Hungary: is it worth working remotely?
Published on 2020-05-18 by Ching Chieh Li.
Remote work in Europe is gaining popularity, however, freelancers do not have an equally easy start in all countries. We have already written in our reports on freelancing in Europe about France, the Netherlands, Bulgaria, Romania and Macedonia. What is the situation of freelancers in Hungary compared to these countries? Is this a friendly country for those that work remotely?
Freelancing and remote work in Hungary
About 10 million people live in Hungary. It is worth remembering that in the nineties Hungary has undergone a number of changes related to the transition from a centrally planned to a free market economy. In recent years, however, an increasingly interventional government policy has also been observed which also concerns tax increases. An important factor shaping the Hungarian economy is also the noticeable lack of workforce, caused by the decline in the population.
Remote work in Hungary: own company or civil contracts?
The biggest advantage of the remote job market in Hungary is that a freelancer does not have to start a business if he wants to work on his own.
Special legal solutions have been created that facilitate starting work as a freelancer. These include a temporary employment contract and simplified employment.
A temporary employment contract can be concluded for a maximum of three months. The employer is obliged to pay insurance premiums and income tax advance.
- The social security contribution ranges from 17.5% to 36%
- The income tax advance is 15% calculated from 90% of the remuneration.
The alternative is so-called simplified employment (egyszerűsített alkalmazás). This is a form of cooperation in which the freelancer and his client do not sign the contract - all that need to be done is a simple registration in the relevant office. In order to prevent the abuse, there is a strict time limit that a freelancer can work within the frames of simplified employment.
Read more: Freelancer in the Netherlands - Useme report Freelancer in France - Useme report
Simplified employment, however, involves additional fees to be borne by the employer to the Tax Office. The fee is 1000 forints per day. And the freelancer is obliged to pay income tax, but the rates depend on various factors, not only on the value of remuneration. If it exceeds 30% of the minimum salary, income tax equals 15%.
In Hungary, there is also the equivalent of a contract of mandate, from which the freelancer also pays social contributions and taxes. The conclusion of this agreement requires additional documents (paperwork).
Freelancer in Hungary: is it worth having your company?
In Hungary, like in many countries, the self-employed are obliged to pay additional taxes, fees and social security charges. Is it friendly for freelancers? Hungarian companies can choose to be taxed in several possible variants.
One of the most popular is the KATA scheme. The idea is simple - an entrepreneur pays a flat monthly charge that includes social contributions and income tax. This does not require complicated accounting, it's favourable for many and is therefore very popular among freelancers.
Another option is to pay contributions based on your revenues. The contributions land into three baskets: pension, health and social.
It is important that if the revenue has not exceeded the minimum salary, then contributions and taxes are calculated on the basis of that number. In this way, the charges for the lowest paid become a lump sum, like in the previous scheme.
On top of that, there is also a special "professional tax" of 1.5%, which is paid by a limited number of professionals. The charges altogether total to about 36%.
Remote work in Hungary: how to hire a freelancer?
The Hungarian tax system, despite some advantages for freelancers, has also some limitations. Not every freelancer decides to start a business.
The alternative for you is the Useme service, through which you hire a selected freelancer to carry out a specific task, without additional difficulties and bureaucracy. Thanks to Useme, a freelancer will settle work with you regardless of whether he runs a business or not and if (s)he is a payer of European VAT.
Do you need to hire a Hungarian freelancer?
Do you have a remote worker from the Hungary or are you pondering how to legally hire one? Consider Useme - with us the whole HR process is completely non-engaging and thus simple and trouble-free for both sides.
Propose your remote co-worker to issue an invoice as an individual or use our API to account for a whole team of Freelancers. Useme will take care of the formalities, payment security, transaction history, file storage and more.
Would you like to know more?
Are you looking for additional information on remote work and the tax system in Hungary? Download the full version of the report to find out:
- what are the tax rates and lump sum taxes in Hungary?
- what restrictions apply when a freelancer is not an entrepreneur?
- what financial obligations a Hungarian company has? + a clear table summary of information.
Do you have more questions? Write to us at firstname.lastname@example.org