducted from taxable income, as well as investments that comply with energy efficiency objectives. 300% of the direct costs for R&D are deductible from the tax base (capped at HUF 50 million) if the research activity is carried out jointly with a higher education institution, the Hungarian Academy of Sciences, or a research institute established by them.
Operating losses generated after the tax year 2015 can be carried forward for five years (up to 50% of the tax base calculated without losses carried forward), whereas the carryback of losses is not allowed.

Other Corporate Taxes

Local municipalities may levy a Local Business Tax (LBT) up to 2% on net sales revenues (the tax is also payable in EUR or USD). Certain financial institutions such as payment service providers and intermediaries of currency exchange services are subject to a financial transactions tax of 0.3% (capped at HUF 6,000 per transaction, the tax base being the amount of the transaction exceeding HUF 20,000). A special tax on retailers has been established, which applies also to foreign resident companies that do not have a permanent establishment in the country (for example online webshops). Progressive rates of 0.1%, 0.4% and 2.5% apply (with the entities with a tax base of less than HUF 500 million being exempt).

Municipalities have the authority to levy building tax and land tax annually. For the year 2024, the building tax rate can be either (i) a maximum of HUF 1,100 per square meter or (ii) a maximum of 3.6% of the adjusted fair market value of the building. Similarly, the land tax rate for 2024 can be either (i) a maximum of HUF 200 per square meter or (ii) a maximum of 3% of the adjusted fair market value of the land. The methodology applied is at the discretion of the municipality. The adjusted fair market value refers to 50% of the fair market value calculated under the inheritance tax and gift tax rules.

When real estate or shares in companies holding Hungarian real estate are transferred, the purchaser is liable for transfer tax at a rate of 4% of the property value up to HUF 1 billion, and 2% on any amount exceeding HUF 1 billion. The total tax obligation is limited to HUF 200 million per property. Certain exemptions may be applicable, such as for transfers occurring within preferential mergers or demergers of companies.

The most common types of stamp duty are gift duty and duty on transfers of property for consideration. Stamp duty is levied on movable and immovable property and property rights if they were acquired in Hungary, unless an international agreement rules otherwise.

Social security contributions paid by the employer amount to 13% of the employee's gross salary.

Mining companies must pay a mining royalty based on the quantity of the mineral resources extracted under authority permit. An environmental tax applies, calculated on the basis of the quantity of emitted materials (e.g. sulphur dioxide, nitrogen oxides, mercury, phosphorous, cyanides, etc.) multiplied by the respective fee rate.

Telecommunications service providers are subject to a specific tax (HUF 2 per minute for calls made and HUF 2 per message sent for private individuals; HUF 3 per minute for calls made and HUF 3 per message sent for other entities).

Various surtaxes are imposed on financial institutions, financial transactions, telecommunication services, insurance, retail, and energy companies, with rates varying depending on the entity and the type of transaction. Some surtaxes are calculated based on income, while others are based on revenue or total assets. Additional surtaxes were introduced for financial institutions, oil production companies, certain electricity sector entities, pharmaceutical companies, and airlines as of either 1 July or 1 August 2022. Moreover, the rates and coverage of several existing surtaxes were increased or extended at the same time. Initially intended to remain in effect until 31 December 2023, these measures have been prolonged until 31 December 2024.

Other Domestic Resources

National Tax and Customs Administration (NTCA)

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed

Hungary Tax Treaty Network

Withholding Taxes

• Dividends:
  • 0 (if paid to legal entities)
  • 15% (if paid to an individual);
• Interest:
  • 0 (if paid to legal entities)
  • 15% (if paid to an individual);
• Royalties:
  • 0 (if paid to a legal entity)
  • 15% (if paid to an individual).