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Clarification on trusts

News, Commercial legal advice / / ,

The institution of trusts came into force more than 10 years ago, and the new Civil Code has designated them as a type of contract and introduced a separate law with detailed rules.

Fiduciary trusts are a responsible but also a great option for natural persons with large private assets, as they can offer tax advantages, and solve management, succession, matrimonial property, private property protection, succession challenges or even provide as a preparation for a sale. A well-constructed contract can plan the fate of the assets for years, or even decades, with regular review. We find that our clients who opt for this structure are at first reluctant, but then increasingly brave, to address issues during the provisions that affect their fundamental life situations:

  • How can I ensure the successful future of a company built up over many years of work, and the predictable future of employees?
  • What role can individual family members play in the fate of the company?
  • Do they want to be involved in management at all and is there a Plan B if I cannot hand over the running of the company to the person I care most about?
  • What happens to all the assets I have built up from my own resources after my death?
  • How can I ensure that my family members can live their own lives in peace and prosperity after I am no longer able to help them?

To consult on these issues is a matter of great trust for us, and we approach such trust with the same care and respect.

At the same time, however, we often come across offers and opinions on the market which identify the tax advantage of asset management – which is otherwise welcome – as the most important objective and which make everything subject to this – but, in our view, the goal does not justify the means in this case either.

The recent joint statement of the Tax and Information Department of the Tax Authority and of the Ministry of National Economy clarifies a position we have previously held under the Civil Code, the Accounting Act and the Income Tax Act, that dividend claims to be placed in trust (which can be done at the time of the conclusion of the trust deed or at a later date), does not alter the liability to pay public tax under the public law, i.e. if the dividend has already been declared in the concerned tax year, it is taxable as a dividend regardless of whether it is paid or placed in trust.

The fact that the Ministry-Tax Authority have published their position paper and that the audit of trusts is a priority in the 2025 audit plan means three things in our view:

  • those who have not assigned the assets in the above manner, based on the combined interpretation of the Civil Code, the Accounting Act and the Tax Act, are expected to be subject to self-audits;
  • those who have not paid due attention to the “substance principle” in the process of disposing of their assets are recommended to review their contracts and adapt the relevant provisions;
  • those who plan to set up a trust this year should take into account that there are different tax consequences for dividends already declared and amounts placed in the profit and loss reserve.

We believe that if we know the rules of the game well, it is possible to win by playing the game cleanly, even collectively.

Image source: Leeloothefirst, Pexels.com

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Review of the right to erasure in 2025

News, Data protection / / , , ,

In October 2020, the European Data Protection Board (“EDPB“) adopted a document on a coordinated enforcement framework under Regulation (EU) 2016/679 of the European Parliament and of the Council on the General Data Protection Regulation, the GDPR, under which each year a specific data protection issue is examined by Member State authorities on the basis of a framework and methodology defined by the EDPB. These harmonised actions aim, among other things, to facilitate compliance and raise awareness.

This year, the EDPB intends to examine the way in which the right of erasure is exercised and its provision by data controllers. In this article, we summarise the most important facts in this regard.

The importance of the review

In 2025, the EDPB intends to examine the right to erasure, as this is one of the most frequently exercised data subject rights since the entry into force of the GDPR, but there are a large number of complaints to supervisory authorities about its enforcement. To this end, the EDPB, with the help of Member States’ authorities, will this year examine practices in relation to the exercise of the right to erasure and assess how data controllers handle requests for erasure received by them and how they apply the conditions and exceptions to the exercise of this right set out in the GDPR.

What is the right to erasure?

The GDPR sets out the basic rights that the data controller – whether an employer, supply partner or contractor – must inform the data subject of in advance and provide them to the data subject during data processing. Among other things, the data subject has the right to request the erasure of personal data relating to him or her, which the data controller must do without undue delay.

However, the right to erasure is subject to conditions, which may be exercised in one of the following cases:

  • if the personal data are no longer necessary for the purposes for which they were processed;
  • if the data processing was based on the data subject’s consent and the data subject has withdrawn it;
  • if the data subject objects to the processing, where the legal basis for the processing is the protection of the legitimate interests of the controller or of a third party;
  • if the data have been unlawfully processed; or if there is a legal obligation to delete the data.

Ensuring the right of the data subject

The data controller must at all times ensure that the rights of data subjects with regard to the data processing of personal data of natural persons are adequately protected. One of the most important steps is to guarantee the availability of the data controller and to enable contact, which should be achieved through mechanisms that facilitate the exercise of the data subject’s rights.

In the event of any request by a data subject concerning the processing of personal data, the controller shall ensure the exercise of the data subject’s right to be informed as soon as possible after receipt of the request, but not later than 1 month or, if it needs further information, to contact the data subject without delay to deal with the request, preferably through the communication channel used by the data subject. If the data controller does not comply with the data subject’s request, it shall also provide a statement of reasons.

In order for the data controller to be able to assess and comply with the data subject’s request, it is important that the data controller has appropriate organisational and technical measures in place. Ensuring the exercise of the right is of paramount importance, because in case of inappropriate data processing, the data subject can file a complaint with the competent authority – in Hungary the National Authority for Data Protection and Freedom of Information – or even with the courts.

Tasks related to data processing

Since the entry into force of the GDPR in 2018, organisations have developed a wide range of data management practices and there have been significant changes in the legislation in the areas affected by data processing.

At the same time, we see that companies that treat GDPR compliance as a one-off project do not review their processes, documents and background legislation (every few years), and therefore the data privacy policy does not reflect reality after years, for which they can be held liable.

We recommend that companies that meet any of the following criteria should review their data processing documentation and, if necessary, align it with their actual processes:

  1. Introduction of new software
  2. Reorganisation of a business unit or certain processes
  3. Choosing new suppliers
  4. Modifying cooperation with customers
  5. Outsourcing of processes – either to a third country or within the EU
  6. Introduction of certificates (ISO, Tisax, etc.)
  7. Compliance with new legislation (e.g. Complaints Act, GPSR, Pay Transparency Directive)
  8. Changes in the group (e.g. new investor owner)
  9. Change of communication platform (e.g. intranet, chatbot)
  10. Create or merge databases

Image source: Freepik.com

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Employers’ tasks related to the implementation of EU Directive 2023/970 on equal pay and pay transparency

News, Employment, labour law / / , , ,

The deadline for the implementation of Directive 2023/970/EU (hereinafter: “the Directive“), published on 17 May 2023, which aims to reinforce the principle of equal pay for men and women for equal work or work of equal value through pay transparency and enforcement mechanisms, into Hungarian law is approaching, and must be met by 7 June 2026. Although the specific Hungarian legislation will be known after the Directive has been implemented, it is already necessary to refrain from any action that would jeopardise the aims of the Directive, so employers should also keep the rules in mind in their internal processes and include compliance with the Directive on their 2026 to-do list.

Purpose of the Directive

The Directive sets minimum requirements to ensure that men and women receive equal pay for work of equal value. It applies to employers in both the private and public sectors and to employees who have an employment contract. Entry into force will be phased in, but from June 2026 large companies with 250 or more employees will have to comply.

Basic principles of the Directive

To achieve the aims of the Directive, we need to see what we mean by equal work or work of equal value and what we need to look at when we talk about pay. Work of equal value is work that is considered to be of equal value in a non-discriminatory and objective, gender-neutral way, in accordance with gender-neutral criteria.

Accordingly, there may of course be differences in pay, but these need to be justified by objective criteria, independent of the sex of the employee. In terms of remuneration, all elements of pay must be taken into account in the comparison, be they basic wage, bonuses, transport allowances, so the Directive looks at all benefits received directly or indirectly, in cash or in kind, by the employee under the employment relationship.

In order to assess and ensure equal value for work and equal pay, the Directive requires the application of a pay structure that allows for the assessment of whether employees are in a comparable situation, based on objective, neutral, gender-neutral criteria. These criteria may, in particular, be relevant to the skills, responsibilities, working conditions and conditions of the job in question and their assessment must not lead to direct or indirect discrimination on grounds of sex.

Member State and employer obligations

The Directive sets out a number of obligations for both Member States and employers.

The Member States are responsible for collecting and regularly communicating data on pay gap and for setting up the necessary monitoring mechanisms and appointing a monitoring body to protect workers’ rights.

There are also a number of obligations for employers. It is important to ensure that, at the application and selection stage, the applicant is informed of the initial pay or its range, based on the criteria for the position concerned, and, where applicable, of the provisions of the employer’s collective agreement in relation to the position. It has to be ensured that the candidate can conduct an informed and transparent negotiation of the position.

In order to provide the relevant information, it is advisable to bear in mind that this data is sensitive for the employer and may therefore be subject to a confidentiality obligation. On the other hand, the collection and processing of the necessary data of the applicant should be in line with the GDPR rules.

During the employment relationship, employees will need to be informed of the criteria used by the employer to determine their pay, pay levels and pay increases. In addition, the Directive gives employees the right to request and receive information in writing about their individual pay levels and the average pay levels, broken down by gender, for categories of employees who perform the same work or work of equal value as them.

On the basis of these data, employers will also have additional reporting obligations on their gender pay gap survey, depending on the number of employees.

Legal remedies, enforcement

The Directive also provides for remedies for employees in order to achieve its objectives and to fulfil the employer’s obligations, and in such proceedings the employer has the burden of proving that there has been no discrimination. Interestingly, the Directive allows for legal costs to be charged to the employer even if the employee has reasonable grounds for bringing proceedings.

Concluding thoughts

The Directive sets out a number of complex obligations for employers to reduce the gender pay gap and promote the principle of equal pay.

Although the specific rules will become known when the transposing legislation is published, the framework of the rules is already visible and no less favourable conditions for employees can be expected at Member State level.

It is advisable to start preparing for these obligations now, to review internal processes in the light of the Directive and to keep them in mind when making any changes, both in recruitment, selection and employment, as the transition may take longer and affect several areas – labour law, data protection – in the event of mandatory implementation. Based on the expected employer obligations, we believe that employers who know the depth of information they need to provide to employees and the reports they need to prepare in advance will be the ones who will comply well with the Directive and Member State rules.

Image source: Freepik.com

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Changes in simplified employment

News, Employment, labour law / / , ,

Simplified employment is an atypical employment relationship that offers the possibility to work in a more flexible framework than the general rules. The specific provisions can be found in Act LXXV of 2010 on Simplified Employment (“Simplified Employment Act“), whereas the provisions of Act I of 2012 on the Labour Code (“Labour Code“) serve as a background rule. This year, there are several significant changes to the rules on simplified employment, which will be or have been introduced gradually in two stages. This article summarizes these changes.

Amendments effective from 2 February 2025

  • Changes concerning taxes

Employers are required by law to pay a specific contribution for their employees working under the Simplified Employment Act. The amount of this tax is based on a percentage of the minimum wage applicable on the first day of the month in question, thus the increase in the minimum wage also affected the amount of the tax payable. It is also important to note that the percentage of the minimum wage per employee and per calendar day has also increased, i.e., the following percentage of the minimum wage applicable on the first day of the month shall be paid:

  • 0,75% (compared to 0.5% previously), i.e. HUF 2 200 per day for seasonal agricultural and touristic work;
  • 1,5% (compared to 1% previously), i.e. HUF 4 400 per day for occasional work.

There was no increase for film industry extras, thus, the tax rate remained unchanged at 3%, i.e. HUF 8,700 per day.

It is important to note that these new provisions will only apply to employment relationships concluded after 1 February 2025. Accordingly, if an employment relationship was established on or before 1 February 2025, the rate of tax will be based on the previous rules.

  • Employee benefit entitlement

An employee employed in a simplified employment relationship is not considered to be insured, but is entitled to pension, accident health care and job-seeker’s allowance.

The amount of the pension benefit is adjusted to the minimum wage applicable on the first day of the month in question, therefore the amount has already been increased from 1 January 2025. Under the amendment to the Simplified Employment Act, the percentage rate has also increased from 2 February 2025. On this basis, the pension is calculated on the basis of the following percentages of minimum wage on the first day of the month:

  • 2,1% (compared to 1.4% previously), i.e. HUF 6 100 per day for seasonal agricultural and touristic work;
  • 4,2% (compared with 2.8% previously), i.e. HUF 12 200 per day for occasional work.

There was no change for film industry extras, which remained at 2.8%, i.e. HUF 8 100 per day.

Amendment to take effect from 1 July 2025

  • Annual limit, introduction of electronic enquiry system

In the future, employees will be allowed to work up to 120 days per year under a simplified employment relationship. This change is of particular importance, as the duration limit previously applied only to the specific employer-employee relationship, but now it will have to be taken into account for all the simplified employment relationships of the employee established in a given year. Hence, the number of working days worked by the employee in the context of simplified employment must be aggregated, irrespective of the employer. In order to enable employers to verify that the employee concerned has not exhausted his/her annual “limit” of 120 days, the National Tax and Customs Administration (“NAV”) will provide them an electronic enquiry system.

Given that this limit will be introduced during the year, the 120-calendar day limit will be taken into account from 1 July 2025 when calculating the duration of employment in 2025.

Summary

It can therefore be concluded that the cost of simplified employment has increased this year, and the rules on the annual limit have made this type of work more restrictive than before.

However, we would like to point out that on 11 March 2025, the Government submitted an act proposing to ease the rules on simplified employment, such as the general limit of 120 days and the possibility of extending the limit with an additional 90 days for occasional agricultural work, with effect – as planned – from 1 January 2026. The provisions of the proposal will be detailed in a separate article, once it is adopted and officially published.

For more information on simplified employment, please have a look at the information brochure (unfortunately, the information brochure only available in Hungarian language) on the following link issued by the NAV.  If you have any further questions on this topic, please do not hesitate to contact us.

Image source: Maria Turkmani, Pexels.com

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The most important, recent changes affecting the Accounting Act

News, Corporate law /

At the end of last year, Act LV of 2024 on amending certain tax laws was published, which, among other things, amends certain provisions of Act C of 2000 on Accounting (the “Accounting Act“). In our article, we summarise the most important changes of the Accounting Act.

Changes effective from 29 November 2024

  • Consequences of non-compliance with the audit requirement

If the company fails to comply with any publication or deposit obligation under the Accounting Act, including the auditing obligation, any third party (e.g. natural person, legal entity, public authority) may initiate a legal supervisory procedure before the Court of Registry.

  • New provisions relating to sustainability reporting

The Accounting Act states that companies who are required to prepare a sustainability report or a consolidated sustainability report, as well as persons who voluntarily undertake to do so, must appoint an auditor or audit firm that is a member of the Chamber of Auditors and has a sustainability qualification. The result is that only an auditor with a specific qualification can proceed in the case of a sustainability report. This circumstance shall be taken into account when engaging and appointing the auditor concerned. According to the transitional provisions, in the case of the sustainability report and consolidated sustainability report for the financial year 2024, instead of the company’s supreme body the management of the company will elect the auditor or audit firm that is a member of the Chamber of Auditors, no later than the balance sheet date.

 Changes effective from 1 January 2025

  • Increase in the threshold for statutory audit

As a general rule, all double-entry bookkeepers must be audited. However, there are exceptions to this obligation, subject to certain thresholds and number of employees. The Accounting Act has amended (doubled) the threshold amount, so that an audit is not required if, on average over the two financial years preceding the financial year

  • the company’s annual net turnover did not exceed HUF 600 million, and
  • the average number of employees of the company did not exceed 50.

If any of the above conditions are not met, the company is obliged to be audited.

The amended conditions apply for the first time to the accounts for the financial year starting in 2025.

  • Changes for the threshold for simplified annual accounts

Another general rule is that companies that keep double-entry accounts must prepare annual accounts and annual reports. However, there is indeed an exception to this rule, depending on the threshold and the number of employees. In view of the doubling of thresholds, a double-entry bookkeeper may now prepare simplified annual accounts if, for two consecutive financial years, any two of the following three values do not exceed the following thresholds at the balance sheet date:

  • the balance sheet total does not exceed HUF 2000 million,
  • the annual net turnover does not exceed HUF 4000 million,
  • the average number of employees in the financial year does not exceed 50 persons.

The general rule is that the new, increased thresholds apply to the accounts for the financial year starting in 2025, but the companies may choose to apply the higher thresholds for the financial year starting in 2024 .

In light of the entry into force and applicability of the above accounting rules, all concerned parties are encouraged to consider to what extent and in what way they affect their current and future operations and practices.

(Image Source: Tima Miroshnichenko, pexels.com)

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Key Provisions of the 2025 Labor Law Amendments

News, Employment, labour law / /

At the end of 2024, Act LVII of 2024 on labour-related provisions (“Amending Act“) was published, introducing new regulations for labour-related legislation for 2025. The Amending Act includes changes to the Act I of 2012 on the Labour Code (“Labour Code“) and the Act XCIII of 1993 on Labour Safety (“Labour Safety and Health Act “). In this article, we summarize the main provisions of the Amending Act.

  • Key provisions affecting the Labor Code:
  • The period to use paternity leave increases from 2 months to 4 months, considering its limiting nature. An important new provision is that employers shall not give notice to employees during paternity leave, even if they are executive employees.
  • Employees will be exempt from the requirement of availability and from work duty for up to two hours if their work obligations exceed eight hours on the day of an election or referendum. They will also be entitled to an absence fee for the duration of their absence. This amendment of the Labour Code aims to ensure employee participation in elections without financial or employment-related disadvantages.
  • The Labour Code already provided that the working time of an employee performing stand-by job or a relative of the employer, if they have a written agreement with the employer, may be increased to a maximum of 24 hours per day in the case of a daily working time schedule and to a maximum of 72 hours per week in the case of a weekly working time agreement. Given that this type of agreement can be very burdensome for the employee, the Labour Code provides the possibility for the employee concerned to terminate the agreement. In order to bring Hungary into compliance with EU law, the above-mentioned rules on the termination of a written agreement are being amended. According to the Amending Act, in the case of a work time frame exceeding 6 months, the employee may give 15 days’ notice to the last day of the calendar month after the expiry of 6 months.
  • The Amending Act, in the light of the interpretation of the law so far, specifically provides that employees are entitled to a 100% wage supplement for overtime work on public holidays.
  • Key provisions affecting the Labour Safety and Health Act:
  • According to the provisions of the Amending Act, documents generated in the context of occupational safety and health activities (e.g. documents on risk assessment or periodic safety review) must be kept by employers in an up-to-date condition at their headquarters or premises in such a way that they are accessible to the parties concerned, in particular employees. According to the reasoning, this is necessary because the Labour Safety and Health Act has not yet stipulated where occupational safety and health documents should be kept. In a number of cases, the occurrence of exceptional events has revealed that employers are not fully aware of their obligations, and employees and their representatives have not been able to get to know the provisions that are applicable to them. Both physical and electronic storage methods are acceptable.
  • In view of the increased amount of the OSH fines, the Amending Act introduces the possibility for employers to be allowed by the authority to pay in instalments, thus protecting smaller companies or, where appropriate, companies in financial difficulties. It is important to note, however, that if any instalment is not paid in time, the full amount of the remaining fine will be due.

The provisions of the Amendment Act take effect on January 1, 2025. Employers are advised to review their practices at the beginning of the year, particularly regarding the storage of occupational safety and health documents. This is crucial as the OSH authority’s scope includes ensuring compliance with all occupational safety regulations and enforcing them through administrative measures. The amendments to the Labor Code are equally important. For instance, should an employer terminate an employee during paternity leave and the termination is challenged in labour court, the court may rule the termination unlawful.

If you have any questions regarding the above, our Office is at your disposal.

(Image Source: Pavel Danilyuk, pexels.com)

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Rules on occupational safety and health in 2025

News, Employment, labour law / /

At the end of December 2024, a legislative amendment was published in the interests of legal competitiveness which also includes changes to the field of occupational safety and health. In this article, we summarise the new rules of Act XCIII of 1993 on Occupational Safety and Health (the “Occupational Safety and Health Act“) that will enter into force in 2025.

Simplification of the document preparation obligation

The employer is obliged to carry out risk assessment, risk management and the determination of preventive measures before the start of the activity and in justified cases. From 1 January 2025, the obligation to carry out periodic assessments under the Occupational Safety and Health Act has been extended to 5 years (compared to 3 years previously). These obligations now also apply if the employer’s scope of activity changes.

In addition, the legislation allows for the risk assessment to include a prevention strategy and the provision of personal protective equipment, so that these no longer need to be set out in a separate document.

Changes to the persons authorised to carry out tasks in the field of occupational safety and health

In many cases, the Occupational Safety and Health Act makes the performance of certain occupational health tasks by persons with professional qualifications subject to the approval of an occupational physician, but the legislator has considered that in certain cases it is appropriate to omit the medical approval and that persons with specific professional qualifications may perform certain occupational safety and health activities independently, thus making it easier for businesses.

Thus, from 1 July 2025, the occupational safety and health tasks required during the preliminary examination from an occupational safety and health point of view, the preparation of the occupational safety and health content of the rescue plan, the preparation of the occupational safety and health training agenda may be performed independently by a person with specialist medical degree in occupational medicine, occupational physician, occupational hygiene, public health epidemiology, preventive medicine and public health, or a person having qualification as a public health epidemiological inspector or supervisor. The tasks may continue to be carried out by a person qualified as a public health inspector or supervisor with the approval of an occupational physician.

The tasks relating to the occupational safety and health content of the risk assessment will also be carried out by persons with the qualifications listed above; this facilitation will also apply to employers with up to 50 employees classified the lowest, so-called class III risk category. This will also apply to the tasks related to the development of the occupational safety and health content of the prevention strategy from 1 July 2025.

For the same reasons, the scope of those entitled to carry out occupational safety and health tasks concerning the internal policy for the provision of personal protective equipment and the implementation of a working environment which does not pose a risk to health will also be amended from 1 July 2025. These tasks will be carried out by a medical doctor providing basic occupational health services or a person having qualification as a public health epidemiological inspector or supervisor. With medical approval, the tasks may continue to be performed by a person qualified as a public health inspector or supervisor.

Summary

The changes that came into force on 1 January and those that will be introduced later, on 1 July, will make it easier for businesses to comply with the safety and health requirements, both administratively and operationally.

If you have any questions about the practical application of the changes or compliance with any other occupational safety and health rule, our Office will be happy to help.

(Image Source: Luis Quintero, pexels.com)

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The Supreme Court took an important decision regarding the postal delivery of termination notices

News, Employment, labour law / /

According to the facts underlying the decision, the employee had moved from his registered address but failed to notify the employer of this change, despite being contractually obligated to do so. At the same time, the employee arranged for a so called “mail forwarding services” with the post office.

After the employee moved out, the employer sent a termination notice by post (to the previous address), which the employee has received as proved by the return receipt. Subsequently, during the communication related to the termination process of the employment relationship the employee indicated that the termination had not been delivered to him. However, the employer relying on the evidence of the return receipt dismissed the claim and proceeded with further steps, such as deregistering the employee.

For the reasons set out above, the employee filed a lawsuit against the employer, claiming unlawful termination of the employment relationship. During the legal proceedings, it was established that the postal worker had not acted in compliance with the delivery procedures when delivering the mail: despite the mail forwarding service, the termination notice was delivered to the employee’s former address, and the postal worker had failed to verify the identity of the person who received it.

The employer argued that the postal worker breached the forwarding agreement between the employee and the post office, but this breach should not affect the termination and could not be held against the employer.

However, the court did not accept this argument. Under the provisions of the Labour Code, in the event of a dispute, the burden of proof regarding proper delivery of a legal statement lies with the party making the statement—in this case, the employer. Since the employer was unable to demonstrate that the delivery was carried out properly (through no fault of its own), the Supreme Court declared the termination unlawful.

The decision highlights that, even if an employer acts lawfully when arranging the postal delivery of a termination notice, unforeseen circumstances outside the employer’s control may still result in adverse consequences, creating a potential risk for the employer. Therefore, before delivering any kind of an employer’s acts, it is advisable to consider alternative delivery methods and assess whether those might be preferable to postal delivery.

(Image source: sl wong, pexels.com)

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Key Information in connection with housing allowance

News, Employment, labour law / / ,

Introduction

Pursuant to Government Decree No. 403/2024 (XII. 18.) on housing allowance for employees (hereinafter the “Government Decree”), published in December last year, employers may provide housing allowance to their employees within a specified budget starting from January 1, 2025. This new type of non-wage benefit is also beneficial for employers, as it is subject only to a 15% personal income tax and an 18% social contribution tax. This article summarizes the main questions and considerations related to this allowance.

Key questions and advantages of the benefit

Housing allowance is available to employees under the age of 35, with a maximum annual amount of HUF 1.8 million, equivalent to a maximum of HUF 150,000 per month, provided the employee’s employment relationship lasts throughout the year.

The allowance can be used to pay off housing loans or rent. According to the Government Decree, employees can request the allowance by specifying their housing-related purpose. Employers are required to transfer the amount of the allowance to the bank account provided by the employee. Although the Government Decree does not explicitly state this, the Government communication suggests that in case of loan repayments, employers may transfer the allowance directly to the banks. Currently, the situation remains uncertain as it is unclear whether new regulations will be adopted or if banks themselves will establish additional conditions.

It is important to note that employees bear the primary responsibility for compliance with the legal requirements related to this benefit. If an employee receives housing allowance in an amount exceeding what they actually pay for rent or loan repayments, the tax authority will impose a penalty for the difference; additionally, the excess amount will need to be paid as personal income tax.

Summary

Although the legislator has already established some basic rules regarding the allowance, we strongly recommend to employers to consider the following during its implementation:

  • Establish internal policies outlining the conditions for providing the allowance, thereby minimizing tax and labour law risks and setting detailed rules in advance;
  • Prepare an appropriate statement for employees requesting the allowance which justify the purpose and type of the allowance, as well as the details of communication;
  • Identify the necessary documentation to be retained for verifying the allowance and ensure proper handling of this information from a data protection perspective.

Should you have any questions regarding the above mentioned, please do not hesitate to contact us.

(Image source: Timur Saglambilek, Pexels.com)

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