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Old Apr 1st 2017, 9:02 pm   #1
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Default IT Contract in Budapest / Tax liability

Hi there, I'm hoping someone can give me some advice on this. I've had a search of this forum for 'tax' and 'contractors' but can't find anything relevant to my situation.

I work in IT and I'm a UK based British citizen, I'm currently considering a contract to work in Budapest for 6 months, possibly extended to 12. As put to me by the agent the payment would be made to me via my UK LTD company. The value/income would be around £2000 per month. I will be maintaining my British home and I also plan to leave Hungary for holidays during my contract even if I extend it to the 12 months so I don't believe I'd fall foul of the 183 day rule.

So my question is this, in the scenario I've described, would I be liable to pay Hungarian income tax and social security, or could it all be handled by my UK company?

Is anyone else in a similar situation?

I've also tried searching contractor forums but everyone seems baffled by Hungary, even after contacting Hungarian accountants!

Thanks in advance for any advise or insight anyone can offer.
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Old Apr 1st 2017, 11:42 pm   #2
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Default Re: IT Contract in Budapest / Tax liability

You would need to get a tax code from Hungary and a TAJ Card (Social Security/NI Card) as you would be working in Hungary and have income produced by a Hungarian company (i.e. you would be creating an income from Hungary); thus liable for tax.

However, there is the dual tax option to explore.....

Last edited by Szeged; Apr 1st 2017 at 11:43 pm. Reason: Spelling mistake!
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Old Apr 2nd 2017, 12:07 am   #3
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Default Re: IT Contract in Budapest / Tax liability

Income taxes abroad - Hungary - Your Europe
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Old Apr 2nd 2017, 2:10 am   #4
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Default Re: IT Contract in Budapest / Tax liability

Hi, thanks for your reply.

I did come across that site and on first glance, it looks straight forward - I'm liable to pay 33.5% (15+18.5) of my income in tax and SS.

However, would my UK Ltd company which receives the contractual payment simply be able to pay me the legal minimum Hungarian wage and retain the left over as 'profit'?

I've never worked as a contractor before but this seems to be how it's generally done in the UK - people pay themselves a wage up to the income tax allowance, expense everything they can through their company and pay themselves what's left over as a dividend at 10% tax.

I'm just not sure if something similar would wash in Hungary.

I've also looked into double taxation laws, but again, I think I'd be liable to pay Hungary up front any tax earned there and as I'm still 'tax resident' in the UK, if Hungarian tax was lower than UK I'd have to pay any excess to the UK.
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Old Apr 2nd 2017, 7:38 am   #5
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Default Re: IT Contract in Budapest / Tax liability

Yes, with the double tax system the idea is you pay the difference to the highest taxable amount country. So, just for example, if the uk wanted 100% but you already paid 79% to Hungary you would pay the uk taxman only the remaining 21%. In theory.....because each person and each case is different. Hence why I always recommend (even how good a forum or website is) to check with an accountant and other offline professionals (i.e. the tax office in Hungary) what the true story is; especially as in Hungary JOE can say one thing but BOB says another.

As a side note of the just said: Just took my HU GF's son to register with the HU gp in Szeged (he is Hungarian, but lives in the UK) whereby when we got to the gp, the gp asked for the son's TAJ Card, etc because he is Hungarian and then had no clue how to register him as a "Foreigner" (UK resident) with a EHIC card because their gp computer system only knew about how to register him as a Hungarian. Hence, we were told to got to the next gp 1 mile away. Luckily the receptionist there knew how to register people coming from the UK. In other words, the first gp passed the buck because they did not know how to fill in the online/offline forms.

With the UK Ltd company part of your story: Assuming you are one of its shareholders or the director; yes, you can pay yourself.......that's one way business people in the UK lower (avoid) their taxes! Expenses is another. Again, your UK accountant should crunch the numbers for you.....that's is what you are paying them for.
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Old Apr 2nd 2017, 7:55 am   #6
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Default Re: IT Contract in Budapest / Tax liability

Quote:
Originally Posted by Szeged View Post
You would need to get a tax code from Hungary and a TAJ Card (Social Security/NI Card) as you would be working in Hungary and have income produced by a Hungarian company (i.e. you would be creating an income from Hungary); thus liable for tax.

However, there is the dual tax option to explore.....
If Hungarian company contracting with UK for services, but you are performing services while in Hungary, certainly some Hungarian tax will be due. However I think answer probably is considering the following- if a UK company sends someone to Hungary to do work, how would they pay that person in Hungary ? They would probably register with tax authorities, and would pay tax on the stated income of the person working in Hungary. Pretty simple except most likely there are additional employer taxes that negate any tax savings, but perhaps worth looking into.

Also, if the assignment I snot permanent, perhaps some living expenses while in Hungary would be deductive.

The answer is to find accountant in UK or Hungary who is familiar with such issues. An hour consulting time many save a lot of money, and bother.
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Old Apr 2nd 2017, 8:53 am   #7
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Default Re: IT Contract in Budapest / Tax liability

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Originally Posted by TheBritishOracle View Post
I've never worked as a contractor before but this seems to be how it's generally done in the UK - people pay themselves a wage up to the income tax allowance, expense everything they can through their company and pay themselves what's left over as a dividend at 10% tax.

I'm just not sure if something similar would wash in Hungary.
Yes it does but the %ages are different and it bites back later because very few have private pensions here and the state pension is earnings related so if you spend your working life on minimum salary to avoid tax and NI then the pension at the end really is peanuts.
Other benefits are also earnings related e.g.maternity benefit so the opportunity to maximise things here also arises.
But they keep changing the rules so you need an accountant.
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Old Apr 4th 2017, 1:13 pm   #8
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Default Re: IT Contract in Budapest / Tax liability

Just got a reply back from a Hungarian accountant:

Q) Do I need a Hungarian Tax Code and TAJ Card.......

A) Tax number is needed as you will be here for more than 183 days, so your personal income tax belongs to HU. TAJ card is not needed as this is business trip, so your social security position stays at GB, and they will issue an A1 certificate about it. It will prove to HU that you do not have to pay it here.

Q) If I need an accountant, how much would you charge?

A) The tax number application is 60 EUR and the tax advance calculation is 40 EUR per quarter, the year end personal income tax report is 60 EUR.

Furthermore: I have just been to the TAJ office and TAX office in Szeged, with my HU GF, to enquire direct questions. The tax code is simply a case of filling out form 17T34 whereby you instantly get a Tax Code. So no need to pay an accountant at all with Google translate or help from a Hungarian to fill out the form. You do not need a residency permit either to get a tax code, just a passport will do; with UK address and temporary budapest address on the form.
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Old Apr 4th 2017, 1:18 pm   #9
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Default Re: IT Contract in Budapest / Tax liability

Forgot to add: You will still need to visit the immigration office for your residency permit and address card. Reason for wanting one is because you must inform the immigration office that you are more than 183 days in the country, with one year, and also because your reason for it will be because of you working in HU.
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Old Apr 7th 2017, 11:20 am   #10
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Default Re: IT Contract in Budapest / Tax liability

Hey, thanks for all the info and comments, it's all very helpful!
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