Share-Based Compensation Programs in the Focus of the Hungarian Tax Authority

Experience shows that in recent times the Hungarian tax authority has placed particular emphasis on the taxation of income derived from global share-based compensation programs (e.g., exercise of options, vesting of RSUs).

Although the role of Hungarian employers is typically limited to the administration of such global share plans — and the benefit is not granted by the Hungarian entities at the time of option exercise or RSU vesting — meaning they generally do not incur withholding or reporting obligations, the tax authority nonetheless closely scrutinizes the taxation of these benefits.

As a general rule, employees participating in the program must determine their tax base, fulfill their tax payment obligations, and complete their tax return themselves. Employees who do not comply with Hungarian tax regulations risk facing penalties.

Deloitte’s View

Employees participating in such programs should familiarize themselves with the relevant rules and prepare to appropriately manage their Hungarian tax obligations. Given the complexity of the applicable tax regulations, companies may also find it worthwhile to seek tax advisory assistance to support their employees, for example by providing tax information materials.

The heightened focus of the tax authority on global share plans may also affect employees of the Hungarian subsidiaries/branches of multinational companies, as the tax authority actively collects information on global share-based compensation programs and examines personal income tax returns for the 2020–2024 period in this regard. Due to the well-functioning international information exchange framework, the tax authority possesses data on various foreign-sourced income streams, and we are increasingly seeing audits initiated specifically as a result of these data exchanges.

Key Focus Areas:

• Option exercises/vestings between 2020–2024 and verification of whether participants have fulfilled their Hungarian tax filing and payment obligations.
• Dividend payments and share sales (DAC2–CRS provides further data for audits), and confirmation that corresponding tax obligations have been met.

All this indicates stricter enforcement of Hungarian tax rules related to global share-based compensation.

Contacts

If you need assistance preparing or updating tax documentation related to share-based compensation, require participant information materials, or have questions regarding the above, please contact your usual Deloitte representative or any of the individuals listed below.