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Limited Liability Companies in Hungary: From Compliance to Excellence – Optimizing Taxes for KFTs (LLC)

Understanding the ins and outs of taxation is pivotal for businesses operating as KFTs (LLC) – Limited Liability Companies in Hungary. This comprehensive guide unveils the corporate tax rate, allowable deductions, tax credits, and critical aspects of reporting and compliance for KFTs.

1. Monthly Tax Declarations for Limited Liability Companies in Hungary: A Deep Dive

For Limited Liability Companies in Hungary, monthly tax declarations encompass both payroll and VAT declarations, with submissions and tax payments due by the 12th and 20th of each month, respectively. This involves a total payable tax of 46.5%, broken down into 18.5% for Social Security payments, 15% for Personal Income Tax (PIT), and a 13% social contribution for each employee. Understanding the intricacies of hiring an employee, including gross salary specifications and associated deductions, is crucial for Limited Liability Companies operating in Hungary.

When a Limited Liability Company in Hungary hires an employee with a monthly gross salary of 400,000 Forints, including total earnings before deductions, it is imperative that all employment contracts clearly specify salaries in Hungarian Forints. The deductions encompass 15% for Personal Income Tax (PIT) and 18.5% for social security contributions. After these deductions, the net salary, reflecting what the individual takes home, amounts to 266,000 Forints. Additionally, the company bears the responsibility of paying a 13% social contribution, totaling 52,000 Forints. Therefore, the overall cost to the Limited Liability Company for employing an individual with a gross salary of 400,000 Forints reaches 452,000 Forints.

In the realm of VAT tax obligations for Limited Liability Companies in Hungary, declarations must be submitted and taxes paid by the 20th of each month, carrying a tax rate of 27%.

Our dedicated team is here to guide you through every step of the Tax Declarations process for Limited Liability Companies in Hungary. Gurcan Consultancy provides comprehensive consultation services. For expert assistance with your process, feel free to reach out to us anytime at: info [@] gurcanpartners.com

 

2. Annual Tax Declarations for Limited Liability Companies in Hungary: Unraveling Corporate Tax and Local Tax

For Limited Liability Companies in Hungary, annual declarations and tax payments are due by the end of May for each calendar year. The corporate tax rate is 9%, and a 12% interest penalty applies to defaults. Additionally, local tax, set at 2% in Hungary, takes a more stringent approach than corporate tax, disallowing certain items as expenses accepted in the latter. Limited Liability Companies can include direct production expenses in the tax calculation, while expenses unrelated to production, such as food or vehicle rent, are not considered.

Our online consultancy services are tailored to streamline your process of Tax Declarations for Limited Liability Companies in Hungary, offering essential insights to navigate regulations and ensure a smooth and compliant entry into the Hungarian business. Schedule your online meeting, and let us guide you through the intricacies of the application, making the process efficient and hassle-free.

Prior to taking any action, we encourage you to reach out to us for a comprehensive discussion on pertinent topics.

 

 

3. Quarterly Tax Declarations for Limited Liability Companies in Hungary 

Limited Liability Companies in Hungary are required to submit quarterly tax declarations covering various aspects, including vehicle, house, management office, and construction site rentals. When dealing with vehicle rentals, companies must verify whether the rental company covers the vehicle tax; otherwise, the responsibility falls on the Limited Liability Company, and the tax rate fluctuates from 16% to 60%, contingent on European emission standards and kilowatts.

In addition to these declarations, Limited Liability Companies in Hungary must fulfill an Environmental Tax Declaration for imports. The submission of this declaration is mandatory, accompanied by the payment of the tax. The tax rate is subject to variation based on the types and quantities of environmentally harmful substances present in the imported product.

Gurcan Consultancy provides comprehensive consultation services. For expert assistance with your taxation process in Hungary, feel free to reach out to us anytime at: info [@] gurcanpartners.com

 

4. Special Cases and Additional Declarations for KFTs in Hungary

Exploring unique circumstances in tax considerations brings to light important nuances for businesses:

Worker Meal Expenses: These can be factored into Local Tax calculations but are ineligible for VAT deduction.

Legally Non-Accepted Expenses: Expenditures disregarded in tax calculations and documents lacking validity for tax purposes can be written off as non-accepted expenses.

Recognition of Deposits: Deposits paid are duly recognized; however, they remain exempt from taxation.
Audit Obligation: If annual sales surpass HUF 300,000,000, a mandatory audit becomes a necessity.

Employment Quota for Disabled Persons: Beyond 25 employees, a company must employ one disabled person, with penalties if not adhered to. Employing two disabled persons after 25 employees is necessary, with a requirement for one disabled person per every 20 employees. A disability certificate from Hungarian authorities is obligatory. Failure to employ disabled persons incurs corresponding taxes, amounting to 5,400 EUR per person annually if no disabled person is employed, or if no personnel is hired.

VAT Refunds: VAT deducted from purchases can be refunded in cash or by offset. An Audit Report, authorized by the Tax Administration, is essential for refunds. Monthly limits are capped at HUF 1,000,000 (EUR 3,000), and a sales invoice is imperative for refund processing.

Feel free to reach out to us anytime at: info [@] gurcanpartners.com

 

5. Tax Reporting & Compliance for KFTs

Meeting reporting and compliance requirements is integral for KFTs. KFTs must adhere to specific deadlines for filing their annual tax returns. It is essential to be aware of these dates to avoid penalties or fines. Alongside tax returns, KFTs are typically required to submit detailed financial statements. These statements provide a comprehensive overview of the company’s financial health. Maintaining accurate and organized financial records is essential for compliance. This includes documentation related to income, expenses, and any transactions impacting the company’s financial position. KFTs should be prepared for potential tax audits. Ensuring meticulous record-keeping and adherence to tax regulations will contribute to a smoother audit process.

Navigating the tax landscape is a critical aspect of managing a KFTs Limited Liability Companies in Hungary in Hungary. By staying informed about the current corporate tax rate, maximizing allowable deductions and credits, and meeting reporting and compliance requirements, KFTs can ensure financial stability and foster a positive relationship with tax authorities. For specific inquiries or personalized guidance regarding the taxation framework for KFTs, businesses are encouraged to consult with tax professionals or accounting experts familiar with Hungarian tax regulations. Please contact our team to schedule a consultation.

Discover the pinnacle of tax optimization with Gurcan Consultancy‘s bespoke consultation services designed exclusively for Limited Liability Companies (KFTs) operating in Hungary. Our expert team is dedicated to guiding you through the intricacies of the Hungarian tax landscape, ensuring your company not only meets compliance standards but excels in maximizing tax benefits. For personalized assistance in navigating your taxation process, we invite you to contact us at any time: info[@]gurcanpartners.com. Your pathway to tax excellence begins with Gurcan Consultancy.

 

6. Summary of Tax Rates for Limited Liability Companies in Hungary

Monthly Tax Declarations:

• Social Security: 18.5%
• Personal Income Tax (PIT): 15%
• Social Contribution: 13%
• Total Payable Tax: 46.5%

 

Annual Tax Declarations:

• Corporate Tax Rate: 9%
• Local Tax: 2%

 

Quarterly Tax Declarations:

• Vehicle Tax Rate: Fluctuates from 16% to 60% (depending on emission standards and kilowatts)
• Environmental Tax Rate: Variable based on imported product’s harmful substances

 

Special Cases and Additional Declarations:

• VAT Refunds: Monthly limit capped at HUF 1,000,000 (EUR 3,000) at a 27% rate
• Worker Meal Expenses: Ineligible for VAT deduction
• Legally Non-Accepted Expenses: Written off
• Employment Quota for Disabled Persons: Penalties if not adhered to, corresponding taxes amount to 5,400 EUR per person annually

 

Tax Reporting & Compliance for KFTs:

• Corporate Tax Rate: Ongoing consideration for financial stability
• Meticulous Record-keeping: Essential for compliance
• Potential Tax Audits: Preparedness for a smoother process

For personalized guidance on these tax rates and navigating the Hungarian tax landscape, youcan consult with Gurcan Consultancy at info[@]gurcanpartners.com.

 

Explore our additional articles about Hungary:
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Company Setup In Hungary, 5 Good Reasons To Start
Company Formation In Hungary
Real Estate Investment In Hungary
Debt Collection In Hungary
Digital Nomad Visa (White Card) In Hungary

 

Feel free to reach out to us through the following contact information:

E-MAIL: info [@] gurcanpartners.com

Gurcan Partners Hungary Office
TELEPHONE: +36 1 808 94 49