Taxation of Digital Nomads in Hungary

As the trend of remote work continues to rise, many professionals are choosing to live a more flexible lifestyle as digital nomads. Hungary has emerged as a popular destination for these individuals due to its rich culture, vibrant cities, relatively low cost of living and its favourable tax system. Taxation is an important consideration for anyone planning to live and work remotely in Hungary. This article provides an overview of the key aspects of taxation for digital nomads in Hungary.

Personal Income Tax in Hungary

Hungary has a flat personal income tax rate of 15% for individuals. This rate applies to all income types, including salaries, freelance income, and investment returns. However, entrepreneuers should pay 9% tax on their profit.

In addition to personal income tax, digital nomads should be aware of the Social Security Contributions: If a digital nomad works as an employee of a foreign company while residing in Hungary, he is also required to pay Hungarian social security contributions, unless he is paying this kind of contribution in another country. The Hungarian social security rates are the followings: 18,5% from the employee, while 13% from the employer.

If they are self-employed or operate a local business, contributions should be paid at least on the minimum wage, which is EUR 730 in 2025 (base of higher contribution can also be chosen). The social security also includes health insurance however, additional private health insurance might also be needed.

Double Taxation Agreements (DTAs)

Hungary has signed Double Taxation Agreements with many countries to prevent individuals from being taxed twice on the same income. This means that if a digital nomad is considered being taxable in Hungary but earns income from another country, they may also be able to offset taxes paid in their home country against their Hungarian tax obligations.

Special Tax Regimes for Digital Nomads in Hungary

Private entrepreneurship in Hungary is especially advantageous for digital nomads running their own businesses; the Hungarian eGovernment services are quite developed, and most of the government services are now available online, without personal presence.

Private entrepreneurs should pay income tax at 15% and social security on the minimum wage (which is EUR 730 monthly, so the minimum social contributions amount to EUR 230 / month) at least, their profit is taxable at 9%, costs are deductible from the tax base, while registration and deregistration are easy and smooth processes through eGovernment services.

Private entrepreneurs are not subject to accounting rules, i.e. they do not have to keep their accounts according to the Hungarian accounting act. However, documents necessary to prepare and file the tax returns should still be kept in records, and web-based electronic invoicing system should be used, but these are easy administrative obligations compared to keeping books and invoicing according to the accounting act.

Family tax credits are also applicable, while young people are free of income tax (15%) until they are 25 years old (social charges are still applicable).

If the entrepreneur has only foreign corporate clients, VAT is also not payable, and he can chose exemption from VAT.

Third country (non-Hungarian and non-EU country) citizens can also apply for private entrepreneur status in Hungary, and they might be eligible to get residency permit for 1+2 years, depending on their education and activities carried out.

Practical Steps for Digital Nomads

1. Understand the potential tax obligations, including double tax treaty rules

2. Immigration considerations for third country (non-EU) citizens

3. Keep Accurate Records: Maintain detailed records of your income sources and any taxes paid abroad to simplify tax filing and to claim deductions or tax credits.

4. Be familiar in using digital technologies to get the most from eGovernment services.

Conclusion

Hungary offers a welcoming environment for digital nomads, with attractive living conditions and favourable taxation options. However, understanding the local tax implications is crucial for staying compliant and making the most of your remote working experience. By being informed and seeking professional advice, digital nomads can successfully navigate the complexities of working in Hungary while enjoying its rich cultural offerings with favourable taxation options.