Tax rate

From 2013, a uniform tax of 15% tax has been payable on income types forming part of the consolidated tax base and taxable in Hungary (e.g. salary, engagement fee etc.) and on capital incomes as well.

Children deduction

There is a family tax allowance, which amounts to HUF 10,000 per child per month per family for one child, HUF 20,000 per child per month per family for two children and HUF 33,000 per month per child for three or more children. The family tax allowance is also available to employees seconded from abroad, subject to a few restrictions.

Tax payment

In Hungary, the tax advance is withheld by the payer (the employer) and the employer transfers the income tax to the tax authority’s account. The tax return on withheld advance payments must be filed by the employer by the 12th day of the month following the relevant month. Private individuals must file their own tax return by 20 May of the year following the relevant year. That is when the difference between the actually payable tax amount and the withheld advance payments can be settled.

Private individuals are required to pay 18% social contribution of which 10% is pension contribution, 7% health insurance and 1% labour market contribution on the part of their income that is subject to contribution payments. It is also the employer that withholds the contributions from the income paid to private individuals and transfers them to the tax authority’s account. The return on withheld advance payments of contributions must also be filed by the 12th day of the month following the relevant month.

The employer is required to pay a social contribution tax of 13%. Since 2013, employers have been eligible for significant tax allowances if they employ members of certain employee groups (career starters, employees under the age of 25 or over 55, employees employed during or following maternity leave, researchers and developers, permanently unemployed persons etc.).

The deadline for filing a return on and paying the taxes and contributions borne by the payer is the 12th day of the month after the relevant month.

Employers employing more than 25 persons on average must also pay a rehabilitation contribution if the proportion of persons with disabilities or with impaired health within their staff does not reach 5% (mandatory level). The level of the contribution is based on the number of workers with disabilities required to reach the mandatory level (HUF 2.088.000 per person per year). The contribution is payable quarterly on the basis of the average headcount of the given quarter.

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.