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From January 2024, a government decree (271/2023 (29.VI.)) will enter into force, which, in line with the Waste Act, requires companies that produce waste on their premises exceeding the quantitative limits set out in the Decree to take a compulsory environmental liability insurance in Hungary or face a fine for failure to do so.
From 2024, the insurance obligation will rise at waste producers whose premises have generated more than:
– 2000 kg of non-hazardous waste,
– 200 kg of hazardous waste
– 5000 kg of non-hazardous construction and demolition waste.
According to the experts’ interpretation, the regulation will apply to all businesses that produce the above levels of waste, including for example restaurants, hotels and grocery stores, if the weekly amount of waste produced exceeds 38 kg, and thus the 2000 kg for the year in question.
Professionals point out that even a large household can generate about 40 kilograms of waste per week. This is the amount that a small business in Hungary can easily achieve today. Where this happens, the regulation, as currently interpreted, therefore requires environmental liability insurance to be in place.
The businesses concerned must have environmental insurance with a minimum coverage of HUF 10 million for each site concerned. Such liability insurance will, for example, help to ensure that there is sufficient cover for remediation costs, mitigation and restoration of damage caused by environmental pollution at the site concerned. It is important to note that most of the similar insurance policies previously on the market do not comply with the Gov. Decree, so businesses already insured should also review their existing policies.
The minimum amount of compulsory insurance may be higher than the minimum if the operator carries out activities subject to a waste management permit or registration obligation – in which case the minimum amount of insurance is increased (based on the Annex to the Gov.Decree) considering the degree of hazardousness of the waste.
After the EPR scheme, the next element of the circular products, the mandatory deposit-refund system, a.k.a. as deposit-return scheme (DRS), will soon be in effect.
Although the complete enforcement of Government Decree 450/2023 (X.4) will not take place until 1 January, certain provisions of the Decree have already entered into force on 1 November 2023 and manufacturers will be subject to obligations from 15 November 2023.
The DRS system will affect glass, metal and plastic bottles and cans (0.1 to 3 litres capacity), except for milk and milk-based drinks packaging.
In addition to the products that are compulsorily covered by the scheme, manufacturers may also voluntarily treat certain products as subject to a return fee.
The rate of the DRS fee is fixed by law at HUF 50 per item for non-reusable products subject to the mandatory DRS.
The participants in the DRS are: manufacturers, distributors, consumers, public authorities (e.g. the national waste management authority) and MOHU Zrt. as the concession company.
Among the obligations of producers, the following should be highlighted. Manufacturers must register their products on the electronic platform of MOHU Zrt. at least 45 days before placing them on the market. In addition, they are also obliged to pay a monthly DRS fee for the mandatory products subject to the deposit-return scheme placed on the market, and a quarterly connection and service fee to MOHU Zrt. who will take over the DRS products from distributors and consumers.
In some cases, distributors are obliged to operate an automatic reverse machine in exchange for a handling fee under an agreement with the concession company, or to take back the products from consumers (grocery stores must operate a reverse machine in areas larger than 400 square metres and in municipalities with a population of more than 1,000 people)..
Consumers are essentially refunded the DRS fee paid in advance for the products they drop off at the exchange points, which they will receive a voucher for (usable for later purchases). To do so, they must return the product intact and with a legible marking.
MOHU Zrt. receives the DRS fee from the manufacturers and takes care of the implementation and operation of the system. The public authorities (e.g. the national waste management authority) monitor the operation of the system.
The relationship between EPR, product charges (green tax) and DRS is somewhat clarified in the legislation: where connection and service charges are payable, no EPR charges are due.
However, for DRS products, the environmental product charge (green tax) cannot be deducted for now.
Pursuant to Government Decree 451/2023 (X.4.), from 16 November this year, there is a new tax exemption for certain wine products in Hungary, for bottled wine or wine products as benefit with a protected designation of origin or protected geographical indication purchased directly from a winery, if it is:
With the Christmas period approaching, it may be good news for many businesses that, if the above conditions are met, wine products can be given tax-free as a gift of negligible value or as gifts to business partners, as well as at certain company events as a derogation from the previous rules. In such cases, neither personal income tax nor social contribution tax will be payable on the benefit.
However, it is important to note that the gift is not tax exempt if the product is purchased from a trader (e.g., wine merchants, chain or individual stores), as the tax exemption is conditional on the product being purchased directly from the winery. In addition, in case of wine, it must be bottled and must have a protected designation of origin or geographical indication.
The new rule specifies the cases in which the supply of a wine product is exempt from tax, which are defined by law as certain specific benefits. The definition and content of these benefits, including the limits, remain unchanged and still include the exempted wine products and their value.
Thus, a gift of a small or negligible value may continue to be granted only once a year as a specific benefit, up to a value of 10% of the minimum wage (currently HUF 23.200), with the value of the wine product now being exempt from tax.
As mentioned above, in addition to catering of representational and non-representational purposes (e.g. business, festive dinners, events) no tax liability arises in respect of wine-sector products which comply with the rules of the above-mentioned Government Decree when
Wine products provided before 16 November, which otherwise would meet the conditions, cannot yet be treated as subject to this tax exemption, and it should be highlighted that the new rule is an transitional provision, so its applicability will be adapted to the duration of the emergency period and will only remain applicable afterwards if the relevant provisions are incorporated into the Act on Personal Income Tax.
From 1 July 2023, the so-called Extended Producer Responsibility in Hungary, or EPR system, will come into force in Hungary.
Although there is a significant overlap between products subject to the environmental product charge and products subject to the EPR, it is highlighted that there are product groups that are subject to solely one or only the other.
It is important to note, however, that further detailed analysis of individual products is necessary, given that there are a number of exceptions and the range of products covered by the obligations is well defined. On this basis, not all electronic equipment is subject to the EPR, and the range of textile products (e.g. clothing, carpets, blankets, bed linen, curtains, footwear) for which the subject is liable to pay the levy is accurately defined.
For each product, in addition to the already known KT and CsK codes (green tax), the EPR introduces the so-called KF codes, which are structured differently from the previous ones and are necessary for the subject to be able to fulfil his obligation.
It is important to note that some of the rules for production, placing on the market and personal use are laid down in separate legislation for each of the two obligations, so that there may be differences and the two obligations need to be assessed separately in each case.
For products covered by both the EPR and the green tax (see list above), the should be established on the basis of the following rule (i.e. the EPR charge should always be set in full and the product charge may be modified):
If, on the basis of the above calculation, the difference between the rates is a negative number or zero, then the calculated product charge is zero Ft/kg and therefore no product charge is payable (EPR charge still applies).
The product charge liability for the first domestic placing on the market or for own use continues regardless, i.e. as before, records must be kept, a return must be filed, but no payment is due (noting again, this is only the case when the difference in the rates is zero or negative according to the above equation).
The obligated manufacturer must (subject to certain exceptions laid down by law) include the following text on the invoice or, in the absence of an invoice, on the document proving the placing on the market, except in the case of retail sales.
If the purchaser of an EPR, i.e., a circular product, so requests, the invoice (or, in the absence thereof, the documentary evidence) must include the following text (again, except for retail sale).
It is important to note that with the entry into force of the EPR regime, the invoice clause requirements for product charges have not changed.
It should be stressed that there are specific cases other than those mentioned above that should be further investigated to determine the exact applicable invoice clause, for example, in the case of shipments abroad.
By the 20th day of the quarter following the end of each quarter:
Note that the deadline for the first return will exceptionally be 15 October 2023.
It is recommended to review the data of the invoice issued by the concession company (MOHU),
Our expert colleagues are available for all requests related to the new liability regime. The new system may raise a number of questions and new tasks in the life and operation of businesses, which our advisers will help you to navigate.
In today’s era, posting of workers has become more and more common, as companies are taking advantage of the increased access to international markets and resources. The benefits of global mobility are countless: from getting access to new skills and technologies to gaining a better understanding of the local culture and diversifying the workforce. However, each market has it’s own specifics when it comes to international taxation of the expats. Our tax professionals from Hungary have prepared a comprehensive overview on the legislative aspects of posting of workers and employing expats in Hungary.
When searching for topics related to international taxation, the first concept we undoubtedly come across is “expat.” Let’s examine what the term “expat” actually means.
The term “expat” originates from the English word “expatriate” and refers to a person living in a foreign country or, in terms of taxation, an individual who temporarily works in a location different from their residency. This can apply to individuals working abroad from Hungary or individuals coming to Hungary from abroad for employment purposes.
There can be various situations when it comes to international employment. For instance, when an employee is sent by their employer to work in another country, this is referred to as a posting. Another scenario is when a foreign employer becomes the employer of a Hungarian individual who works for them in Hungary. It is also possible that a Hungarian employee works outside of Hungary for a Hungarian employer. Additionally, there are cases where an employee works in multiple countries for the same employer.
Right from the beginning, it should be noted that no two cases are exactly the same, and each situation must be examined individually. The most important question is that taxation and social security contributions cannot be treated as one entity. Their regulations are completely separate and distinct from each other.
To begin with, let’s examine international regulations, personal income tax, and determine the tax residency of the employee.
Tax Residency: Tax residency expresses the closest connection between an individual and a specific state for taxation purposes. For instance, if multiple states would consider the same individual as a resident based on their internal laws, we need to examine the relevant double tax treaties to make a determination.
International agreements primarily rely on the rules of Model Tax Convention to determine tax residency. The main criterion is the individual’s permanent residence. If a person has permanent residences in multiple countries, the focus is on the center of their vital interests. In cases where this criterion is also met in multiple countries, the agreement considers the habitual place of residence. The nationality of the individual is the last factor to be examined, if necessary.
Hungarian Personal Income Tax Law disrupts this order as it first examines nationality, followed by the right of free stay (whether the individual spends 183 days or more in Hungary within a year). Many individuals are familiar only with the “183-day rule,” while in reality, it is just one of several rules to consider.
According to the Hungarian regulations, the residential card (a.k.a. address card) is merely an administrative matter. Permanent residence refers to the place where an individual has registered for long-term residence and actually lives. According to the law, this can even be a hotel room if the aforementioned conditions are met, and the room is at the disposal of the individual.
The center of vital interests refers to the examination of where the employee’s closest family and economic interests are located and to which country they are linked (children, spouse, bank account, ownership).
Determining tax residency is crucial because it is necessary to declare worldwide income, including income from both domestic and foreign sources, in the tax return filed in the country of the tax residency.
A double tax treaty, also known as a tax treaty or tax convention, is an agreement between two countries to prevent double taxation.
Countries establish these treaties to determine which country has the right to tax specific types of income. Once the allocation of taxing rights is determined, the domestic laws of each country are examined to ascertain the specific tax treatment and any applicable tax rates for the income in question. In Hungary, for instance, double tax treaties have been established with 80 countries to avoid double taxation.
If there is no double tax treaty between two countries, then only the Hungarian Personal Income Tax Act (Act on PIT) needs to be examined for both tax residency and taxation purposes. The taxation of income is determined based on the provisions of the Act on PIT, which may potentially lead to double taxation in certain cases. However, the Act on PIT provides solutions for such situations. If the income has already been taxed in another country, the Hungarian tax legislation partially recognizes it by allowing a deduction of 90% of the foreign tax paid from the tax assessed after the tax base.
These are mostly specialized sector-specific agreements (e.g., aviation). However, we may also encounter individuals belonging to the professional or civilian personnel of NATO who are stationed and active in Hungary, but are not required to pay Hungarian personal income tax (PIT). International organizations and diplomatic bodies may also have other exemptions and benefits.
Conclusion: If there is a treaty between two countries, the tax will be paid in one country for sure. If there is no treaty between the two countries, partial taxation may occur by one of the countries, or both countries may have the right to tax the income. In the case of certain types of incomes (such as royalties, dividends, interest income), double taxation may still occur even with the existence of a treaty.
Regarding the payment of contributions, there are also international agreements, which can be classified into four categories:
The Regulation on the Coordination of the Social Security Systems of the European Union has direct applicability even without being implemented into domestic legislation, and it applies even if it contradicts the laws of Hungary or any other country. It applies to citizens of member states, stateless persons and refugees with a residence in member states, their family members, as well as to the citizens of Iceland, Liechtenstein, Norway, and Switzerland. The regulation establishes the main rule that individuals falling under this regulation can be subject to the legislation of only one state. As a result, while taxation can be divided among countries, in cases falling under the regulation, social security contributions must be paid exclusively in one country.
This category includes bilateral agreements on social security and social policy that are currently in effect. Hungary, for example, has such agreements with Japan, India, Canada, Austria, and Montenegro.
These individuals are referred to as third-country nationals with whom Hungary has not concluded a social policy agreement or who are not members of the EEA. An example of such a case is China. In this situation, dual contribution may occur, as a Chinese individual coming to work in Hungary may be required to pay contributions in both Hungary and China or may be on posting.
Similarly to the case of double taxation, specific agreements typically apply to airlines, NATO, and other international organizations and to their personnel.
Secondment refers to the situation where an employee from Hungary is posted abroad by their employer. This can be considered the most common circumstance, and it is regulated both at the EU and at international levels. In such cases, the employee remains under the jurisdiction of their Hungarian employment contract, and the posting is strictly temporary, for a limited period. The temporary duration is defined as 183 days for tax purposes and, in certain cases, up to 24 months for social security contributions.
The determination of taxation follows the principles outlined in the double taxation agreements established by the OECD Model Tax Convention. If, within a period of one year or 12 consecutive months, the duration of the posting exceeds 183 days, the right to tax is transferred to the host country. This also occurs if the secondment lasts less than 183 days but the remuneration is paid by the host employer. In such cases, the obligation to pay personal income tax (PIT) is established in the host member state.
If the duration of the secondment (posting) does not exceed 24 months, the employee remains subject to the social security rules of the sending state.
If the employee is subject to the Hungarian social security system and will remain covered by Hungarian insurance in the future, the employer is required to register in Hungary as a foreign employer.
In such cases, the foreign employer obtains a Hungarian tax identification number, which can only be used for the payment of social security contributions related to the individual employee. The payment of personal income tax is the responsibility of the employee in this case, not the employer. Therefore, the employee is required to pay the tax to the tax authority.
It is crucial for the foreign employee to have a certificate of tax residency from their home country, which allows them to maintain their tax liability there during a short-term assignment (under 183 days). Another important document is the certificate of coverage for foreign insurance (A1 certificate), and in such cases, the employee is exempt from paying social security contributions in Hungary.
The first step is to determine where the employee has their permanent residence because if they “habitually carry out substantial work” in the state of permanent residence, they will be subject to social security coverage in that Member State. If the employee does not perform their work “substantially” in their state of permanent residence, then they will be covered by social security in the country where the employer is based.
The determination of “substantial work” needs to be assessed on a case-by-case basis, considering the working hours in each country and the extent of remuneration. Accurate records and attendance sheets are necessary for this assessment.
Remote work and home office are not considered business trips or assignments (posting), and temporarily working abroad is unlikely to change the location of tax and social security obligations. However, engaging in long-term remote work or home office in a foreign country may establish a basis for changes in tax obligations. Therefore, it is important for employers to know where their employees are located and from where they are performing their work, as income tax or social security contributions may arise in another country where the employee is working in a home office.
The National Tax and Customs Administration (NTCA) has published its audit plan for 2023. The document includes the main objectives and the areas, the taxpayers and activities to be audited along with other useful information.
Based on the published information, the NAV will target its 2023 audit activities, focusing on taxpayer behaviour and adapting its actions to taxpayers’ tax morale. In summary, this means that taxpayers who are cooperative and law-abiding will receive ongoing support to correct errors and deficiencies, while fraudulent taxpayers and networks will be dealt with vigorously, closer and closer to the time of the infringements.One of the most important elements of the control activity is the considerable amount of data available to the tax authority, which is used by the NTCA for targeted risk analysis and risk management purposes and on the basis of which it initiates its procedures.
One of the most important elements of the control activity is the considerable amount of data available to the tax authority, which is used by the NTCA for targeted risk analysis and risk management purposes and on the basis of which it initiates its procedures.
The four main areas of audit activities in 2023 are the following:
Compared to the activities identified as risky in previous years, the list has been extended to include new activities in addition to those already included (which were e.g., sales on websites, grocery acquisition and distribution, construction, motor vehicle dealership and repairer activities, tourism and catering, passenger transport, seasonal goods sales).
The new elements to the list are the following:
Based on the tax authority’s experience and risk analysis so far, these are the areas to focus on in 2023.
We can see that the NTCA operates in a data-driven way, using the data available to it for risk analysis purposes to try to filter out which taxpayers are suspected of abuse and may need to be audited. One of the key elements of the analysis is the data from online cash registers and online invoicing systems under the online reporting obligations. In addition, data from EKAER (Electronic Public Road Trade Control System), vending machines, construction and tourism systems should also be mentioned. These data are also cross-checked by the IT systems with other sources, such as declarations, and data from other parties to the transactions are also compared, which can reveal discrepancies.
The aim is to check those involved in deliberate tax avoidance or invoicing chains, with particular attention being paid to those registered to a seat-service provider or those engaged in activities requiring a large amount of live labour (construction, film), as subcontracting or subcontracting chains are common in these sectors.
As in previous years, the focus this year will be on taxpayers who are linked to or make profits from non-cooperative (from a tax aspect) countries (other taxpayers in those countries). They may be selected by the NTCA for audits based on risk analysis. In addition, certain data from international data exchanges will also be a priority this year.
According to the audit plan, those who, on the basis of the available data, engage in tax-minimising behaviour and those who do not realise any revenue on a sustained basis but claim tax refunds can expect to be audited by the tax authority during the year. Taxpayers who commit employment-related abuses are also included in this category.
With the restructuring of the ‘KATA’ tax scheme system, the NTCA has set itself the target of auditing both those who opt for ‘KATA’ taxation (whether they are genuinely eligible) and flat-rate taxpayers (application of appropriate cost ratios and income thresholds). In addition, it was pointed out that taxpayers who have not opted for any of the tax scheme options and are therefore likely to continue their activities without authorisation can expect to be subject to on-the-spot audits.
This year’s risk-based tax audits will also focus on the registration tax payable on vehicles imported from abroad and on vehicles leased by fleet operators.
In addition to the above, there will be a focus on the investigation of undervaluation in import procedures and VAT evasion linked to customs procedures, with the tax authorities planning to take immediate action to tackle the practices of disappearing importers acting through an indirect customs representative. At this point, while the goods are still under customs supervision, the transaction documentation and the client are available, allowing effective risk analysis and immediate action by the authorities.
In addition to the large taxpayers, the NTCA will also include the companies and taxpayers with the highest tax performance in its audits, as they will receive special attention in the audit plan due to their importance for the national economy.
In addition to the general aspects, the authority has listed a few priority aspects.
The use and application of tax incentives for investments in development and energy efficiency and renovation, as well as transfer pricing obligations, will also be audited. In relation to the latter, the authority also points out that, in general, a significant number of these companies have a related company, so the examination of the prices applied between them will be a high priority task in 2023. This will also include certain related obligations such as reporting and record-keeping.
Also new for this year, taxpayers with a large number of employees will be subject to an audit focus on those operating an Employee Stock Ownership Plan (ESOP), where the authority will examine the entitlement to payments, compliance with remuneration policies and legal requirements, and other tax issues, in particular insurances as specific defined benefits for employees.
In principle, the NTCA’s approach is to support taxpayers and, in cases where tax compliance is inadequate or incorrect, the tax authority draws attention to this to encourage compliance. These support procedures will be maintained in 2023 with the help of certain control data.
A new task this year, given the number of people leaving the KATA tax scheme, will be to help taxpayers who were previously KATA taxpayers to switch to new tax arrangements.
In addition to the above, the NTCA also includes the continuous monitoring of basic deviations, by which it continuously examines certain types of data, taxpayers and their behaviour and if necessary, launches an audit after carrying out a risk analysis.
Following the textual description, the tax authority groups the audit points and tasks for the year in question as a kind of summary.
Audits are expected for group corporate taxpayers and small enterprise taxpayers (‘KIVA’).
Beneficiaries receiving the largest allocations from the personal income tax donations and real estate agents can also expect audits.
Among the thematic tasks, the authority is planning transfer pricing audits in the automotive sector.
In general, audits are expected in the area of green tax, and lawyers, legal practitioners, independent bailiffs and taxpayers engaged in metalworking activities can also expect audits.
The season of personal income tax (PIT) returns is around the corner – incomes from abroad, foreigners’ incomes from Hungary, and the available tax allowances. The deadline for filing personal income tax returns for 2022 is May 22, 2023.
The tax authority will prepare draft returns for those who are registered to Client Gate or have specifically requested so and who receive their income exclusively from a payer (for example, as an employee) in a form that will automatically become final and become a submitted return on the due date.
In many cases, however, it will be necessary to amend the draft or prepare a full return. This is the case for self-employed persons, but also for many individuals whose income is derived from abroad.
As a general rule, for those whose tax residence is in Hungary, the obligation to file a return is complete, i.e., they have to declare not only their income from domestic sources but also their so-called “worldwide income”, i.e., all income from abroad, regardless of whether they have already paid taxes abroad.
This is also true for those items on which, under an international convention in force, tax has been paid abroad and no further personal income tax is payable in Hungary. Although no tax liability is then due here, if the individual fails to declare these incomes on their tax return in Hungary, they may be liable to pay a default penalty.
In the case of individuals who are not Hungarian tax residents but who are liable to pay tax here on the basis of the time spent and the activities carried out in Hungary, they are required to file a tax return on their income taxable in Hungary.
In practice, this means that individuals must declare income in the country where it is taxable, while in the country of tax residence, they must declare all income to the authorities, including income that has only become taxable in another country under a double taxation convention.
The Hungarian Act on Personal Income Tax treats individuals who are foreign tax residents in a similar way to residents in Hungary regarding tax benefits and allowances and imposes a single condition for them to benefit from any of the Hungarian tax allowances.
If at least 75% of all income from non-self-employment and income from self-employment (including in particular entrepreneurial income and entrepreneurial dividend base or flat-rate tax base), as well as pensions and other similar income earned in respect of previous employment, is taxable in Hungary, the individual with foreign tax residency is entitled to claim domestic tax allowances.
It is important to note, however, that individual allowances can only be claimed if none have been claimed in respect of the same reason in another state during the same period.
This means that if, for example, an individual spends a longer period of time on secondment in Hungary and at least 75% of their annual income becomes taxable here, they can claim the following benefits in the same way as any other Hungarian tax resident:
The allowance for mothers of four or more is available to women who are entitled to family allowances for at least four children of her own or adopted or, if no longer entitled, have been entitled to at least 12 years or if the entitlement to family allowances has ceased due to the death of a child. A child who receives care in a social institution because of a disability and for this reason the mother does not receive family allowances is also considered to be a child who meets the above conditions.
If the mother is entitled to the allowance, she does not have to pay personal income tax under the Personal Income Tax Act and there is no upper limit to the benefit.
The allowance for young persons under the age of 25 is available to all young people who have not yet reached their 25th year of age. The allowance reduces the taxable amount based on income included in the consolidated tax base. The maximum monthly amount of the discount in 2022 was HUF 433.700, which represented a monthly tax saving of HUF 65.055. The maximum monthly amount of the discount in 2023 is HUF 499,952, which represents a monthly tax saving of HUF 74,993.
The allowance for mothers under 30 is available to mothers who are under the age of 30 but over the age of 25, who are entitled to the family allowance for their biological or adopted child, and whose entitlement to the family allowance opened after 31 December 2022. The amount of the allowance is the same as in the case of young persons under 25.
The personal allowance is available to people who suffer from one of the illnesses mentioned in the Government Decree on illnesses that constitute a serious disability and who have a medical certificate to that effect. People who receive an invalidity allowance or disability allowance are also entitled to the allowance; in which case the entitlement decision serves as a supporting document. The necessary medical certificate may be issued by a specialist doctor in a specialized outpatient department or hospital ward or by a general practitioner on the basis of documentation drawn up by a specialist.
The allowance for first-time married couples is available to couples where at least one of the spouses is married for the first time. In this case, the benefit is also available to that party that is not married for the first time. The place of marriage (foreign or domestic) is irrelevant. Registered partners are also entitled to the benefit, and the term ‘spouse’ is used in the legislation to include them. The allowance is granted for 24 months from the first month after marriage, at a rate of HUF 33 335, which in practice means a tax saving of HUF 5 000 per month.
The family allowance is available to individuals who are entitled to a family allowance (parents, partner of a parent in certain cases) and to the following persons: parents who take turns in caring for their children, spouse living with the person entitled to a family allowance, pregnant woman and her spouse, child entitled to a family allowance in his/her own right, persons entitled to a family allowance under foreign legislation. The rate of the allowance depends on the number of dependents and beneficiary dependents and has been increased from 2023 if one of the beneficiary dependents is seriously disabled or permanently ill.
We are available to help our clients with the preparation of the personal income tax return and the claiming of tax allowances in Hungary.
The provisions of the Governmental Decree no. 16/2023. (I.27.) has increased the reimbursable cost of commuting and traveling to home which can be provided with no tax obligations from HUF 15 per kilometre to HUF 30 per kilometre in case of traveling by car.
In practice, this means if the employees meet the requirement of commuting as per in the relevant legislation, therefore they daily commute from outside of the borders of the municipality where their workplace is, then employers are entitled to reimburse their costs up to HUF 30 per kilometre with no tax obligations in Hungary.
The legislative changes had no effect on the definition of commuting, therefore if the employee commutes from within the territory of their workplace’s municipality, the reimbursement still cannot be provided tax-free.
We highlight, that reimbursing the costs in case of commuting by car is still not obligatory but up to the decision of the employer in most cases.
However, in some cases, reimbursement of a kind is compulsory, when at least 60% of the maximum amount must be provided to the employee (HUF 18 per kilometre):
The option for an increased amount of cost reimbursement is not only to be used in case of daily commuting but also for traveling home at the weekends.
It is important, that whereas the increased amount may be used for commutes and traveling in January as well, the obligation of paying at least HUF 18 per kilometre is only applicable from 1 February 2023.
As usual, the mandatory minimum wage and the educated minimum wage have been increased from 1 January 2023 under the provisions of Governmental Decree 573/2022 (XII.23.).
The decree states that the minimum wage is to be HUF 232 000 and the educated minimum wage HUF 296 400 as of the new year. In addition to determining the minimum wage for full-time employees, the increase also affects a number of other tax and benefit issues. This article aims to summarize them.
Self-employed individuals who are subject to flat-rate taxation may opt for this form of taxation as long as their annual income does not exceed 10 times the minimum wage, i.e. HUF 23,200,000 in 2023. The annual exempt income threshold, which is equal to half the annual minimum wage, has been increased to HUF 1,392,000.
The personal allowance that can be claimed for personal income tax is one third of the minimum wage rounded up to hundred forints, i.e. 77,300 this year, which means a tax saving of 11,595 forints per month.
The minimum contribution base for taxpayers in the defined group (sole proprietors, partnerships) will be adjusted to the new minimum wage in 2023, i.e. HUF 232,000, while the lower limit for the social contribution tax base will be 112.5% of the minimum wage, i.e. HUF 261,000. This means that the group concerned will have to pay tax and contributions on at least these amounts. As far as the upper limit for social contribution tax applies, the tax is payable on certain specified incomes until the sum of the total tax base and certain specified capital and personal income reaches twenty-four times the amount of the minimum wage, bringing the upper limit to HUF 5,568,000 in 2023.
The definition of gifts given at certain events under the Personal Income Tax Act and of gifts of small value are also defined as a percentage of the minimum wage (25%, 10%), so these will also change in 2023. Similarly, salary advance payments can be granted tax-free (without the assessment of income from interest relief) up to five times the minimum wage, i.e. HUF 1,160,000 in 2023. Cultural and sporting event tickets are tax-free under the personal income tax system up to the amount of the minimum wage, i.e. HUF 232,000 from this year.
Self-employed individuals who are subject to flat-rate taxation may opt for this form of taxation as long as their annual income does not exceed 10 times the minimum wage, i.e. HUF 23,200,000 in 2023. The annual exempt income threshold, which is equal to half the annual minimum wage, has been increased to HUF 1,392,000.
Teleworkers (who are to be considered as teleworkers according to the Labour Code) may also be reimbursed for expenses in relation to remote working in the form of a lump sum, for which no receipts are required. The law allows this up to 10% of the minimum wage, which means that from this year the amount of reimbursement without certificates for teleworkers has increased to HUF 23,200 per month.
The daily rate of taxes and contributions after employees in simplified employment is also adjusted to the minimum wage. This is based on a fixed percentage of the minimum wage, rounded up to hundred forints. For seasonal agricultural and tourist workers, the daily tax is 0.5% (HUF 1,200), for casual workers 1% (HUF 2,300) and for film extras 3% (HUF 7,000) of the minimum wage. In addition, for those employed in this way, the minimum daily salary is 85% of the daily minimum wage and 87% of the daily educated minimum wage if educational background is required at least on a middle level. Income earned from simplified employment is not subject to income assessment and declaration up to 130% of the daily minimum wage or educated minimum wage calculated as above multiplied by the number of days of simplified employment.
The Government Decree No 639/2020 (XII. 22) on certain measures necessary to mitigate the impact of the coronavirus pandemic on the national economy (hereinafter referred to as the “Decree”) allows eligible enterprises to pay 1 % reduced rate in Hungary for local business tax for the 2021 tax year.
Those businesses who meet the conditions for qualification as micro, small and medium-sized enterprises „SMEs”, under the Act on SME and whose annual net turnover or balance sheet total is less than HUF 4 billion (Approx. EUR 12 million) on the basis of the last available and accepted annual report.
An enterprise is considered to be an SME
In the lack of an accepted annual report, i.e., if the company started operating in 2020, the estimated balance sheet total, annual turnover and headcount figures should be taken into account.
In the case of autonomous enterprises, the figures shall be determined based solely on the records of the enterprise in question.
In the case of enterprises having partner or linked enterprises, the figures shall be determined based on the consolidated annual accounts, or in the absence of this, on the records of the partner or linked enterprise concerned.
Looking at the above figures, we can clearly state that the above-mentioned criteria are met in case of an autonomous enterprise with 249 employees, with the balance sheet total of EUR 42 million and with the annual net turnover of HUF 3,9 billion in 2019.
Under the Decree, the eligible entrepreneurs are required to pay only 50 % of their tax advance as due at the given tax advance due date for 2021.
By the amount of the released instalment, the tax authority will reduce the amount of the local business tax liability and this fact will be entered into the records of the tax authority without taking any decision.
In order to claim the LBT allowance, a declaration must be submitted by 25 February 2021, which can only be send electronically via National Tax Authority on the form of 21NYHIPA.
The above-mentioned declaration shall be made in case of the joint compliance with the following conditions:
In other words, as an additional condition for eligibility, it has been highlighted that if the undertaking has not reported so far, all its permanent establishments to State Tax Authority, it should be done until the date of declaration.
The notifications should be submitted towards State Tax Authority in electronic form.
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