social contribution tax,

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

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In case of the income withdrawn from the business account, dividend income, entrepreneurial dividend fund, capital gains income, the maximum amount of SZOCHO shall be increased to19,5 percent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 labour law related changes in 2018

A summary regarding the labour law related changes in  2018 – mandatory minimum wage, social contribution tax, healthcare contribution, simplified contribution to public revenues, childcare benefits, sick pay, cafeteria rules, statutory retirement age

The labour law related changes in 2018

Government Decree No 430/2016. (XII. 15.) determines the amount of the mandatory minimum wage. The mandatory minimum wage for full-time employees increased with 8% as of 1st January 2018, from 127,500 to gross 138,000 HUF. The guaranteed minimum wage paid to skilled workers rose by 12% in the case of completion of full time working as of 1st January 2018, from 161,000 to 180,500 HUF. The social contribution tax (SZOCHO) and the amount of the healthcare contribution (EHO) reduced from 22% to 19,5%. The simplified contribution to public revenues (EKHO) also decreased, the employer shall pay 19,5% EKHO instead of the previous 20%.  

Due to the increasing minimum wage the amount of the childcare benefits (GYED), the benefits for university students and graduates grew as well as the sick pay as of 1st January 2018. The eligible families are entitled to a maximum of 193,200 HUF in childcare benefits. Students enrolled in a bachelor’s program will be eligible for 96,600 HUF support and students enrolled in a master’s program for 126,350 HUF. Female university students or graduates are eligible for an extra year of child support up to the child’s second birthday. Moreover, fathers also eligible to claim baby-care allowance (CSED) in more cases from 1st January 2018. The daily maximum of sick pay increased from 8500 HUF to 9180 HUF.   

In addition to the above, the cafeteria rules have changed. New cafeteria element: a student loan reimbursement as employer benefit can be provided tax free up to the installments but not more than 27,600 HUF monthly. The conditions for a tax free housing allowance eased, the ceiling price of this benefit became higher (nearly 83,000 HUF). The burden on employers reduced from 43,66% to 40,71% in case of certain specific benefits (Erzsébet vouchers, hot meals at the work place, monthly public transport ticket, school starting support, contribution to a voluntary health fund/pension fund). The costs of cafeteria cash payment and benefits may be granted as Széchenyi Recreation Card („SZÉP” Card: accommodation, catering, leisure) remained the same 34,22%, if it does not exceed 450,000 HUF. 

The statutory retirement age increased to 63,5 year and the amount of pensions amended favorably. The pensions (including among others retirement pension, widows’ pension, orphans’ allowance etc.) increased with 3% with the effective date of 1st January 2018. The amount of minimum pension remained unchanged (28,500 HUF).