The personal income tax refund for families, first floated in June, has recently been finalized. Anyone raising children in Hungary can expect a refund on their personal income tax paid in 2021, reimbursed early 2022. Are you eligible? How much to expect? Find out below!
Who is eligible for the personal income tax refund?
The tax refund targets families raising children. Accordingly, a person is eligible for the personal income tax refund if they were eligible for the family tax benefit for at least one day throughout 2021. However, while the family tax benefit is “distributed” (either evenly or by choosing one person to receive it) among the guardians of the children (which may include the new spouses of parents after a divorce), the new personal income tax refund is actually available to all those eligible.
How much is refunded?
Personal income tax in Hungary is 15%. This is a full refund, so whatever you actually paid in 2021 as personal income tax will be refunded to you. If your personal income tax was reduced (e.g. by the family tax benefit), you will get back that reduced amount: you cannot be refunded more than you paid.
There are also individuals who pay taxes in a tax regime where personal income tax is integrated in a bulk tax. If they are raising children (and are eligible for the family tax benefit), they are also eligible for the personal income tax refund.
- Those paying EKHO (simplified contributions): 9.5% of the EKHO
- Those paying KATA (the tax of small tax payers): 25% of the KATA
In all cases, the sum of the refund is capped by the “average” Hungarian gross salary in December 2020, which was HUF 449,400. Accordingly, the maximum refund is:
HUF 449,400 x 12 months x 15% = HUF 808 920 ≈ HUF 809 000.
If both parents are eligible for the maximum amount of personal income tax refund, the household may receive a refund of HUF 1.6 million. This system favors households with two working parents. If one of the parents is on maternity leave or between jobs, they are not paying personal income tax, meaning they cannot take advantage of the personal income tax refund.
How to apply?
The personal income tax refund is automatic to everyone whose income is transparently available to the Tax Authority (they have income only from an employment relationship where the employer regularly reports and handles their taxes) IF a refund bank account is known to the tax authority. In short: if your salary is regularly transferred to your bank account, you have nothing to do, and you will receive the refund by 15 February 2022.
KATA taxpayers, whose relevant bank account is not necessarily known to the Tax Authority, can submit a form called “VISSZADO” between 31 October and 31 December 2021 in an electronic format or on paper to receive the refund by 15 February 2022.
If you fail to submit the above form in time, or if you do not receive the refund for any reason by 15 February 2022, you can apply for it in your yearly tax returns. Your tax returns draft will contain the calculations for you, and you can add the missing data. Then paying out the refunds will start on 1 March 2022.
What does this mean for your Hungarian company?
Thanks to the personal income tax refund targeted at families, your employees raising children will get a refund. Since this is handled by the tax authority, you do not have to do anything – they will receive the refund automatically. However, you might expect your employees to ask you, your accountant or your payroll specialist to check if they are eligible, since the refund is based on the family tax benefit, and even those are eligible who do not actually receive that benefit.
Helpers Finance offers payroll as well as accounting and bookkeeping services to small and mid-sized companies in Hungary, with special expertise in working with companies that have a foreign owner. Should you need any assistance, feel free to contact us. Just fill in the form, send an email, or call our office on +36 (1) 215–0712.
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