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Recent tax changes from labour law perspective

As result of the tax changes adopted at the end of last year, new tax regulations have entered into force as of 1 January 2015. The aim of this newsletter is to provide you with a brief introduction of these changes which may affect both employers and employees as well.

Tax burden of fringe benefits and of certain specific benefits
The scope of the fringe benefits that may be given to employees under the provisions of the Hungarian Personal Income Tax Act (“PIT Act”) has remained unchanged, but the annual limit of the fringe benefits subject to a preferential tax burden (35, 7%) has been decreased compared to annual limit applicable in 2014, from HUF 500 000 to HUF 200 000/ year.

As a consequence of the above, from January 1, 2015 the tax burden of the fringe benefits not exceeding the value of HUF 200 000 will remain unchanged (i.e. the value of the benefit multiplied with 1,19, after which 16% personal income tax and 14% healthcare contribution shall be paid, amounting in an overall 35,7% tax burden). The benefits provided in excess of the above value, according to the PIT Act shall qualify as certain specific benefits subject to a higher tax burden of 51,17% (i.e. the value of the benefit multiplied with 1,19 after which 16% personal income tax and 27% healthcare contribution shall be paid).

As an exception to the above, the law provides that in respect of the money allowances provided by the employer on Recreational Card (in Hungarian: „SZÉP kártya”) – the preferential tax burden rate of 35,7% shall continue to be applied even if such value exceeds the value of HUF 200 000 but remains under the limit of HUF 450 000, the latter defined as the annual recreational limit.

It is worth mentioning that in order to fall within the scope of the preferential tax burden rate (35,7%) a combination of fringe benefits and allowances given on Recreational Card is also an option in the sense that the employer may provide fringe benefits within a value of maximum HUF 200 000 plus further allowances may be allocated on Recreational Card for a further amount of HUF 250 000 (without exceeding the annual recreational limit defined above).

The new tax regulation also clarifies that students employed via school cooperations, shall be entitled to fringe benefits falling under the scope of the PIT Act under the same conditions as the employees employed by the employers who are hiring students as well.

Family allowances and tax allowances to first married couples
In 2015 the amount of family allowances introduced in the previous years, will remain the same, thus the allowances per one dependent shall amount up to HUF 62500, and in case of three of more dependents shall amount up to HUF 206 500, nevertheless the law provides that, from 2016 the amount of the family allowances granted for families with two dependents shall increase gradually within the consecutive four calendar years up to HUF 125 000.

Additionally, in the frame of the newly introduced changes, the category of persons entitled to family allowances and the category of persons receiving such tax statements has been also expanded, and further administrative requirements have been introduced in the sense that if parents will wish to take in advantage of such allowances, when completing their tax statement for 2015 shall also indicate the tax number of the dependents, as for the future the indication of other personal data (such as name, mother’s maiden name, address, place and date of birth) shall not be sufficient. Thus parents will be required to submit a request to the tax authority for obtaining a tax number for their dependants, if the dependants do not have a tax number.

Pursuant to the provisions of the PIT Act, as from January 1, 2015 every paying agent although not qualifying as employer who shall provide regular income to employees (especially monthly or weekly salary, service fee, royalty, compensation for personal contribution, other allowances) shall be obliged to assess the amount of the monthly family allowance. Thus a Principal /Assignor paying a regular monthly fee to the Agent/ Assignee on a contractual basis shall also be regarded as a paying agent.

A new category of tax allowances has also been introduced, for which first married couples are eligible who got married after December 31, 2014, provided that at least one of the spouses has its first marriage.

The above tax allowance may be used prior the use of family allowances, by which the first married couples may reduce their payable tax with an amount of HUF 5000 (reflected on a tax base level this means that the overall income could be this decreased with a total amount of HUF 31250.

First married couples are eligible for the tax allowance as from the first month following the month in which they got married for a duration of maximum 24 months, but not later than the month from which the eligibility for family tax allowance has arisen. If within the period of 24 months the marriage breaks up, the tax allowance shall no longer apply.

The couple may take advantage of the above tax allowance either by sharing it, or individually (just one of them). As a precondition for obtaining such tax allowance a joint tax declaration of the couples shall be required, by indicating the tax numbers of the spouses. clearly specifying which one of them will take advantage of the tax allowance as well as their decision on sharing such tax allowance.

Travel orders issued under the PIT Act
The definition of travel orders has also been changed, according to which beside the previously used paper-based travel orders, from now on electronic travel orders processed and stored under the conditions required by law, or any electronic supporting document relating hereto shall also be accepted.

Temporary agency workers
Within the meaning or article 24 subsection 3 of the PIT Act, as from January 1, 2015 for the case when temporary employee are employed in Hungary via a foreign temporary agency, the acquiring Hungarian company may act as employer in respect of the income provided to the temporary employee, thus the law provides for the possibility that the tax obligations regarding the assessment and declaration of personal income tax may be fulfilled by the Hungarian acquiring company.

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This article contains only general information, thus by its nature it shall not constitute as legal advice nor a substitute for and the information provided herein may not be regarded as complete.

Should you have further queries CLV Partners is ready to answer your questions.

Dr. Marianna Csabai
Dr. Antónia Zsigmond

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