CLVPartners

CLV-02
Menu

income

The income related tax changes in 2019: the new type of social contribution tax (SZOCHO)

Employment, labour law, Medium-sized companies, News, Start-ups / / , ,

The Act LII of 2018 on the social contribution tax was published on 31 July, 2018 and it will significantly increase the tax items payable after the wages and other incomes from January 1, 2019.
The termination of healthcare contribution (EHO) and SZOCHO with the rate of 19.5% on income instead of EHO are considered to be significant changes of the new regulation.

The new provisions clearly increase the dues of the employers, e.g. increasing tax rate after the fringe (non-wage) benefits, increase of tax base for calculating and the tax rate in case of dividend income, and the significant reduction of tax reliefs. Therefore during planning of wages for the next year, the following new rules shall be considered.

In case of the income withdrawn from the business account, dividend income, entrepreneurial dividend fund, capital gains income, the maximum amount of SZOCHO shall be increased to19,5 percent of twenty-four times of the minimum wage, which shall be HUF 645.000, – calculating with the minimal wage in the present year – from the current amount of HUF 450.000. In addition, the base of SZOCHO payable after the insured member of general partnership, limited partnership and limited liability company shall be 112,5 percent of the minimum wage.

Generally the pay office/employer shall pay SZOCHO, however in some special case the private person earning the income shall pay the SZOCHO. There are special legal provisions regarding assignment, temporary agency work and employment relationship established by more than one employer.

Abolished tax reliefs

– tax relief for young employees under 25 years and employees over 55;
– tax relief for participants in Karrier Híd Program;
– tax relief for research and development activity;
– tax relief enforceable by the employer employing doctoral candidate employees or students participating doctoral education determining by the Act CCIV of 2011 on the national higher education;
– tax relief for permanent job-seekers;
– tax relief in connection with the payment of child care allowance and benefit.

Please note that the tax relief which may be claimed for definite period of time shall not be ceased automatically by 1 January, 2019. These may be obtained during the entire validity period.

The following group of people will be entitled to tax reliefs from the next year:

– the unskilled workers and employees in agricultural positions;
– people who have been out of job for a particular period of time;
– woman nursing three or more children,
– disabled employees,
– workfare workers.

Only one type of tax relief shall be claimed regarding any employee at the same time. In case of eligibility for more tax reliefs, the employer may decide, which tax relief to claim.

The amendment of the Act on Health Insurance

Pharmaceutical law, Company groups, Employment, labour law, Medium-sized companies, Start-ups / / , ,

Act No. 111 of 2014 about the amendment of certain health and health insurance acts adopted on 16 December 2014 (“Amendment Act“) affected various Hungarian laws. In the frame of this present newsletter we summarize only the most significant amendments of those which affect Act No. 83 of 1997 on the services of the mandatory health insurance (“Health Insurance Act“). Additional provisions of the Amendment Act will be discussed by us in a separate newsletter.

As a consequence of the Amendment Act, the definitions set out in the Health Insurance Act were extended with the definition of income, monthly contractual income and salary, further, this part of the Health Insurance Act listed the financial health care allowances. These are infant care fee – instead of the previously applied maternity pay, which shall be only considered as an amendment in the name of the allowance -, childcare fee and sick pay.

According to the Amendment Act when defining the aforementioned financial health care allowances, further, (irrespective of certain exemptions) the sick pay payable on account of accident, the reported income – reached in any relationship effective on the date of the eligibility – serving a basis for determining the personal income before tax shall be taken into consideration instead of the income reached in a relationship on the basis of which the affected person should have been considered as insured.

It was added to the Health Insurance Act, that the eligibility for infant care fee shall begin on the date of the childbirth, or on the first date of the maternity leave in case of premature child, the latest.

The amount of the infant care fee and the childcare fee remained unaltered, however, the calculation of the income serving basis for the payment of the above fees – to which the rules defining the sick leave pay shall still apply – have been amended. Accordingly, in case of a continuous relationship the amount of the sick leave pay shall not be defined based on the daily average of the income gained in the year preceding the eligibility date for the sick leave pay. According to the Amendment Act, as a general rule, the basis for sick leave pay shall be defined on the basis of the average daily income accrued in a 180 days period between the first day of the year preceding the date of being eligible for the sick leave pay and the last date of the third month preceding the eligibility date. For example: if the eligibility date of the sick leave pay is 15 June 2015, the period between 01 January 2014 and 31 March 2015 shall be reviewed and the income gained within 180 days before 31 March 2015 shall be the basis for the calculation of sick leave pay.

By sustaining the current structure, the Amendment Act sets out those cases when the insured person does not have either 180 days income, or 120 days income – that shall already been considered as an exceptional case.

According to the provisions of the Amendment Act, the detailed rules of defining and calculating the infant care fee and the sick leave pay will be included in a Government Decree.

A significant amendment is included in the Amendment Act, namely, that if any of the parents shall be considered as sick on account of caring for and staying with his or her child in the course of a treatment rendered in a hospital, the amount of the sick leave pay shall be 50% of the sick leave base instead of the previously applied 60%.

The rules concerning childcare fee have also been amended. Accordingly, the mother or that person who was eligible to an infant care fee and whose insured status terminated while being eligible for infant care fee, shall receive childcare fee, provided that the eligibility for infant care fee was acquired during a relationship on the basis of which this person was insured and lasted for at least 365 days within the two years prior to the child’s birth, further, if the child is raised in his or her household.

If on the date being eligible for childcare fee or two years before this date a person is or has already been eligible for childcare fee with regard to his or her other child, the period of payment of childcare fee:

  • cannot be shorter than the defined period of the childcare fee, paid the latest, further
  • cannot be extended with the infant care fee’s payment period for which the parent is eligible on account of the second child; further
  • cannot be extended with the payment period of the childcare fee and childcare allowance defined on account of the birth of the last child.

These provisions of the Amendment Act entered into force with the effective date of 1 January 2015.

Should you have any questions regarding the above, please feel free to contact us:

Dr. Marianna Csabai
Dr. Boglárka Kricskovics-Béli
Dr. Nóra Óváry-Papp

CLVPartners news