Last updated on 14 November 2021.
The parliament has recently approved tax cuts in Hungary from 2022. This week, we take a look at the update to regulations, explaining how it will affect your business in Hungary.
Payroll tax will drop by 2 percentage points from July 2022
From 1 July 2022, social contribution tax (currently 15.5%) will be reduced to 15% and it will include vocational training levy, which is currently a separate tax at 1.5%. The two measures combined will cause a 2 percentage point decrease in payroll tax. It is estimated that employers will save HUF 250 billion (EUR 710 million) as a result.
UPDATE: From 1 January 2022, social contribution tax will be reduced to 13% and it will include vocational training levy. Read more here.
Moreover, employers will need to pay decreased social contribution tax after workers who were employed for a maximum of 92 days in the previous 183 days.
- In the first two years of employment, social contribution tax will not apply to the minimum wage (currently gross HUF 167,400 per month). This means that employees who earn the minimum wage will not be subject to social contribution tax at all. If they earn more, 15% social contribution tax will apply to the portion of their salary above the minimum wage.
- In the third year of employment, the minimum wage will be subject to 7.5% social contribution tax, while 15% social contribution tax will apply above the minimum wage.
More freelancers will be eligible for flat-rate tax
Starting from 2022, more freelancers can choose to pay flat-rate tax: the taxation scheme will be available to freelancers with a yearly revenue under 10x the yearly minimum wage, or 50x the yearly minimum wage if their business activity is retail, for example, if they run a stationery shop. If you are paying flat-rate tax, you can use the following cost ratios to deduct your expenses from your tax base. (For details, §53 of the Act on Personal Income Tax here.)
|Freelancers in general||40%|
|Freelancers with retail activity||80%|
|Primary agricultural producers||90%|
|Freelancers with retail activity throughout the year||87%|
|Freelancers with retail activity throughout the year with specific merchandise (e.g. groceries, drugs, medical products, manufactured goods)||93%|
Based on this, for example, freelancers who are not performing any retail activities can use their expenses to reduce their tax base by 40% at most, even if they have more expenses.
Freelancers paying flat-rate tax will be eligible for family tax benefit. However, they will not need to pay personal income tax if their yearly revenue is below half of the yearly minimum wage.
Other changes to your taxes in Hungary
In July 2021, the VAT exemption of non-EU purchases came to an end. The OSS and IOSS schemes were introduced to facilitate the payment of cross-border VAT. From 2022, banks receiving cross-border payments will be obligated to report these transfers to the tax authority to ensure compliance with the new regulations.
A new option is becoming available in 2022 for reducing the tax base of your Hungarian company: starting from next year, companies donating to foundations managing universities will have the tax base of their corporate tax reduced by 300% of their donations, which can massively reduce the taxes of your Hungarian business. You can donate as much as you like, but your donations will not generate negative tax. This means that you will not get money back even if you donate an amount that would decrease your taxes by more than 100%. (Although at a 9% rate, Hungarian corporate tax is already one of the lowest in the EU.)
Currently, cryptocurrencies are taxed at 30.5% when you exchange them for traditional currencies. From 2022, social contribution tax (15.5%) will no longer apply to them, meaning that their tax rate will drop to 15%. Moreover, crypto investors will be able to deduct their expenses and losses from their tax base, an option they have not had so far. If you would like to learn more about the taxation of cryptocurrencies, read our next article here.
Are you looking for an accountant? Contact us!
It is good to stay abreast of changes to taxes in Hungary. Choose the English-speaking accountants of Helpers Finance, and your reports will always be in good hands. Learn about our accounting services here, or ask for a consultation by calling our office on +36 1 215 0712, by e-mailing email@example.com, or by filling in our contact form.
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