The taxation of insurance premiums in Hungary is unique, both in terms of the technique used to calculate the tax and how it is governed.
Regarding calculating Insurance Premium Tax (IPT), Hungary is the only country in the EU where the regime uses the so-called sliding scale rate model. It applies to both IPT and the extra profit tax on insurance premium amounts (EPTIPT), also known as the supplemental insurance tax.
The insurance premium tax law (Act of 102/2012) includes the rules of IPT. However, this law can be amended by a government decree. Government Decree of 197/2022 regulates the EPTIPT. The Hungarian Tax Office has issued guidance about the rules of insurance premium taxation, and both IPT and EPTIPT are declared on the same return template.
What kind of taxes are applicable in Hungary on insurance premium amounts?
In Hungary, insurance premium tax (IPT) and extra profit tax (EPTIPT) are levied on the premium amounts collected by the insurance companies.
What are the IPT tax rates in Hungary?
In Hungary, it is almost impossible to determine the rate and amount of the insurance premium tax for a single policy, because IPT and EPTIPT are levied on the aggregated amount of the collected insurance premium.
The sliding scale regime considers:
- The amount of the collected premium in the year preceding the reporting period (i.e. threshold)
- The amount of the collected premium in the reporting month (i.e. scales)
For IPT, the threshold is HUF 20 billion since April 2024. It was HUF 8 billion prior to that. EPTIPT has no such taxable premium threshold.
For IPT, the scale is:
- Under HUT 250 million (HUF 100 million prior to April 2024)
- Over HUF 250 million but under HUF 1.75 million
- Over HUF 1.75 million (HUF 700 million prior to April 2024)
For IPT, the only exception from the sliding scale regime is the Class 10 motor third party liability insurance (MTPL) premium. IPT on MTPL premium is calculated differently, hence MTPL premium amount is not part of the aggregated taxable premium. The tax rate for MTPL premium is 23%.
EPTIPT’s scale differs from those of the IPT. Although the EPTIPT computation for non-life and life policies differs, the same scales apply. The EPTIPT scale is:
- Under HUF 2 billion
- Over HUF 2 billion but under HUF 36 billion
- Over HUF 36 billion
The rates, as of 2024, are:
- IPT: 10% and 15% for P&A policies and CASCO policies, respectively. These rates are reduced by 75% and 50% in the first two scales.
- EPTIPT non-life policies: 2%, 4% and 12% respectively.
- EPTIPT life policies: 1%, 1.5% and 5% respectively.
What is the basis of Insurance Premium Tax Calculation in Hungary?
The taxable basis is the insurance premium. The insurance premium is defined by the IPT Law (point 1 article 7 of Act 102/2012) as:
“The gross premium accounted for by the insurer based on accounting regulations for insurance services, including values not accounted for as gross premiums but considered as the countervalue for insurance services as coverage for insurance services, excluding premium income received from reinsurance taken from another insurance company, which is accounted for as gross income.”
MTPL premium amounts should not be considered for IPT’s sliding scale. However, the premium collected for MTPL is included in the EPTIPT non-life aggregated premium amount.
Are life and sickness policies exempt from Hungarian IPT?
Life policies are exempt from IPT, but EPTIPT is payable on premium amounts collected by insurance companies from life policies.
Sickness insurance is exempt from both IPT and EPTIPT.
Another notable exemption is the premium amount collected on certain agricultural policies.
What are Insurance Premium Tax challenges in Hungary?
Currently, the biggest challenge in Hungarian Premium Taxation is the legal environment. The Constitution and the law on special measurements in case of catastrophic environments allow the government to amend tax rules – including IPT – via governmental decrees, instead of actually changing the relevant tax law.
For example, in 2022, a governmental decree introduced a new tax: the extra profit tax on insurance premium amounts (known as supplemental IPT or EPTIPT). In 2024, the government published another decree to change the applicable brackets of the sliding scale for the IPT regime.
The Act on Insurance Premium Tax No 102/2023 was not changed in either of these cases.
Updates on IPT in Hungary
Hungarian IPT regulation is regularly changing. To keep yourself in the know, subscribe to Sovos’ tax alerts.
Here’s a brief timeline of changes to IPT in Hungary:
February 2024: Change for filing and payment of EPTIPT
March 2024: Hungary changes IsPT rates
- June 2023: Additional Insurance EPTIPT amendments
- January 2023: Government Decree on EPTIPT amended
- June 2022: Supplemental IPT introduced
Want to learn more about Insurance Premium Tax?
These resources can help you navigate the intricacies of Insurance Premium Tax:
- Read our Insurance Premium Tax guide
- Navigate Location of Risk rules with our eBook
- Understand IPT compliance with our eBook, written by our regulatory experts
Need help with Insurance Premium Tax in Hungary?
Sovos’ IPT Determination solution enables you to confidently calculate and apply IPT rates at quotation. Real-time tax updates ensure tax rates and tax applicability are always accurate.
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