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Changes of taxation and social security 2020

In the following we would like to inform you briefly about tax changes related to personal income tax and contributions in year 2020.

Forrás: CONSULTATIO

Minimum Wage

minimum wage: HUF 161.000,- (gross)

guaranteed minimum wage: HUF 210.600,- (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 labour 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 17,5%.

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 17,5%.

The 17,5% 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).

Health service contribution

The amount is HUF 7.710 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 inform 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

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

Also in year 2020 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 17,5% social contribution paying obligation (32,5%).

Certain determined benefits

After the 1.18 times multiplied amount of these benefits the employer also has a 17.5% social contribution paying obligation, as well as the 15% income tax (38,3%).

  • 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

Benefits previously not listed, formerly (in the year 2018) 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

Budapest, 3rd January 2020

 

Takács Gabriella HR-advisor

Gubicza Krisztina chartered tax expert

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