One way to make your Hungarian company operate in a more cost-effective way is to reduce payroll taxes. Authorities let you do this if you employ workforce who has difficulties entering the labor market due to some disadvantages compared to other workers. However, they may still prove eager and skilled, while employing them grants you significant payroll tax relief.
Payroll taxes in Hungary
While usually employers and employees agree on the gross salary, employers have to pay two main taxes on the gross salary:
- 1,5% vocational training tax
- 19,5% social contribution tax
The 19,5% social contribution tax is a major element of the total salary cost. However, if you carefully select your workers from some specific groups, it can be reduced to 9,75%, or even 0%.
Tax relief based on age: under 25 or over 55
If your employee is younger than 25 years or older than 55 years, the company pays only 9,75% as social contribution tax on the gross salary up to HUF 100,000.
Tax relief based on experience: career entrants
If the tax authority can verify that your new hire spent less than 180 days in employment, in the first two years of employment your company pays 0% social contribution tax on the gross salary up to HUF 100,000.
Tax relief based on disabilities
If your employee has a valid rehabilitation card, your company pays 0% social contribution tax on their gross salary up to HUF 276,000.
Tax relief based on maternity leave
If your employee is now returning to the labor market after the maternity leave, in the first two years your company pays 0% social contribution tax on the gross salary up to HUF 100,000, and still only 9,75% in the third year. Based on the number of children, more tax reduction is available (see our article on the family tax benefit).
Tax relief based on hiring permanent jobseekers
If the National Labor Office verifies that your new hire has been a permanent jobseeker, your company pays 0% social contribution tax on their gross salary up to HUF 100,000 in the first two years and still only 9,75% in the third year.
Reduce payroll taxes
When planning to make a new hire, make sure you prepare thoroughly to make both the recruitment and the work together as efficient and cost-effective as possible. While you can always use the salary calculator to estimate your spendings, you should also discuss this with your accountant, who will be able to give you more details – especially if you already have a candidate, and you know data based on which they might be eligible for tax reductions.
Disclaimer: The data in this article reflect the state of affairs upon publication. To get up-to-date information, always consult your accountant.