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Taxes

What are taxes?

Taxes form the basis of burden sharing. Taxes are an involuntary fee required to be paid by individuals or corporations. Paying taxes is enforced by a government entity and most typically they are paid in money.

Who pays taxes, and how much?

Part of the taxes is paid by the employee, and part of it by the employer. Taxes are closely connected to benefits; these have to be paid to the government from the gross salary.

The following is deducted from the gross salary.

– 15% personal income-tax: this is your contribution to the budget of the government, to the burden sharing.

– 10% pension contribution: Hungary currently has an unfunded system for pensions, which means that pensions are paid for directly from the current workers’ contributions and taxes. Paying this contribution also allows you to get a pension later on.

– 7% health insurance contribution: health insurance contribution is made up of two parts: 4% is paid to finance hospitals, doctors and hospital care; 3% is paid to finance sick pay (which is important to keep getting some salary while you are unable to work due to health problems).

– 1.5% labour-market contribution: this has to be paid to provide workers with things like free health care.

Payroll taxes are paid by the employing companies after each employee to the government:

– 22% social contribution: this is a mandatory tax for anybody who employs workers, private enterprises, sometimes even licensed traditional small-scale producers.

– 1.5% qualification contribution.

Students employed through student cooperatives only have to pay the personal income-tax, but not the contributions. It is important to note that this is true only if you find work through a student cooperative. If not, regardless of being a student you have to pay all contributions.

Tax declaration/returns

Via tax declarations the government can keep record of workers paying taxes, being registered at their workplace, and having a valid contract. Both employers and employees have to declare their taxes. Through these tax declarations we can also see if we are eligible for tax cuts/benefits (for example you pay less taxes if you are a parent with three children) – in these cases you can get tax returns for the difference. Tax declarations have to be filed annually, and you have to indicate how much taxes you have paid in the given year (or how much taxes were deducted from our salary). This is due in the middle of May every year. After the due date the National Tax and Customs Administration checks all this and fines those who have missed the due date.