Tax Treaty Relief in Hungary

What is the scope of Hungary's double tax treaty network?

Hungary's tax authority, Nemzeti Adó- és Vámhivatal (NAV), publishes an annually updated list of double taxation conventions (DTCs). As of 1 January 2026 Hungary has approximately 80 treaties in force, covering all major EU member states, most OECD partners, and numerous non-OECD economies including China, India, Brazil, Malaysia, and the Gulf states. [^1] The conventions are concluded under Act LXXXI of 1996 on the Avoidance of Double Taxation and follow the OECD Model Convention framework. Articles 10, 11, and 12 allocate taxing rights on dividends, interest, and royalties respectively; Article 4 governs residence and tie-breaking. Two treaties have material disruptions: Belarus unilaterally suspended Articles 10, 11, and 13 from 1 June 2024 to 31 December 2026 (Hungary continues applying the treaty); Russia unilaterally suspended Articles 5-22 and 24 from 8 August 2023 (Hungary again continues applying). The United States is the most consequential gap — its 1979 treaty was terminated effective 1 January 2024 (see section below). Hungary is also party to a 2010 draft treaty with the US that was signed but never ratified by the US Senate; that unratified text has no legal effect.

For a broad overview of doing business in Hungary see the Hungary country overview.

How does Hungary eliminate double taxation — the credit method?

For individuals, Hungary taxes residents on worldwide income at a flat 15% personal income tax (SZJA) rate under Act CXVII of 1995. [^2] Where a DTC applies, the convention's own elimination article governs — most Hungarian treaties use the credit method for passive income and the exemption method for active business profits. Where no DTC exists, Hungarian domestic law provides unilateral relief: for employment and similar consolidated-tax-base income the foreign tax paid may be deducted, subject to two ceilings — no more than 90% of the foreign tax paid abroad, and no more than the Hungarian PIT computed at the 15% rate on that foreign income. For separately taxed investment income (dividends, interest, capital gains), the foreign tax is creditable but Hungary retains a minimum 5% Hungarian tax floor: the foreign credit cannot reduce Hungarian liability below 5% of the tax base. [^3] This 5% floor is particularly consequential for US-source income post-treaty (see below). Hungarian corporate taxpayers offset foreign taxes against the flat 9% corporate income tax, capped similarly at the average Hungarian effective rate.

What withholding tax rates do Hungarian treaties provide?

Hungary's domestic WHT on outbound payments is limited. Under domestic law, payments by Hungarian entities to non-resident companies attract no WHT on dividends, interest, or royalties. Payments to non-resident individuals attract 15% PIT unless reduced by treaty. [^4] The table below shows indicative treaty rates for a selection of Hungary's major partners; practitioners must verify rates against the current treaty text for each transaction.

For intra-EU flows, Council Directive 2011/96/EU (Parent-Subsidiary Directive) eliminates WHT on qualifying dividends where the parent holds at least 10% of the subsidiary for a minimum two-year continuous period. Council Directive 2003/49/EC (Interest and Royalties Directive) eliminates WHT on qualifying intra-EU interest and royalty payments between associated companies. Hungary implements both directives through Act LXXXI of 1996. Where both a DTC and an EU directive apply, the more beneficial rule governs.

What happened to the US-Hungary double tax treaty?

The United States gave formal diplomatic notice of termination on 8 July 2022. Under Article 26 of the 1979 convention, the treaty ceased to have effect with respect to taxes withheld at source on amounts paid or credited on or after 1 January 2024, and for other taxes from taxable periods beginning on or after 1 January 2024. [^5] The US Treasury stated the treaty's benefits had become disproportionate and cited Hungary's resistance to the OECD global minimum tax (Pillar 2) framework.

The consequences are material. Before termination, the treaty capped US WHT on dividends paid to Hungarian residents at 15% for portfolio holdings (5% for qualifying substantial shareholdings) and fully exempted interest income from US WHT. From 1 January 2024, the default US statutory WHT rate of 30% applies to fixed or determinable annual or periodical (FDAP) income — dividends, interest, rents, and royalties — paid to Hungarian residents unless another domestic US law exemption applies. The portfolio interest exemption under IRC Section 871(h) continues to shield qualifying US-issued bond interest, but the broad treaty exemption is gone. Hungarian residents who previously provided Form W-8BEN to US withholding agents must file an updated W-8BEN reflecting the change in treaty status. [^5]

On the Hungarian side, US-source income is still reportable and still subject to 15% SZJA, but the foreign tax credit available under Hungarian domestic law is limited. For separately taxed capital income, the Hungarian tax cannot be reduced below 5% of the tax base regardless of US WHT paid. Where 30% US WHT has been deducted, a Hungarian resident can offset up to 90% of the foreign tax but capped at the 15% Hungarian rate — meaning substantial stranded US tax typically results. Hungary enacted amendments in 2024 reclassifying certain US-source interest from OECD-registered issuers to enable more favorable long-term investment account treatment, partially mitigating the burden for some savers. [^6]

Negotiations for a replacement US-Hungary treaty opened after the November 2024 US election. A new convention is not anticipated before 2027 at the earliest; in the interim no bilateral relief applies and taxpayers with US-Hungary cross-border income should engage a qualified tax professional for current filing positions.

How does the residence tie-breaker work under Hungarian treaties?

Hungarian treaties adopt Article 4 of the OECD Model, applying a sequential tie-breaker for individuals claiming residence in both states: first, permanent home (a dwelling available for continuous use, not a temporary stay); second, centre of vital interests (personal and economic ties — family, employer, primary bank, professional relationships); third, habitual abode (habitual pattern of physical presence beyond a single year); fourth, nationality; and fifth, competent-authority mutual agreement. [^2] NAV applies these criteria conservatively and defends Hungarian residency robustly where a taxpayer maintains Hungarian property, family members, or active professional ties in Hungary. The MLI Article 4 amendment replaced the tie-breaker final step in certain covered treaties with automatic competent-authority resolution, reducing treaty-shopping risk but lengthening resolution timelines. Dual-residency disputes typically resolve through mutual agreement procedures (MAP) within 18 to 36 months depending on the counter-party.

Hungary itself taxes residents on worldwide income once either the 183-day calendar-year threshold or the centre-of-vital-interests test is met. NAV issues a tax residence certificate (illetőségi igazolás) upon application confirming Hungarian SZJA residency; this document is required by foreign withholding agents to apply reduced treaty rates. Application is made via the IGAZOL form to NAV's competent regional Customer Service Directorate, with processing typically within 30 days; the certificate is issued free of duty in Hungarian or bilingual Hungarian-English format. [^1]

For cross-border investment and capital gains implications connected to Hungarian residency, see also the Hungary country overview and consult a qualified tax professional familiar with Hungarian and international tax law before taking any filing position.