Hungary Insurance Lawyer Refund
Many changes have been made to the tax laws in Hungary, effective January 2010. The major changes are listed below but for full details and other changes please contact your MS City Treuhand representative directly or email to: office@mscity.hu
Act on Personal Income Tax
All income to be considered as a part of the consolidated income shall be completed by 27% when calculating tax (so-called “super-grossing”). The tax base calculated this way shall be increased by allowances bearing no tax burden (pension and family allowance) at the time when the allowance is paid. As a consequence, the upper limit of the lower tax bracket is HUF 5 million and the tax rate for this bracket is 17%; the tax on the income above HUF 5 million is 32%.
Tax credit shall be 17% of the income from wages and salaries but not more than HUF 15,100 monthly. The eligibility limit shall be an annual HUF 3,188,000; tax credit is available to a reduced degree for income exceeding this amount, only for a maximum annual income of HUF 4,698,000.
Most tax allowances shall be cancelled; only those remaining in force are listed below:
- payments made to voluntary health funds and pension funds;
- family allowance amounting to HUF 4,000 per child if the number of dependants is at least 3;
- allowance for agricultural primary producers
No tax advance shall be deducted upon payment from taxpayers who have a tax number and are eligible to issue invoices.
Some types of allowance that used to be exempt from tax (family allowance and maternity grant) shall be regarded as allowances bearing no tax burden already as of September 2009.
The exemption from tax for optional and tax-exempt fringe benefits (so-called Cafeteria benefits) shall be cancelled.
A tax of 25% shall be imposed on the paying entity for the following items:
- Hot meal vouchers or supply up to a monthly amount of HUF 18,000. Vouchers can be provided subsequently in an accumulated way;
- Local travel passes up to the amount included by invoices issued to the name of the employer;
- Back-to-school vouchers up to 30% of the monthly minimum wage annually
- Holiday vouchers up to the monthly minimum wage annually
- Reimbursement of formal education costs up to 2.5 times the monthly minimum wage annually;
- Payments made by the employer to voluntary health funds or mutual funds up to 30% of the monthly minimum wage or to voluntary pension funds up to 50% of the minimum wage monthly.
All other fringe benefits (for a detailed list, please refer to §69) are liable to tax: the paying entity shall pay 54% PIT plus social security contribution at a rate of 27% (or healthcare tax “EHO” amounting to 25) on the amount increased by PIT. If a benefit is incompatible with the regulations of §69 or exceeds the value limit set forth then it shall be regarded as consolidated income liable to tax and social security contribution.
For partners of partnerships not liable to EVA (simplified entrepreneurial tax) and entrepreneurs who are not employed beside pursuing business, income received by partners (members) for personal participation (i.e. not under employment) shall be determined according to the market income typical for the business in question and PIT shall be paid accordingly. We do not recommend addressing this issue in detail because the relevant sections of the act are still expected to change.
Income tax at a rate of 54 % shall be imposed on income from interest rate reduction (for loans provided with an interest rate less than the base rate of the central bank + 5%); this tax shall be paid by the lending entity. Payment obligation shall arise as of the last day of the year or the date when the loan is terminated.
The entire amount of per diem payments received for trips to Hungary or abroad shall be liable to tax, except for per diem payments received by those working in international transportation of goods and passenger transport. For these sectors, the previous tax-exemption limit of EUR 25 continues to be in force.
Income for non-formal education shall be liable to tax if the education is provided for any other purpose than to pursue activities of the entity providing education.
Business entertainment and gifts provided by corporate taxpayers shall be exempt from tax because these amounts increase the corporate tax base for providers.
Income received in the form of products given or services provided by a paying entity free of charge or at a reduced price shall be regarded as benefits in kind liable to tax unless the paying entity is an employer of the person receiving such benefits.
Amendments to the Act on Social Security Contributions and Healthcare Tax
Employers’, employees’ and entrepreneurs’ contributions have been included in social security contributions. Labor market contributions at a rate of 1% imposed on employers shall be paid on any income liable to social security contributions. However, labor market contributions at a rate of 1.5% imposed on employees shall not be deducted from income not liable to employees’ contributions (e.g. reimbursement of holiday pay, income of pensioners, income of private entrepreneurs or partners in business partnerships employed elsewhere).
The rate of social security contributions shall be 27% for employers and 17% for private individuals.
START Cards of graduates starting their careers shall be valid for 1 year instead of 2 years; employers can apply a contribution rate of 10% for 3 months and 20% for 9 months.
There is no income limit for pensioners younger than 62 years who already received pension under their own eligibility as of 31 December 2007. For other pensioners, the annual income limit shall be 18-fold the monthly minimum wage.
The fixed-amount healthcare tax (EHO) of HUF 1950 per person per month shall be cancelled.
The rate of the healthcare tax imposed on private individuals shall continue to be 14% that shall be paid up to a limit of HUF 450,000. The healthcare insurance contributions of 6% deducted from private individuals from the beginning of the year shall be added to the amount of healthcare tax paid from the beginning of the year. The rate of the healthcare tax imposed on paying entities shall increase from 11% to 27%.
No healthcare tax shall be paid on income received by individuals insured in another member state if he/she certifies his/her insurance relationship by presenting an E101 form.
Rehabilitation Contribution (compensatory levy)
This liability still applies to employers with more than 20 employees. Its amount is HUF 964,500 per person per year. The average statistical headcount shall be reduced by the number of staff handicapped in their work ability pursuant to the Government Decree No. 177/2005 (09.02.).
Amendments to the Act on Value Added Tax
The most important amendment was made in the matter of place of performance of services. The following table will illustrate these changes as well as the taxable area of each.
Every VAT taxpayer shall have an EU tax number for purchasing services from or providing services to a taxpayer of another member state.
Taxpayers shall make a summarizing statement on services used and provided, similarly to the case of product sales within the EU that has already been in force.
Rules of VAT refund
To refund VAT to a taxpayer of another member state, a claim shall be submitted to the taxpayer’s own competent tax authority in electronic form. The claim for refund shall be addressed to the member state of the place of refund.
Rehabilitation Contribution (compensatory levy)
This liability still applies to employers with more than 20 employees. Its amount is HUF 964,500 per person per year. The average statistical headcount shall be reduced by the number of staff handicapped in their work ability pursuant to the Government Decree No. 177/2005 (09.02.).
For instance, if a Hungarian company charges VAT to a Swedish company then the Swedish taxpayer shall submit the refund claim to their own tax authority, addressed to the Hungarian tax authority. In a reverse case, the claim shall be submitted to the Hungarian tax authority. Electronic claim forms will be available on the online portal of the tax authority; its format shall be specified by a Decree of the Ministry of Finance to be issued by the end of year 2009.
The refund claim shall be submitted not later than 30 September of the year following the year in question.
All other amendments affect special fields therefore we do not address them here.
Written by Eta Bojtos, December 21, 2009. Budapest, Hungary.
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