The United States–Hungary Income Tax Treaty is designed to prevent double taxation, encourage trade and investment, and provide clear rules for individuals and businesses operating across both countries. This treaty defines how income, dividends, interest, royalties, and capital gains are taxed, ensuring fair and efficient treatment under both U.S. and Hungarian tax laws.

At Z Tax & Accounting, our international tax professionals help clients leverage the U.S.–Hungary Tax Treaty to minimize tax liabilities, maintain compliance with both U.S. and Hungarian authorities, and optimize cross-border tax strategies.

Key Provisions of the U.S.–Hungary Tax Treaty

1. Elimination of Double Taxation
   The treaty allows taxpayers to claim foreign tax credits or exemptions to prevent double taxation on the same income. U.S. taxpayers may offset taxes paid to Hungary against their U.S. tax liability.
   
   

2. Residency and Tie-Breaker Rules
   Residency determines taxation rights. In dual-residency situations, tie-breaker rules consider permanent home, center of vital interests, habitual abode, and nationality.
   
   

3. Business Profits and Permanent Establishment (PE)
   Business profits are generally taxed only in the country where a Permanent Establishment exists, such as a branch, office, or factory. Profits from a business without a PE in the other country are taxed solely in the country of residence.
   
   

4. Dividends, Interest, and Royalties
   
   

   • Dividends: Reduced withholding rates of 5%–15%, depending on ownership.
     
     

   • Interest: Typically taxed at reduced rates or exempt in the source country.
     
     

   • Royalties: Reduced or exempt rates encourage cross-border licensing and investment.
     
     

5. Employment Income and Personal Services
   Wages and salaries are generally taxed in the country where services are performed, with exceptions for short-term presence or nonresident employers.
   
   

6. Pensions and Social Security Benefits
   Pension income is generally taxable only in the recipient’s country of residence. U.S. Social Security benefits paid to Hungarian residents are typically taxable only in the U.S.
   
   

7. Capital Gains
   Gains from the sale of property are generally taxable in the country of residence, except for real property or business assets connected to a Permanent Establishment.
   
   

8. Exchange of Information
   The treaty allows cooperation between the IRS and the Hungarian National Tax and Customs Administration, enabling information exchange to prevent tax evasion and ensure compliance.
   
   

Treaty Benefits for Individuals

• Avoid double taxation on wages, pensions, dividends, and investment income.
  
  

• Benefit from reduced withholding rates on cross-border payments.
  
  

• Clarify residency and taxation under treaty rules.
  
  

• Access foreign tax credits and exemptions.
  
  

• Maintain compliance with both U.S. and Hungarian authorities.
  
  

Treaty Benefits for Businesses

• Prevent double taxation on U.S.–Hungary operations.
  
  

• Reduce withholding taxes on dividends, interest, and royalties.
  
  

• Determine Permanent Establishment status to minimize exposure.
  
  

• Structure cross-border operations efficiently for tax savings.
  
  

• Gain predictability and legal certainty for international transactions.
  
  

Z Tax & Accounting – International Tax Experts

Z Tax & Accounting helps individuals and businesses maximize the benefits of the U.S.–Hungary Tax Treaty. Our services include:

• Treaty-based tax return preparation and compliance
  
  

• Cross-border income reporting and foreign tax credit optimization
  
  

• Residency and Permanent Establishment analysis
  
  

• Structuring international business operations under treaty rules
  
  

• IRS representation for expatriates and foreign nationals
  
  

We ensure compliance while minimizing global tax liabilities.

Contact Z Tax & Accounting

For expert guidance on U.S.–Hungary tax treaty benefits, contact Z Tax & Accounting today. Our team helps you navigate international tax laws while optimizing treaty advantages.

📞 Phone:  (214)  699-4790
📍 Office: 600 E John Carpenter Freeway, Suite 268, Irving, TX 75062

Z Tax & Accounting — Trusted Experts in International and Cross-Border Taxation

The above Summary may not include specifics about individual taxpayer's specific situation and is for general information. Contact us directly to discuss your situation. The link to the actual Tax treaty is as under: