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Changes of taxation and social security 2019

In the following we briefly inform you about tax changes related to personal income tax and contributions in year 2019.

Forrás: CONSULTATIO

Minimum Wage

minimum wage: HUF 149.000,- (gross)

guaranteed minimum wage: HUF 195.000,- (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).

Healthcare contributions

Healthcare contributions will cease, instead of it a Social contribution tax need to be paid.            

Social contribution tax

The scale of social contribution tax is 19,5%.

Because the healthcare contribution has been derecognized, therefore, in the future, 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 19,5%.

The 19,5% 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 2019:

  • Tax benefit after unskilled and agricultural workers is enforceable
  • 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

Abolished Social contribution benefits

  • Tax benefit for employees under the age of 25 and over 55
  • Tax benefit for a permanent job-seeker
  • Tax benefit for employee receiving childcare allowance, childcare assistance, child raising allowance
  • Tax benefit for businesses operating in free business zone

Employment of retired worker

After the income of a retired worker, in 2019, only 15% personal income tax will be paid, but no kind, financial healthcare and pension contributions.

According to the Labor Act, after their employment, a worker who is an own right retired person, will be not insured, so Social contribution tax is not charged for the employer either.

The insured legal relationship has to be closed with 31 December 2018 of those own right retired persons who are in employment according to the Labour Code on the 31 December 2018 and are further employed in year 2019, and the cease of insured legal relationship has to be reported on ’T1041 form.

This does not cover the pensioners who are employed in mandate or business.

Health service contribution

The amount is HUF 7 500 per month which has to be paid by the natural person after the time he/she spends outside of an ensured legal relationship.

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

Amount equal to the 5% of the prevailing minimum wage can be taken into account in case of severely disabled individuals, which reduces the tax base. It can be validated from the starting month of disability until this disability continues.

Cafeteria

In year 2019 the Széchenyi card will be the only favorable taxed cafeteria element. All other favorable taxed benefits are taxed in the same way as income.

Fringe benefit

Széchenyi card (maximum HUF 450 000/year)

Employer has a 15% income tax and 19,5% social contribution paying obligation. (34,5%)

Certain determined benefits

After the 1.18 times multiplied amount of these benefits the employer also has a 19.5% social contribution paying obligation, as well as the 15% income tax.  (40,7%)

  • The part of Széchenyi card which is above the limit
  • Gift voucher 1 time/year up to 10% of the minimum wage
  • Employer contribution transferred to voluntary pension fund
  • Employer contribution transferred to voluntary health fund
  • School system training, in case the employer obliges the employee
  • 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 (voucher cannot be given)
  • Risk insurance (the tax exemption ceased, but remains until the expiry of the insurance year (anniversary), but no longer than 31. December 2019
  • Commuting to work by own car maximum 15 HUF/km

Benefits previously not listed, formerly cafeteria benefits are taxed as wages.

  • Local travel season ticket
  • Erzsébet voucher
  • Workplace meal
  • Cash benefit
  • Mobility housing support
  • Housing support
  • Student Loan Support
  • Risk Insurance (Health)
  • An employer assigned to a voluntary insurance fund is a non-targeted subsidy

Széchenyi Card changes

From 1st of January 2019 the request for Széchenyi Card is not thought the employer, the individual need to request it at the Fund Service.

If the individual does not use the amount what was transferred to the Széchenyi card until 31st of May of the second calendar year after the reference year, the monthly fee charged up to the 3% of the unused funds, paid by the individual.

From January year 2019, all employees will have 3 account numbers for the “pockets”. The employer needs to send on these account numbers the Széchenyi Card upload. For this, all employees must provide the employer the contract from the Fund Provider listed with the account numbers.

Budapest, 7th of January, 2019

Takács Gabriella HR advisor
Gubicza Krisztina chartered tax expert

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