Because freelancers are not our employees and we don't pay taxes on payouts, they must declare any income received via Solar Staff by themselves.
To carry on tax accounting in Hungary for your Solar Staff income, you need to:
Tax residence in Hungary
Hungary's residents are taxed on their worldwide income, while non-residents are taxed only on their Hungarian-sourced income.
An individual is regarded as resident in Hungary if one is either:
A citizen of Hungary (in case of dual citizenship, it is necessary to have a permanent registration address in Hungary)
A European Economic Area (EEA) national with an EEA registration card issued in Hungary, and spends at least 183 days in Hungary in a calendar year
A third-country national permanently settled in Hungary
Even if the above criteria are not met, an individual is regarded as tax resident in Hungary if:
Their only permanent home is in Hungary
Their center of vital interests is in Hungary (if they have no permanent home or have a number of permanent homes in different countries)
They spend more than 183 days in a calendar year in Hungary (if they have no permanent home in Hungary or any other country, and their center of vital interests cannot be determined)
Tax identification number (TIN)
To pay income tax on earnings from official employment (not from Solar Staff), individuals are required to obtain a tax identification number (adóazonosító jel) consisting of 10 digits. Individuals can get a tax identification number online, by mail, or by phone. Learn more about the process of obtaining a tax ID number here.
However, for income derived from entrepreneurial activities and for VAT payment purposes, a different tax identification number (adószám) is required. This one consists of 11 digits and is issued to entrepreneurs upon registration. You can check the validity of a tax identification number (adószám) here.
To earn income in Hungary, freelancers are required to register as a sole proprietor (egyéni vállalkozás, egyéni cég). Such registration is only available to citizens of the EEA countries or residents of Hungary. Agricultural producers, veterinarians, lawyers, attorneys, private patent attorneys, and notaries may not register as sole proprietors (Article 2 of the Act on Sole Proprietors and Sole Proprietorships).
Registration. To start activities as a sole proprietor, one needs to get access to the Client Gate (Ügyfélkapu) e-government services portal. Through this portal, sole proprietors can file tax returns, pay taxes, and interact with the Hungarian tax authorities. To register on the e-government portal, individuals need to personally visit a local government office in Hungary or the Hungarian consulate if they are located outside the country. Prior appointment is required for the visit. To apply for access to the e-government portal, individuals need to provide an identification document, a residence permit (or another document permitting long-term stay in Hungary), and an email address for communication with the tax authorities. The login credentials, including the username and password, will be sent to the provided email address.
Once access to the portal is granted, the sole proprietor will be added to the register and a certificate will be sent to their address, specifying the tax identification number, registration number, personal information of the sole proprietor, and the chosen type of business activity.
Sole proprietors in Hungary may start their activities as soon as the certificate is issued. New sole proprietors are required to register with the tax authorities within 15 days after their registration in the tax status, either electronically via the Web Business Service app or in person at the customer service department of the Hungarian Tax Service.
A sole proprietor shall always indicate the registration number and sole proprietor designation (or its short form "e.v.") next to their name or signature. Sole proprietors in Hungary are not required to have their accounts audited.
In Hungary, there are the following tax regimes for sole proprietors:
These tax regimes differ in terms of tax rates and procedures for recording business expenses. Regardless of the tax regime chosen, sole proprietors are required to pay contributions to social security funds, local taxes, and may also be VAT taxpayers.
Read on for more details on tax regimes.
Regular tax regime
Upon registration of a sole proprietor, the regular tax regime is automatically applied by default for the purpose of income tax payments. It requires the payment of the following taxes and contributions:
Income tax is paid at a rate of 9% on the difference between income and expenses that are related to business activities (for a full list of deductible expenses, see Appendix No. 11 of the Personal Income Tax Act).
Accounting and reporting. Sole proprietors are obliged to keep records of their income and expenses in accordance with Appendix No. 5 of the Personal Income Tax Act. Tax returns (Form 22SZJA) are required to be filed before May 20 of the year following the reporting year. Learn more about completing and filing a tax return here.
Payment of tax. The final tax payment towards the total tax amount shall be made while filing the tax return, with advance tax payments made before the 12th day of the month following the quarter. It is not necessary to provide separate reporting for these advance payments, as they shall be included in the final income tax return.
VAT (ÁFA, Általános forgalmi adó) is calculated at a rate of 27% and is payable if the annual turnover from entrepreneurial activities exceeds 12 million Hungarian forints (HUF). To register as a VAT payer, it is necessary to file Form 23T201 to the tax authorities. After obtaining the VAT identification number, Form EGYKE is to be submitted to the Electronic Public Road Trade Control System (EKAER) for the e-filing of invoices.
Reporting and payment. The reporting period for VAT can be a month, quarter, or year, depending on the VAT amount due. If the VAT amount is up to HUF 250,000, the reporting period is a year; if it is between HUF 250,000 and HUF 1 million, the reporting period is a quarter; for amounts exceeding HUF 1 million, the reporting period is a month. VAT returns (Form 2265) are required to be filed before the 20th day of the month following the respective reporting period. The annual VAT return shall be filed before 25 February of the year following the reporting tax year. Tax is payable at the same time as the tax return is filed.
Reporting and payment. Local business tax returns (Form 22HIPAK) are required to be filed before May 31 of the year following the reporting year. Learn more about completing and filing a tax return here. The tax return is to be completed using the ÁNYK program and may be filed online. The final tax payment towards the total tax amount shall be made while filing the tax return, with advance tax payments made before 15 March and 15 September.
Declaring and paying contributions and taxes. To pay contributions and the social tax, it is necessary to register as an insurer with the tax authorities by submitting Form 22Т1041. Contributions and the social tax shall be paid monthly, with respective returns (Form 2308) submitted quarterly before the 12th day of the month following the quarter. Learn more about filing deadlines and returns completion requirements here.
This tax regime differs from the regular one in that it sets a flat rate for your deductible business expenses instead of treating actual documented expenses as deductible. The flat rate varies depending on the type of the sole proprietor's activity:
90% of income for retail trade
80% of income for industrial, agricultural, and service sector (hairdressing, construction, repairs, etc.) activities
40% of income for other types of activities
Starting 2023, there are no annual income caps for sole proprietors under the flat-rate regime.
To switch from the regular tax regime to the flat-rate regime, it is necessary to submit an application (Form 22T101E) before September 1. The application shall specify the intended period for switching the tax regime (either the current or the next tax period). The application can be completed using the ÁNYK program and submitted through the Client Gate (Ügyfélkapu) e-government services portal.
The income tax, local business tax, VAT, social tax, and social security contributions are payable by sole proprietors using the flat-rate regime similarly to the regular tax regime, but with certain nuances:
Business income tax rate – 15%
Each year, there is an opportunity to deduct half of the annual minimum wage from the sole proprietor's taxable income ((HUF 232,000/2) * 12 = HUF 1.392 million in 2023)
If a sole proprietor combines their business activity with part-time employment (up to 36 hours per week), social security contributions and the social tax are only required to be paid after exceeding the established income caps:
For a 40% flat-rate regime, the income cap is HUF 2 million
For an 80% flat-rate regime, the income cap is HUF 6 million
For a 90% flat-rate regime, the income cap is HUF 12 million
The National Tax and Customs Administration of Hungary (Nemzeti Adó- és Vámhivatal / NAV)
The Client Gate (Ügyfélkapu) e-government services portal
List of tax account numbers for payment of taxes
If you have any questions, get in touch via the chat in your Solar Staff account or email us at [email protected].