Changes of taxation and social security 2021

Minimum Wage (modified on 01, February 2021)

minimum wage:    HUF 167.400,- (gross)
guaranteed minimum wage    HUF 219.000,- (gross)

Personal income tax

Tax rate is uniformly 15%, which is applicable not only for income included in the consolidated tax base, but income acquired by every other legal title (e.g. interest, dividend, property sale).
From 01.01.2020 those mothers who were entitled to family allowance after 4 children (for at least 12 years) will exempt from the payment of personal income tax (after the labor income) lifelong, regardless of how old the children are.

Social security

From 01.07.2020 the currently differentiated pension, healthcare (kind and financial) and labor market contributions will cease, and instead of them will be a uniform social security contribution of 18,5%. But in certain cases the 10% pension contribution will be applicable.

Social contribution tax

The scale of social contribution tax is 15,5%.

Social contribution should be paid after the following payments:

•    Fringe benefit
•    Certain defined benefits which are not qualifying as fringe benefit
•    Income from interest on loans
•    Income extracted from the company
•    Income from securities lending
•    Dividends
•    Entrepreneurial dividend base
•    Income from exchange gains

Taxation of dividends

Payable tax scale of dividend is 15 %, rate of Social contribution tax is 15,5%.

The 15,5% Social contribution tax has to be paid until the income related to Social Contribution tax reaches 24 times the amount of the minimum wage in the current year. The limit does not include fringe benefits, certain specific benefits which does not constitute as a fringe benefit, as well as income from interest on loans.

The payer does not have to pay tax, if he declares that his income is expected to reach the tax payment ceiling.

If the declarant’s personal income does not reach the tax ceiling, then he needs to admit his tax return for personal income tax for the current year with increase of 6% and pay it until the deadline for the submission of tax returns.

If the individual has paid more tax then his payment obligation or the payer was taken more than the overpayment can be claimed by the personal income tax return for the tax year.

Social contribution benefits

Changes, that the benefit can be enforceable not only to 100.000 HUF, but also to the amount of the minimum wage.

Available benefits in the year 2020:

•    Tax benefit after unskilled and agricultural workers is enforceable
•    Tax benefit after person who entering the labor market
•    Tax benefit after three or more children raising women who entering the labor market is enforceable
•    Tax benefit after person with reduced working capacity is enforceable
•    Tax benefit after public sector employment is enforceable
•    Tax benefit after the employment of researchers is enforceable
•    Tax benefit for research and development activities is enforceable

Employment of retired worker

After the income of a retired worker, in 2020, only 15% personal income tax will be paid, but no kind, financial healthcare and pension contributions.

From 01.07.2020 not only the employed retired worker but all retired worker is entitled to a contribution relief, regardless of the form of employment (for example: work carried out under mandate).

CHANGES

Health service contribution

The amount is HUF 8.000 per month which has to be paid by the natural person after the time he/she spends outside of an ensured legal relationship.

The tax authority informs the individual in 8 days, if he/she will have an obligation to pay the health service contribution, because of the termination of the insurance legal relationship or of the eligibility for health service. If it is in excess of the amount of 3 months, then the individual’s social security card becomes invalid and the person supported by social security cannot use the health services free of charge only if he/she reimburse the debt.

Tax reliefs

Family tax reliefs

The tax base reducing tax relief can be claimed without an income limit
•    in case of one child HUF 66,670
•    in case of two children HUF 133,330
•    in case of three or more children HUF 220,000 after every dependent child

Tax reliefs for those who get married for the first time

Tax base reducing tax relief is HUF 33,335 /month. One is entitled for this from the first day of the following month of the wedding, through 24 months.

Personal tax reliefs

The scope of personal benefits will be changed, according to which the tax benefit currently available up to 5% of the minimum wage will be taken into account next year as a discount reducing the consolidated tax base up to one third of the minimum wage. The PIT savings are expected to be HUF 8,055 per month (a possible increase in the minimum wage may also affect this), so the amount of the discount will not change, only the method of validation.

A person with a severe disability should still be considered who is suffering from an illness listed in Government Decree 335/2009 on severely disabled diseases and receives an invalidity allowance or disability allowance for the benefit of the consolidated tax base. The discount can be enforced on the basis of a medical certificate or a decision on disability benefits and disability benefits.

Order of application of tax benefits

1.    the first is the discount for mothers raising four or more children
2.    personal discount,
3.    discount for first married couples
4.    family discount.

Contribution to vocational training

From this year, the base of the vocational training contribution is already the same as the base of the social contribution tax.

A 1.5% vocational training contribution is also charged to

•    other income
•    fringe benefits
•    certain defined benefits that do not qualify as fringe benefits
•    income from an interest discount, if the payer is subject to social contribution tax
•    meals and other services incurred during a business trip • private use of the telephone
•    representation for business partners
•    business gift
•    a gift of low value
•    the amount paid for a voluntary mutual insurance fund targeted service

After the benefits transferred to the SZÉP card, the 1.5% vocational training contribution will have to be paid from 1 July 2021.

Cafeteria

SZÉP Card

Until June 30, 2021, the exemption from social security tax on SZÉP card benefits was extended.

Budget from 1 January 2021 to 30 June 2021

•    the subsidy transferred to the accommodation's sub-account up to HUF 400,000 per year,
•    the subsidy transferred to the hospitality sub-account up to HUF 265.000 per year,
•    the subsidy transferred to the leisure sub-account qualifies as a fringe benefit up to a maximum of HUF 135.000 per year.

From 1 July 2021, the annual recreational budget for all employers will be HUF 450,000

•    for accommodation sub-accounts up to HUF 225.000 per year,
•    for the hospitality sub-account up to HUF 150.000 per year,
•    for leisure sub-account up to HUF 75.000 per year

The amounts specified in the law apply to the tax year. If the employer has already provided enough benefits in the first half of the year to exhaust the limit under the rules in force at the time of the next benefit, the excess can only be granted as a specific benefit.

Certain determined benefits

After the 1.18 times multiplied amount of these benefits the employer also has a 15% personal income tax, 15.5% Social Contribution Tax and 1.5% Vocational Training Contribution.

The part of Széchenyi card which is above the limit
Gift voucher 1 time/year up to 10% of the minimum wage (maximum HUF 16 100)
Employer contribution transferred to voluntary pension fund
Employer contribution transferred to voluntary health fund
Taxable income given by the employer based on meals or other services related to business travel
After 20% of company mobile phone usage
Such taxable income given through free or discount goods, services, for which more than one individual is entitled at the same time and the employer cannot determine the acquired income of the individuals.
Furthermore, incurred costs related to free events, organized for more than one individual (including business partners too), if it is ascertainable from the circumstances of the benefit, that it is predominantly aimed for catering, leisure program (coffee, tea, juice consumption of own employees is also included) (Point b.) of Article 3. of 70§ of Personal Income Tax)

Tax free benefits

Safety glasses benefit
Cost of kindergarten, nursery
Ticket for sports events and Cultural services up to the amount of the minimum wage
Commuting to work by own car maximum 15 HUF/km

Takács Gabriella HR advisor

Gubicza Krisztina chartered tax expert