Hungary’s 17% Effective Tax Rate Attracts Web Designers and Multimedia Creators

Hungary has positioned itself as one of the most tax-friendly destinations for creative professionals and athletes through the Simplified Public Burden Contribution (EKHO), featuring an effective tax rate as low as 17%—the lowest in the OECD. This attractive tax model makes it easier for web designers, multimedia creators, artists, and athletes to legally optimize their income up to 60 million HUF per year (approximately 150,000 EUR). However, to fully benefit from these preferential rules, several factors should be considered.

The simplified contribution to public burdens (ekho) is a form of personal income taxation that is designed to practitioners of specific professions on the fields of art, media and sports. They can be employees or contractors. Under certain conditions they can opt for this taxation if they also have income (at least the minimum wage) on which they pay the tax according to the general rules.

Lowest Effective Tax Rate – Just 17%

The total tax burden under EKHO is significantly lower compared to general taxation. Eligible professionals pay just 15% in EKHO, while employers cover a minimal contribution, resulting in an OECD-low effective tax rate of only 17%. This includes personal income tax and social taxes; no more charges are payable from the employee’s or from the employer’s side.

Simple & Predictable Taxation

If you are taxed under these preferential rules, you can forget complex tax brackets and deductions—EKHO offers flat-rate taxation for eligible professionals, making tax compliance stress-free and predictable.

Conditions & Potential Pitfalls

While EKHO offers great tax advantages, it comes with specific eligibility criteria that must be met. Only professionals working in designated fields (such as web design, multimedia creation, journalism, and sports) can opt for this tax model. Additionally, EKHO applies only to a portion of income, meaning individuals must maintain a minimum level of general-taxed earnings to qualify (which should be at least the minimum wage). Without proper preparation, some might face limitations in social benefits—such as reduced eligibility for sick pay or other insurance-based allowances.

Furthermore, a Hungarian registered employer is also needed to apply these preferential rules; employees with a foreign employer cannot opt for this taxation. Therefore, a specialized Employer of Record (EOR) service provider may be required.

To navigate these complexities and ensure compliance, engaging a specialized EOR service provider can be a key strategic step. With expert guidance, professionals can secure the benefits of EKHO while avoiding potential pitfalls.

Who Can Opt for EKHO?

EKHO is available to individuals in selected creative and sports-related professions, including:

• Web Designers & Multimedia Planners
• Graphic Designers, Film Industry Specialists, and Photographers 
• Musicians, Actors, and Writers 
• Journalists, Editors, and Media Professionals 
• Sports Coaches, Athletes, and Trainers 

The interpretation of the aforementioned professions is crucial for the application of EKHO rules. Therefore, contracts and the activities of employees or contractors must be carefully defined and articulated to ensure compliance and avoid misclassification.

Final Thoughts

With an OECD-lowest 17% effective tax rate, a streamlined taxation process, and the potential support of an EOR service provider, Hungary’s EKHO tax model is a game-changer for web designers, multimedia professionals, and athletes looking to optimize their finances.

EKHO offers a beneficial tax model for creative and sports professionals, with an effective tax rate of 17%. Simplified processes and EOR services make Hungary an attractive option for managing financial obligations. Clear contracts and following rules are essential to maximizing this benefit. Additionally, leveraging EKHO’s tax advantages can result in significant savings, allowing professionals to focus more on their passions and careers without the stress of complex financial management.

Despite the numerous advantages of the EKHO tax model, it is not without risks. Misclassification of professions or activities can lead to non-compliance, resulting in penalties or fines. Furthermore, the legal and tax environment in Hungary can be complex and subject to changes, which may affect the applicability of EKHO to certain professionals. This complexity underscores the need for vigilance in adhering to the rules and ensuring contracts are properly drafted and structured.

Given these potential pitfalls, it is highly advisable to engage the services of a tax consultant. A knowledgeable consultant can help navigate the intricacies of the EKHO system, provide tailored advice based on individual circumstances, and ensure compliance with all regulatory requirements. They can also assist in identifying additional opportunities for optimizing tax efficiency while mitigating risks. By investing in professional guidance, creative and sports professionals can fully capitalize on the benefits of EKHO while safeguarding against unexpected financial or legal challenges.