In-kind-benefits represent a generally accepted and popular form of remuneration in Hungary, primarily because these are subject to a lower tax rate compared to wages and the employer is liable for the full tax amount, thus relieving employees of applicable tax or contribution obligations. While an employee’s net wages only constitute half of the total expenses paid by the employer, this ratio is much more favourable in case of benefits-in-kind.
Fringe benefits fall into three categories according to how they are taxed:
Non-taxable benefits (net benefit / total cost: 100%):
- non-returnable support provided for housing purposes
- tickets for sporting and cultural events, library registration fees
- life insurance, accident insurance or health insurance premium up to 30% of the national minimum wage
- the regular premium of a life insurance policy taken out for an indefinite period and only providing cover for death
- vaccinations.
Benefits subject to a lower tax rate (net benefit / total cost: 74.5 %):
- local travel pass
- meal voucher
- holiday/recreational/food allowance
- back-to-school voucher
- voluntary pension and health fund contributions
- assumption of training costs
Benefits subject to a higher tax rate (net benefit / total cost: 71.1 %):
- any benefit other than the ones listed above if it is provided to all employees or to a specific group defined in advance (e.g. gift certificates)
- gifts of small value (on maximum 3 occasions per year)
- taxable insurance premium paid for the benefit of a private individual
Given the diverse range of benefits available in each category as well as the fact that all employees have different needs, it is advisable for employers to set up their own cafeteria regulations. The cafeteria system is very much like a self-service shop: the employer first specifies which benefit types specified by law it will make available to its staff (i.e. it specifies the product range that can be chosen from), and employees select the items that best suit their personal needs up to an amount fixed by the employer in advance.