As of 1 January 2019, the Hungarian regulation of tax-efficient benefits for employees has been drastically changed. Popular benefits such as tax-free employer housing allowance, school-entry support and certain goods and services provided (under the same conditions and in the same way) free of charge or at a reduced rate, subject to tax as certain defined benefits, have been excluded from the favourable tax treatment.
At the same time, employers still have the opportunity to develop a more varied, demand-driven and tax-efficient benefit system. In our first article, we summarized below some of the benefits (e.g. SZÉP-card, mobility support, support for employees and their families in special situations) that can be offered to physical workers (in other words blue-collar employees) as an alternative, while employers can offer them at a lower tax burden than the regular salary.
- Benefits not regarded as fringe benefits
Some of the so-called "benefits not regarded as fringe benefits” that may be relevant for blue-collar workers could be the followings:
- amounts paid for certain pre-specified services under the provisions of the Act on Voluntary Mutual Insurance Funds (with the exception of supplementary self-aid services);
- events and programs for spare time aimed at catering or leisure activities (e.g. company family day, Christmas dinner) provided free of charge or at a reduced rate (this includes gifts of individual value not exceeding 25% of the minimum wage (HUF 50,000 in 2022) per person given to participants at such events);
- gifts of small value (not exceeding 10% of the minimum wage (HUF 20,000 in 2022)), which may be given once a year (e.g. a gift for Women's Day).
In a general case, for benefits not regarded as fringe benefits the tax base is 1.18 times the value of the benefit, and the tax burden is 15% personal income tax plus 13% social contribution tax payable by the employer, i.e. the total tax burden on the employer is 33.04% of the value of the benefit provided free of charge. However, the total tax burden on the employer under KIVA taxation (small entrepreneurs’ tax) is 27.7%.
- Fringe benefits – SZÉP-card
The fringe benefits (except for two not widespread benefits) are practically limited to SZÉP-card, which may be an appropriate form of benefit for physical workers.
The main information on SZÉP-card benefits, taking into account the related tax law changes effective from 1 January 2022, are as follows:
- with favourable tax treatment, the employer can transfer up to HUF 225,000 per year to the accommodation sub-account, up to HUF 150,000 per year to the catering sub-account and up to HUF 75,000 per year to the leisure sub-account of the SZÉP-card;
- the so-called annual recreational budget (i.e. the total amount paid into the sub-accounts that can be treated as fringe benefits for tax purposes) is HUF 450,000 per employee;
- payments (benefits) exceeding the amounts mentioned in relation to the sub-accounts and the annual recreational budget are taxable as benefits not regarded as fringe benefits as described above;
- the transfer between the individual sub-accounts of the SZÉP-card has been extended until 31 December 2022, meaning that payments can be made from any sub-accounts of the card;
- between 1 February 2022 and 31 May 2022, the amount of the sub-accounts can be used for the purchase of food (except alcohol and tobacco products).
In general, in the case of SZÉP-card benefits (taking into account the above-mentioned limits), the employer has to pay 15% personal income tax and 13% social contribution tax on the value of the benefit, i.e. the total tax burden on the employer is 28% of the benefit provided free of charge. However, in the case of KIVA taxation, the total tax burden on the employer is 25%.
- Tax-free benefits
In recent years, the scope of tax-free benefits has been considerably narrowed and restructured. Among the tax-free benefits , blue-collar workers may be welcome to receive the following payments / allowances.
- if certain conditions are met, the provision of a travel pass or ticket relating to going to work, or reimbursement of expenses up to HUF 15 per kilometre ;
- bicycle powered by human power or a bicycle powered by an electric motor of up to 300 W received for private use (including service/maintenance costs);
- (season) tickets for sport events up to the value of the minimum wage (HUF 200,000 in 2022) per year;
- (season) tickets for cultural services (e.g. museum exhibitions, theatre, dance, circus or music performances, entrance to the Budapest Zoo), and library subscription fee up to the value of the minimum wage (HUF 200,000 in 2022) per year;
- provision / reimbursement of nursery, kindergarten services/ nursery, kindergarten care;
- provision of vaccination, epidemiological screening ;
- support for employees and their families in special situations through a public interest commitment or a (company) foundation.