forráslevonásos

Forráslevonásos, from the Hungarian term for “source deduction,” describes a method of tax and contribution collection in which the payer withholding from a payment at the time it is made remits the withheld amount to the tax or social security authority. The concept applies to income paid to individuals, with the tax base determined and the tax collected before the recipient receives the payment.

In Hungary, forráslevonásos procedures are standard for employment income (munkabér) and a range of other payments. Under this regime, employers or other payers calculate the applicable tax and social contributions, deduct the amounts, and transfer them to the authorities. Depending on the type of income and the rules, the withholding can be final or may be reconciled later via an annual income tax return.

Other payments, such as dividends or royalties, may also be subject to withholding at source (forrásadó) under specific rules. The term is often used to describe withholding arrangements in which the payer acts as the source of the deduction, sometimes overlapping with the broader concept of at-source taxation.

Purpose and effects: The system aims to simplify compliance, ensure timely collection, and reduce the administrative burden on individuals, while improving collection efficiency. However, it can reduce transparency for taxpayers and may require annual adjustments if the withholding does not align with the individual’s final tax liability, allowances, or deductible expenses.

Legal framework: The specifics of what qualifies as forráslevonásos and the applicable rates are defined by tax law and related regulations. It is a core feature of the Hungarian personal income tax regime and is used to manage wage withholding, social contributions, and certain forms of passive income.