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Taxes for self employed person, I'm very confused!

Taxes for self employed person, I'm very confused!

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Old Mar 1st 2018, 3:48 pm
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Default Taxes for self employed person, I'm very confused!

Hi everyone,

I live in Berlin, Germany and am thinking of relocating to budapest because it is a great city and seems to be much cheaper now to live in than Berlin. The rent prices in Berlin are now very high.

I Germany as a self employed person I must pay, aside from rent and food and optional costs, as a self employed musician who earns money from record sales, royalties and film synchronisation licenses in the region of 25k EUR per year:

- 4000EUR income tax (around 16% of my income)
- private health insurance 1200EUR per year
- old people's care insurance around 200EUR per year
- TV license around 200 per year regardless of if I have a TV
- either 7% or 19% VAT tax rates on invoices depending on what I invoice for

Total tax/health/government costs are therefore, with profits of 25,000EUR around 5600EUR.


In Hungary, the VAT is 27%, that is OK because I have no Hungarian customers and everyone will be zero rated anyway. But the tax and other costs are EXTREMELY CONFUSING. I've been reading in forums everywhere and cannot figure out a simple answer of what you need to pay like I have written objectively and simply above for what a self employed person needs to pay in Germany. Some people say they had to pay as much as 88% of their total income in tax. There is corporate tax, income flat tax at 15% but then another flat tax of 50000HUF per month and then another flat tax of 75000 HUF per month and then social contributions and then public health insurance and so on and so on and it is essentially impossible to comprehend in any reasonable way, what I would actually need to pay. I'm convinced many of the forum posts I have read were just from people who have no clue because it's not possible that it is so difficult.

Is anyone able to write an easy objective breakdown, like I did above with Germany, for self employed person earning 25,000EUR profit (<8M HUF per year) after costs?

Thanks in advance!
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Old Mar 1st 2018, 5:28 pm
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Default Re: Taxes for self employed person, I'm very confused!

It is all quite simple - you need an accountant - end of !!

The only problem is finding one that comes with a recommendation other than their own and speaks a language that you are comfortable in using.
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Old Mar 1st 2018, 6:37 pm
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Default Re: Taxes for self employed person, I'm very confused!

Originally Posted by Peter_in_Hungary View Post
It is all quite simple - you need an accountant - end of !!

The only problem is finding one that comes with a recommendation other than their own and speaks a language that you are comfortable in using.
This! Made a world of difference for us.
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Old Mar 1st 2018, 6:43 pm
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Default Re: Taxes for self employed person, I'm very confused!

Originally Posted by Peter_in_Hungary View Post
It is all quite simple - you need an accountant - end of !!

The only problem is finding one that comes with a recommendation other than their own and speaks a language that you are comfortable in using.
Yes I will need an accountant to file my tax return as I cannot speak hungarian, that is fairly obvious. However, are you trying to say that it is so incredibly complicated that you have absolutely ZERO idea what types of tax you need to pay in Hungary?

With both german and UK tax I can describe in one short paragraph exactly objectively what you need to pay without any confusion whatsoever. It's exceedingly simple. Why can this not be done with Hungary?

I don't understand why nobody has a clue what they are paying.
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Old Mar 1st 2018, 9:05 pm
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Default Re: Taxes for self employed person, I'm very confused!

There are several options but to know which would be best (= cheapest) for you will need an accountant.
We have been here about 24 years, we run a farm and have a (small) company. Farm and company finances are separate, we have never been self employed but have been 'small farmers', 'small producers' and employed by our company. - not both of us and not all the time. We take advice from out accountant (Hungarian only) and she does the tax returns.
I could not say whether you would be better off being self employed or having a company.
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Old Mar 2nd 2018, 9:52 am
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Default Re: Taxes for self employed person, I'm very confused!

I've been researching intensively on the internet all last night and all this morning and I have come to the conclusion that the KATA tax option in Hungary covers all tax and social responsibilities. It costs 1915EUR per year, is paid on a monthly basis and is a completely all inclusively flat tax until you earn over 38k EUR, in which case the amount which you earn over this threshold is taxed at a rate of 40%.

This is extremely simple. I have just written it in one concise paragraph. I have absolutely no idea why there is so much misinformation elsewhere in this forum and people saying everything is hopeless unless you visit an accountant immediately. Straight up bizarre.... apparently it is that simple. The most simple tax scheme I have ever encountered in my life, why the obfuscation???
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Old Mar 2nd 2018, 10:31 am
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Default Re: Taxes for self employed person, I'm very confused!

Originally Posted by jalfk View Post
I've been researching intensively on the internet all last night and all this morning and I have come to the conclusion that the KATA tax option in Hungary covers all tax and social responsibilities. It costs 1915EUR per year, is paid on a monthly basis and is a completely all inclusively flat tax until you earn over 38k EUR, in which case the amount which you earn over this threshold is taxed at a rate of 40%.

This is extremely simple. I have just written it in one concise paragraph. I have absolutely no idea why there is so much misinformation elsewhere in this forum and people saying everything is hopeless unless you visit an accountant immediately. Straight up bizarre.... apparently it is that simple. The most simple tax scheme I have ever encountered in my life, why the obfuscation???
The devil can be in the detail especially in Hungary....... The tax laws have a reputation for a reason! I would still talk to an accountant anyway just to make sure.......
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Old Mar 2nd 2018, 11:56 am
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Default Re: Taxes for self employed person, I'm very confused!

I'm not a tax expert (retiree ...) but I know that these laws were changed often in Hungary and it was difficult for foreigners.
Now it seems easy and simple if you follow this e g:
KATA tax (Hungarian simplified taxation) - TILEA International Inc.

PS:
Living in Bp may be cheap compared to Berlin but objectively housing in Bp is expensive.Do you have any idea already where you want to stay and how big the apartment/office/house has to be?
For KATA you need an address and lots of papers, TAJ card etc ...

Last edited by wolfi; Mar 2nd 2018 at 11:59 am.
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Old Mar 2nd 2018, 12:08 pm
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Default Re: Taxes for self employed person, I'm very confused!

As Wolfi implies Bp housing costs (both rent & purchase) have risen very significantly in the last few years.
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Old Mar 2nd 2018, 12:35 pm
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Default Re: Taxes for self employed person, I'm very confused!

Jalfk.
Be a bit careful about VAT. Your original post stated an expected income of 25,000 euro. This is a bit close to the VAT threshold (which I believe is currently 8,000,000HUF) If you are working here then your turnover will be subject to the VAT rules - regardless of whether your customers are Hungarian or foreign. And you can't drop in and out of VAT easily. (AFAIK)

Whilst the KATA system seems simple you have to pay the monthly charges regardless of income and AFAIK there are no opportunities for deductible expenses so this may or may not be the most cost effective method for you.

I would agree with Wolfi and Expatrick about Budapest - probably the most expensive place to live in Hungary - and unless you are wedded to crowded smelly cities there are cheaper and nicer places to live in Hungary (just IMO)
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Old Mar 2nd 2018, 2:07 pm
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Default Re: Taxes for self employed person, I'm very confused!

Originally Posted by Peter_in_Hungary View Post
Jalfk.
Be a bit careful about VAT. Your original post stated an expected income of 25,000 euro. This is a bit close to the VAT threshold (which I believe is currently 8,000,000HUF) If you are working here then your turnover will be subject to the VAT rules - regardless of whether your customers are Hungarian or foreign. And you can't drop in and out of VAT easily. (AFAIK)

Whilst the KATA system seems simple you have to pay the monthly charges regardless of income and AFAIK there are no opportunities for deductible expenses so this may or may not be the most cost effective method for you.

I would agree with Wolfi and Expatrick about Budapest - probably the most expensive place to live in Hungary - and unless you are wedded to crowded smelly cities there are cheaper and nicer places to live in Hungary (just IMO)
Message from the metropolitan elite - less of the "crowded & smelly"!
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Old Mar 4th 2018, 6:24 am
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Default Re: Taxes for self employed person, I'm very confused!

Jalfk
Since you mentioned VAT - A thought occurred - Are royalties regarded as income (= salary/wages) and therefore outside of the VAT schemes or are they regarded as a billable charge and so caught up in the VAT regs?
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Old Mar 4th 2018, 1:03 pm
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Default Re: Taxes for self employed person, I'm very confused!

You need a Hungarian accountant. That will cost you but remember

"Ein Arbeiter ist seines Lohnes wert."

"A labourer is worthy of his hire." In other words sometimes you have to pay for goods and services !

Last edited by scot47; Mar 4th 2018 at 1:09 pm.
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Old Mar 4th 2018, 2:56 pm
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Default Re: Taxes for self employed person, I'm very confused!

Originally Posted by scot47 View Post
You need a Hungarian accountant. That will cost you but remember

"Ein Arbeiter ist seines Lohnes wert."

"A labourer is worthy of his hire." In other words sometimes you have to pay for goods and services !
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Old Mar 5th 2018, 1:56 pm
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Default Re: Taxes for self employed person, I'm very confused!

Just my two penneth....
I cannot comment on vat as I don't earn enough for it to be applicable but my wife and I have been in KATA for several years and that system is as simple as you could imagine. We pay our 50,000 ft on line each month and that's the end of it. There are also taxes to pay to our local authority each year which amount to 2% of our gross income (I believe).
Also, we use a bookkeeper rather than an accountant who charges use 5,000 ft each month each to do the necessary paperwork and keep us up to date of any changes. A couple of years ago we started a BT which was a nightmare and used an accountant who charged us the best part of 50,000 ft per month for his services. The paperwork there was much greater.
I'm sure you could find a suitable bookeeper and get some free advice if they believed they'd be getting your long term business.
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