Individuals have until 21 May 2024 to file their 2023 tax returns – a deadline that is fast approaching. In recent years, the national tax authority (“NAV”) has prepared an increasingly wide range of draft tax returns, leading many to believe that the task was finished. However, the NAV does not have a complete overview of all individuals’ income, so it cannot be construed as complete. Below we have compiled some of the more important items that are worth addressing – either because of their frequency or their extent.

Real estate sales
In the year 2023, the real estate market experienced a substantial downturn but real estate was still one of the most popular investments for Hungarian individuals. Therefore, it is certain that many individuals were involved in real estate transactions last year.
Income from the transfer of real estate is the countervalue of the transfer reduced by substantiated costs such as the amount spent to acquire the property and value-adding investments.
It is important to note that the transaction should only be included in the tax return if the individual has received income from it. For example, no income is earned if the property is sold at a loss; if the sale takes place more than five years after the acquisition; or if an individual uses the countervalue in an out-of-court debt settlement.

Letting property to a non-paying agent
If a private individual rents property to another private individual, the income, revenue, tax advances and tax must be declared and paid by the private individual. The deadline for assessment and payment of the tax advance is the 12th day of the month following the end of the quarter.
Anyone who has not fulfilled the obligation to declare and pay the advance for the year 2023 can do so at the same time as paying the tax, but will have to pay a late payment penalty from the due date. In practice, the NAV calculates and communicates the amount of the late payment penalty to the private individual in the second half of the year – at which time, of course, the late payment penalty is no longer calculated and is only calculated from the due date until the date of payment of the tax. If the advance payment did not exceed HUF 10,000, it was not necessary to calculate and declare an advance payment, which can be settled in the annual return without any late payment penalty.
The income can be offset by a 10% flat rate or itemised cost accounting, in which case depreciation deduction may also be allowed.

Foreign source income
Resident individuals have unlimited tax liability in Hungary, i.e. Hungary is entitled to tax their global income. If the individual has income that is taxable abroad, the right to tax must be determined in accordance with the treaty with the source country.
In the absence of a convention, domestic law also contains provisions on the offsetting of tax paid on foreign source income. Recent regulations have been brought into the spotlight with the expiry of the US-Hungary treaty, but considering that the treaty was still in force in the 2023 tax year, its provisions still apply.
Due to the diversity of foreign source income and conventions, the general advice is that anyone who receives any form of foreign source income should check that it is properly disclosed in the draft.

Discounts not applied during the year
It is also important to note that if an individual has not claimed a benefit during the year on income from a paying agent to which he or she would otherwise have been entitled, he or she can claim it by amending the draft.
In some cases, it is worth seeking the help of an expert to check and prepare a draft personal income tax return.

The content of this post does not constitute legal or tax advice and does not create an engagement. In each case, detailed knowledge of the individual case is necessary to assess it and to find a tailor-made solution. If you have any questions, please do not hesitate to contact us at http://www.bekespartners.com/.