Hungary

Individual - Significant developments

From 1 January 2019, the taxation of benefits in kind has been changed significantly. Most of the benefits that were subject to a zero or low tax rate lost their tax advantage and became taxable the same way and at the same rate as wage income.

From 2019, the option of providing cash benefits up to maximum 100,000 Hungarian forint (HUF) per year as fringe benefit is no longer available for employers, and only the Széchenyi Recreational card (SZÉP as per its abbreviation in Hungarian), trade-union-supported recreation, and benefits provided by cooperatives to their members can be provided as ‘fringe benefit’.

Additionally, only a limited group of benefits can be provided as ‘other specific benefits’ (e.g. private use of company phones, meals on business trips, gift of small value once a year).

In addition to the above, it needs to be highlighted that the possibility to provide benefits by the employer under an internal policy (available to all employees) or applied equality to all employees cannot be taxed as defined benefits from 2019.

As of 2019, the monthly amount of family tax base allowance has increased from HUF 116,670 to HUF 133,330 in case of two dependants, which represents a total amount of tax saving is HUF 20,000 per child in this case. The family tax base allowance is still HUF 66,670 per month for a child if there is only one dependent child and HUF 222,000 per month for each child if there are three or more dependent children.

As of 1 January 2020, all mothers who are currently raising at least four children, or who have raised four or more children during their lifetime, will be completely exempt from paying the personal income tax (PIT) in case of certain types of income specified by law (especially in case of the wage income).

The interpretation of the economic employer is still a hot topic in Hungary. In addition to the previous criteria (the so-called '183-day-rule', the party bearing the costs of employment, and whether these costs are cross-charged), a more complex examination of the circumstances of employment is also necessary in order to determine which country has the taxation right of the employment income. This is based on the concept of 'economic employer'. This approach might result in a situation in which Hungary is entitled to tax a foreign individual's income acquired from work performed in Hungary, even if the employment in Hungary does not exceed 183 days and the related costs are borne by the seconding company and will not be charged to the Hungarian company.

Similarly to the above, the social security position of an assignee with third-country nationality can be considered as an evergreen issue.

According to the social security rules, third-country nationals assigned to Hungary are exempted from Hungarian social security, provided that the length of the assignment does not exceed two years. If the length of the assignment exceeds the two-year limit, Hungarian social security applies from the start of the assignment.

Nevertheless, the first two years of secondments longer than two years could be exempted from both employee and employer charges if the period of secondment is extended be­yond the initial two years due to previously unforeseen circumstances. The circumstance giving rise to the extension must occur at least one year after the start of the secondment, and the secondee must report it to the tax authority within eight days. Note that employee and employer charges have to be paid even in this case but 'only' after the income that is paid in return of the working activity performed after the first two-year period of secondments.