13-12-2014
Tax
Hungary
personal income tax, social security contributions , social contribution tax
Personal income tax
Higher tax burden for non-wage benefits
The new rules will introduce a significant change in the taxation of non-monetary compensations. The employer can provide these benefits with reduced tax burden – meaning a 35.7% tax rate – only up to the annual limit of HUF 200,000 (as opposed to the current limit of HUF 500,000) whereas the tax burden above HUF 200,000 will be elevated to 51.17%. As an exception, the reduced rate can be applied to the benefit provided in the form of SZÉP Card up to the annual amount of HUF 450,000. The change makes the planning of cafeteria more difficult, but at the same time it is expected to spur the spread of SZÉP Cards.
Non-wage benefits made available to students
In the future students employed through students’ cooperation can be provided with benefits by the employer under the same tax conditions as employees. This means that students employed by these cooperations can be given non-wage benefits (such as monthly public transport ticket, SZÉP Card, Erzsébet vouchers) with tax allowance.
First marriage tax allowance
From 1 January 2015 a new type of family tax allowance will be introduced. Newly married first time couples can jointly reduce their tax base with HUF 31,250 (meaning a monthly tax cut of HUF 5,000) for 24 months from the month of the marriage until the month in which the entitlement to family tax allowance is unlocked. The allowance can already be applied if only one of the partners is a first-timer. Due to the allowance the government is expecting a growth in the number of marriages formed.
Family tax allowance unchanged
The extension of family tax allowance has been put off. The monthly amount of tax base allowance will remain HUF 62,500 (or HUF 206,250 from three children), meaning a HUF 10,000 (or HUF 33,000) tax relief per child in a month.
From 2016 tax allowances for parents raising two children is intended to be doubled in 4 years.
Life insurances to be taxed from 2018
Whole life insurance policies currently provided as tax-free benefit within the framework of the cafeteria system are expected to be taxed with 51.17% from 2018.
Liability insurance deemed tax-free
Liability insurance premium of executive officers has been deemed to be tax-free retroactively.
Workforce leased from abroad
Companies will be allowed to act as employers in respect to the remuneration paid to the workforce they lease from abroad. This rule has an effect especially on the tax-paying and tax advance paying practice of these employees.
Taxation of foreign actors
A simplified taxation scheme will continue to be available ‒ at their discretion ‒for foreign performers with respect to their
activity in Hungary. Pursuant to the modification the actual amount paid for accommodation (instead of the market value as per current practice) shall be considered in calculating the income. Although foreign performers are not insured under the social
security system of Hungary they are still obliged to pay a 14% health contribution (up to the limit of HUF 450,000) on their income earned in the country. Individuals can be exempted from this liability if they are insured in an EU country or in any other country that has a treaty with Hungary and contributions are paid there.
Personal income tax and health contribution liability is to be paid in 90 days upon departure from Hungary if taxes are filed through an agent or procurator.
Reckoning with banks – no PIT effect
Amounts received from banks due to the reckoning with foreign currency loans will not trigger income tax liability in any of the tax years for the individuals.
This implies that the money transferred back due to the reckoning will have no impact on the tax-exemption of employee housing supports either.
Non-wage benefits instead of bonuses?
The newly enacted legislation explicitly states the principle that the income of the individual cannot be subject to a favorable tax treatment if granted as non-wage benefit instead of salary or bonus payment.
In other worlds benefits received by individuals as a substitute for wages, bonuses or commission fees in return for their activities will not qualify for tax-free or non-wage benefit categories.
Electronic secondment order introduced
Raising secondment orders electronically will be acceptable on condition that requirements prescribed for content are met and a closed system is used.
Social security contributions
Contribution base for foreign secondmentsexpanded
The definition of contribution base has been expanded. From next year in case of employment contracts under foreign jurisdiction the monthly fee defined in the contract shall be considered as contribution base.
Health services contribution increased
Any resident person who is not insured in any other way is required to pay health services contributions to attain eligibility for health care services.
The monthly amount of health services contribution will be raised to HUF 6,930.
The liability can only be cancelled if the individual’s residency is shifted to abroad and the individual is subject to the health insurance system of the other state.
Social security position of third country individuals on secondment
Employees from third-countries sent to Hungary on secondment can be exempted from contribution liabilities if their assignment does not exceed 2 years. After 24 months, however, they will become insured in Hungary. The existing rules determine that the 24 months shall be counted from 1 January 2013 whereas the amendments put this date to 1 July 2013.
Social contribution tax
Tax allowance for parents with infants
Employers will be able to claim the tax allowance for mothers employed in part-time positions in full i.e. without having to proportionate.