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8.3. Other Taxes

Local Business Tax

All local governments are entitled to levy certain types of local taxes up to the ceiling set forth in the relevant regulations. The local business tax is by far the most significant such local tax.

The basis of the local business tax is the net turnover of the enterprise decreased by certain eligible expenses (e.g. material costs). The tax rate is determined by the local government, but may not exceed 2%. The capital city Budapest and most other large cities have set the rate of the local business tax at the maximum allowed 2%. However, some municipalities apply a lower rate or no local business tax at all.

No local business tax is payable on dividends, interest (except for certain financial institutions and insurance companies) and royalty income.

Transfer Tax

The transfer of Hungarian real estate or shares in companies holding Hungarian real estate is subject to transfer tax payable by the purchaser. The rate is 4% of the value of the property up to HUF 1 billion (approx. EUR 3.1 million) and 2% on the part of the value exceeding HUF 1 billion. However, the total tax liability is capped at HUF 200 million (approx. EUR 630,000) per property.

The purchaser is obliged to pay transfer tax on the acquisition of a real estate holding company provided that the purchaser acquires (by itself or together with its related parties) more than 75% interest in the real estate holding company. A company qualifies as a real estate holding company if more than 75% of its total assets (less financial assets and receivables) consists of real properties (at book value) or it has at least 75% direct or indirect stake in another company that satisfies this criterion. Intra-group transfer of real estate or a real estate holding company is generally not subject to transfer tax.

Special Industry Taxes

The Hungarian government has introduced over the past few years a number of industry-specific taxes. Hence, special taxes are levied on financial and insurance service providers, on telecommunication companies, on energy suppliers and on advertising activities. Such taxes are payable based on the commission revenue of financial service providers, the balance sheet total of credit institutions, certain insurance premiums paid to insurance companies, the turnover of energy suppliers and the revenue generated from advertising activity. Additionally, telecommunication companies and energy suppliers are also subject to a public utility tax which tax is imposed on the owner of the public utility lines. The basis of the tax is the length of the utility lines. In addition, as of 2015, investment funds and advertising are also subject to special taxes.

Excise Tax

Excise taxes levied on certain goods such as hydrocarbon oil, alcoholic drinks and tobacco at various rates or ad valorem. This single phase tax is levied on the manufacturer, importer or wholesaler; however, no tax is imposed on export sales.