While major taxes do not change very often in Hungary, the system is tweaked every year. Read on to learn about changes to taxes most relevant to employees and HR, such as fringe benefits, the social contribution tax, and taxes on various types of gifts.
Personal income tax remains unchanged
In Hungary, personal income tax is 15%. Unless benefits or special tax regimes apply, it is the same for every natural person, whether they work in employment, as self-employed, or running a business. It was previously suggested that freelancers in “regular” self-employment should pay taxes differently starting from 1 January 2025, but this was not included in the modification package in the end.
Regarding tax benefits: while the tax benefits themselves do not change, some procedures and definitions do. First, mothers under 30 will need to make a new type of declaration to apply the tax benefit. Second the definitions for who counts as chronically ill or seriously disabled change, and the latter will include the taxpayer’s adult children, after whom a disability allowance will be given instead of the family allowance.
Fringe benefits and gifts
Various forms of non-salary compensation are referred to as fringe benefits, or “cafeteria” in Hungarian. The most popular fringe benefit in Hungary is the SZÉP Card, which can be used to pay for hot meals, holiday accommodation, or cultural programs (e.g. theater, museums). Until last year, these three options were handled separately, but these “pockets” have been abolished for good. Users were also allowed to pay for groceries with the SZÉP Card until 31 December 2023, but this option is suspended as of 1 January. Relevant administration is moved to a quarterly basis from a monthly one, so in 2024 employers must need to report such payments and pay the relevant contributions only 4 times a year.
Employers are also allowed to give small gifts to employees. Up till now, they could do this only once a year, but from 2024 the number is increased to three times a year. Please note that a small gift to the employee is different from a business gifts, and the two are governed by different rules.
If the gift is a wine product purchased from a vineyard, there is no additional tax on it, whether it is given to employees. The rule has been in force since November 2023, and it is expected to give a boost to the Hungarian wine sector.
Tax exemption for startup companies
“Startup company” is a new concept in Hungarian law, and it refers to
- small and micro-companies
- that are younger than 5 years,
- are not listed on the stock exchange,
- have not paid out dividends
- were not created by a merger or de-merger.
In these companies, if managers or employees receive shares free of charge or at a discount as a form of remuneration, that will be tax exempt for the employer.
Social contribution tax
Benefits for the social contribution tax will change for those entering the labor market will change. From 1 January 2024, they will be available in the employment of nationals of non-EEA countries bordering Hungary (Ukraine, Serbia) as well as Hungarian nationals.
Starting from this year, the tax payable on simplified employment (EFO) is considered social contribution tax. However, it is still payable according to the rules of the EFO, without the option to apply benefits to it.
Minimum wage and guaranteed minimum salary increased
The gross minimum wage was increased by 15%, and the guaranteed minimum salary by 10% as of 1 December 2023. This affects how much employers must pay in taxes, even though payroll taxes hardly changed. Learn more here.
U.S.–Hungarian double taxation treaty stays canceled
The updates to Hungarian taxation include measures to offset some of the negative effects of the cancellation of the U.S.–Hungarian double taxation treaty. We will detail them in a separate article.
Helpers Finance can help you navigate the tax changes
Whether you are an employee or an employer in Hungary, there is a chance that the latest tax changes will affect you. Stay on top of the news, and work with an expert accountant specialized in assisting small and medium-sized companies in Hungary.
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