Employment posting questions emerge
in both short- and long-term relations. In practice, long term-postings are
usually handled by the HR department; however, short-term business trips and
trainings that may get a lower emphasize also require due care from a taxation and
administration perspective. In addition, the logistics sector also has some
special treatments.
Long-term postings: the most complex taxation, social security and labor
implications.
Salaries, wages and similar
remuneration may be taxed in the receiving or the posting country. Taxation
depends firstly on whether the private person keeps his or her tax residency during
the period away from the home country. A change of tax residency may incur if
the whole family travels and moves out of Hungary for a longer period together;
thus the personal relations of the individuals are significantly and
permanently changed.
If the work is physically carried out
in the receiving country and the tax residency of the persons has also moved,
then taxation rights go exclusively to the receiving country. Moreover, shift
of tax residency for a private individual results the shift of taxation for its
worldwide income too (e.g. investment income); except for income deriving from
real estates which remains taxable at the place where such properties are
located. Otherwise, if tax residency remains at home, the taxation of salaries
will depend on the physical place of work, the duration of stay and the
disburser of the money (i.e. potential permanent establishment to be created in
the receiving country or not). In such cases, income taxation may goes to the
receiving or the posting country or to both in combination.
Social security legislation is based
on a different logic, meaning that it is not always in harmony with the
taxation. As a main rule, a private individual may be insured in the social
security system of one and only country, unlike in taxation. To find our which
country should provide coverage, and thus be entitled to the contributions, the
length of the posting, and single or parallel working relations in the affected
countries should all be investigated.
In terms of labor relations, the
receiving and posting countries’ legislation should be jointly applied in terms
of minimum wages, maximum working times, minimum rest periods, health and
safety, protection of female and youngsters, equal treatment and lack of
discrimination. The understanding of both legislations is very important as the
most advantageous rules shall be applied in a conflict of the rules.
Short-term delegations may also create difficulties in taxation
Cafeteria elements were deregulated
in 2019, although this does not affected the treatment of business trips and
short-term delegations from a tax point of view. For such short trips, the
employer may provide its employees with a daily allowance fee, which is at
least partially exempt from taxation. The thresholds for this tax exemption
depend on the destination: domestic allowances may be granted tax free up to
HUF 500 per day normally, and HUF 3,000 per day in the logistic sector. Logistic sector is
special with EUR 60 tax free daily allowance. Travel and accommodation expenses
may be provided without taxation; always on the condition that the proper
invoice is issued for the name of the company.
If no daily allowance is provided,
the employee may be entitled to hand in invoices, again for the name of the
company only, for the food he/she buys during the trip. Such reimbursements are
taxable, but taxes to be paid by the employer at 15% personal income tax and
19.5% social tax over an income multiplied by 1.18%; so the total effective tax
rate is 40.7%. Similar tax implications need to be considered for
representation costs, if the employee during its business trip invites others to
a business meal.
Special attention should be made,
however, on the legal aspects as well; the wording of the employment contract can
result in different interpretations about postings. If no place of work is
regulated in the contract, or the workplace is varying, the definition of
postings could be difficult to fulfil in practice. This leads to additional
taxation for business trips and car utilization.
In some cases, companies also
organize trainings for the personnel that may be tax exempt costs or in-kind
contributions depending on the nature of the event and the portion of business
and entertainment character. In-kind contributions are fully taxable at the
level of the disbursing company similar to representation by an effective tax
rate of 40.7%.
Short-term postings, business trips
and training, therefore, fall under even more complicated taxation
implications. This, based on our practical experiences, is usually overlooked
or treated improperly within organizations. It is not bad thing to accept the
helping hand of external advisors and payroll specialists in employment posting
matters both in short- and long-term cases, whether domestic or cross-border
situations.
LeitnerLeitner is one of the most
influential tax consulting, accounting and auditing companies in Central
Europe. We have comprehensive knowledge on the legal and tax environment of
countries in the region. With the help of our other experts we can provide high
quality advise on taxation aspects of posting for our Clients.
