From 2012, new rules will apply to personal income taxes and social security contributions.

Businesses should update their existing payroll and benefit schemes to reflect the changes.

Personal income tax

Progressive personal income tax will be re-introduced and 'super-grossing' of the tax base will be abolished below monthly gross income of HUF 202,000 (c. €650).  This means the effective tax rate will be 16% below the threshold and 20.32% on the excess.

Low earners' tax credit will also be abolished, but the family allowance will remain.

In-kind benefits

Benefits previously requiring no health care contribution will now be subject to a 10% contribution, and will be capped at HUF 500,000 (c. €1,613) a year in total, with any excess subject to the 27% rate.

Preferentially taxed items include:

  • the 'Széchenyi Leisure Card', which will effectively replace hot meal vouchers as it is being extended to include a restaurant and a recreational sub-account;
  • meals up to HUF 12,500 (c. €40) a month at workplace canteens;
  • a new, special voucher called the 'Erzsébet voucher', replacing existing vouchers for ready-to-eat meals up to HUF 5,000 (c. €16) a month.

Business gifts and entertainment costs will become tax-deductible for corporate income tax purposes, but be subject to personal income tax and 27% health care contribution. This will also apply to any benefits granted in the framework of transparent cafeteria schemes.

The effective personal income tax rate remains 19.04% for both categories of benefit.

FX loan repayment support

Non-refundable subsidies up to a maximum of HUF 7,500,000 (c. €24,195) and interest free loans (with no maximum) from employer to employee to make a final repayment of FX loans will be tax exempt (subject to further conditions).

Social security contributions and the 'social tax'

  • Health insurance fees will increase from 6% to 7%.
  • The 27% social security contributions currently payable by employers are being replaced by a 27% 'social tax' which will no longer entitle the employee to any social benefits.
  • Employers can claim a regressive credit against the 'social tax' for any wage increase awarded in order to preserve the net value of monthly wages below HUF 300,000 (c. €968) gross.

Training contribution

The tax base for training contributions will be the same as that for health insurance and labour market contributions; the rate will remain 1.5 %. Development subsidies and/or training costs of own employees will no longer be creditable against the training fund contribution liability.

These and other changes appear in the 2012 tax amending Act that has recently been published in the Official Gazette.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 13/12/2011.