Employment
Based on Hungarian legislation, income earned
from an employment relationship (Hungarian or foreign) qualifies as employment
income. Employment income includes all wages, remuneration or honorariums
received for such activities but also bonuses or cash payments (redundancy
payments) in connection with the employment relationship.
Employment income is deemed to be in-come from
dependent activities. It constitutes part of the individual’s consolidated tax
base and is taxed at a flat tax rate of 15%. Ordinary and necessary employee
business expenses borne by the employer (e.g. business travel and accommodation
expenses, etc.) are not considered income for Hungarian personal income tax
purposes. Housing provided to a seconded employee is generally tax free if the
foreign employment relation is maintained (no Hungarian employment contract is
concluded) and appropriate contractual arrangements and invoices are in place.
Tax rate, assessment and social security contributions
Personal income tax
The applicable tax rate to the consolidated tax
base is 15%, except for youngsters below the age of 25 where no PIT is applied.
In Hungary the annual salary is paid in 12 equal instalments. The personal
income tax must be withheld by the employer from the gross salary of his
employees and paid to the tax authorities on a monthly basis until the 12th of
the month following the calendar month.
For lack of a Hungarian disburser to with-hold
the prepayments of personal income tax, the individual must settle the personal
income tax due on the employment in-come on a quarterly basis. The personal
income tax advances should be transferred to the Hungarian tax authorities and
should be credited on the individual’s tax account by the 12th of the month
following the calendar quarter (i.e. 12 April, 12 July, 12 October and 12
January of the following year in which the income was received).
Personal income tax withheld by the
employer/disburser is considered to be a pre-payment on the employee’s final
income tax and is credited against his assessed income tax liability.
Individuals liable to Hungarian personal income tax should file an annual
income tax return whereby the deadline is 20 May of the year following the
calendar year concerned. The Hungarian Tax Authority pre-pares a draft PIT
return for the persons. Any difference between the annual tax liability and the
prepayments must be paid by the employee by the filing deadline. Any excess tax
payments must be refunded by the tax authorities within 30 days from the date
the tax return was submitted. Employees may, under certain conditions defined
by the Hungarian personal income tax rules, deduct certain tax credits and
allowances (i.e. family allowance, allowance for first-time married couples as
of 1 January 2015) from their personal income tax base.
Social security contributions
Social tax is payable by the employer over the
gross salaries at a rate of 13%. The employer is also obliged to withhold
employee-side social security contribution from the gross salaries paid to the
employees and is also liable to pay social tax and vocational training
contribution on his be-half on the employer-side over the gross salaries.
Several groups of privileged per-sons (e.g. young or old employees, parents
returning from child-care leave, highly-educated personnel engaged in R&D
activities) entitle the employer for a reduction or ex-emption from the above
social tax.
Rehabilitation contribution
In 2022 the amount of the rehabilitation
contribution is HUF 2,088,000 (approx. EUR 5,500 / USD 5,800) per person (below
the mandatory employment ratio) per year. Companies employing more than 25
per-sons are obliged to pay the rehabilitation contribution if the number of
employees with disabilities does not exceed 5% of the total labour force
(mandatory employment ratio). The annual amount of the rehabilitation
contribution must be calculated by multiplying the number of employees un-der
the mandatory employment ratio by the HUF 2,088,000. The contribution advances
must be paid in the first three quarters by the 20th of the month following the
quarter. The difference between the advances paid and the annual contribution obligation
must be paid for the tax year by 25th February of the following year.
Non-cash benefits
The scope of cafeteria (i.e. in-kind) benefits is limited in Hungary.
The non-cash benefits are taxed as follows:
Fringe benefits with advantageous employer-side taxation
Certain specified benefits payable by the employer
Further non-cash benefits are subject to 15%
PIT plus 13% social tax over super-grossed amount (multiplier: 1.18; effective
tax rate altogether: 33.04%) next to the benefits provided in the preferential
cate-gory (see above), the following are applicable: representation expenses
and business gifts, entitlement to private use of company mobile phones,
certain taxable insurance premiums paid by the employer.
Benefits granted to all employees under the
same circumstances or on the basis of a company policy are taxable as wages.
Tax-exempt benefits
The scope of tax-exempt benefits include: for
example tickets for cultural and sport events, nursery and kindergarten
services.
Representation costs and business gifts
Representation costs and business gifts are
also taxable within the personal income tax system. The value of these benefits
is subject to 15% personal income tax and 13% social tax, payable by the
provider (multiplication 1.18; effective tax rate: 33.04%). These costs qualify
as deductible expenses in the system of corporate income tax.
Daily allowances
A daily allowance paid by the employer in the
case of domestic business trips is fully taxable in the hands of the employee
(i.e. part of the consolidated tax base). There is an exemption applicable for
truck and bus drivers.
Daily allowances paid for foreign business
trips are exempted from taxation up to 30%, but maxi-mum EUR 15/day. Daily
allowances provided to truck drivers are tax exempt up to the amount of EUR
60/day.
Non-resident employees
Non-resident individuals are subject to
Hungarian personal income tax on their Hungarian source income, i.e. income
received from activities performed in Hungary (limited tax liability). The
rules regarding the determination of the tax base, tax rate, assessment, social
security contributions and social tax are similar to the treatment of resident
employees. In certain cases social security taxation may not be effected over
non-resident employees, subject to specific conditions and procedures to
fulfil.
If you need a reliable partner in tax advisory, accounting, payroll or auditing, don't hesitate to contact us!
LeitnerLeitner
Address: 1027 Budapest, Kapás utca 6-12.
Telephone: +36 1 279 2930
Fax: +36 1 209 4874
Email: office.budapest@leitnerleitner.com
Web: http://www.leitnerleitner.com/
