On 15 December 2021, the latest winter tax law package (T/17668., T/17882.) was adopted, which increased the minimum wage to HUF 200,000 and the guaranteed minimum wage to HUF 260,000 as of 1 January 2022. At the same time, the tax burden of companies was reduced as of 2022 by 2.5 percentage points regarding social contribution tax and the 1.5% vocational training fund contribution was abolished. In addition, the local business tax which was reduced earlier to 1% for micro, small and medium-sized enterprises (SMEs) was extended to the tax year 2022, in those locations where the local business tax is higher than 1%. Furthermore, as part of the year-end busy period, the government approved various decrees at the end of December 2021, including favourable rules on the so caled SZÉP-card.
In addition, on 15 December, the proposal no. T/17671 was also adopted, which extends the validity of Act I of 2021 on the protection against the coronavirus pandemic until 1 June 2022. This amendment addresses certain regulatory issues related to the pandemic situation and, together with Act XCIX of 2021, it lengthen the date of expiration of certain tax reliefs or extends them.
The additional tax law changes effective from 2022 but adopted earleir last summer, were covered in our earlier article . Previously adopted changes that are enter into force on or after 1 January 2022 are in italics for better understanding.
In our newsletter, we have summarised the most important changes by main tax categories.
PERSONAL INCOME TAX AND RELATED TAXES
Increase in minimum wage and guaranteed minimum wage
- The most significant change is the increase in the minimum wage and the guaranteed minimum wage from 1 January 2022. The table below illustrates how net wages, sick pay, childcare allowance and public charges will change.
(minimum monthly wage
gross HUF 167,400)
(minimum monthly wage
gross HUF 200,000)
(guaranteed minimum monthly wage
gross HUF 219,000)
(guaranteed minimum monthly wage
gross HUF 260,000)
|Net wage||HUF 111,321||HUF 133,000||HUF 145,635||HUF 172,900|
|Personal income tax advance||HUF 25,110||HUF 30,000||HUF 32,850||HUF 39,000|
|Social security contribution||HUF 30,969||HUF 37,000||HUF 40,515||HUF 48,100|
|Maximum amount on sick leave||HUF 11,160 /day||HUF 13,333 /day||HUF 11,160 /day||HUF 13,333 /day|
|Maximum for childcare allowance||HUF 234,360 /month||HUF 280,000 /month||HUF 234,360 /month||HUF 280,000 /month|
- The table shows that in 2022 the monthly net income of an employee earning the minimum wage increases by HUF 21,679, while for an employee earning the guaranteed minimum wage it increases by HUF 27,265.
- At the same time, we note that overall public charges are also increasing, despite the reduction in social contribution tax and the abolition of the vocational training fund contribution.
- For a self-employed entrepreneur or at a partnership, the basis for social security contributions is at least the minimum wage, or the guaranteed minimum wage in the case of activities requiring qualifications. On this basis, the social security contributions paid by an entrepreneur are the same as those paid by an employee, as described in the table.
Reduction of social contribution tax and inclusion of the vocational training fund contribution in the social contribution tax
- The rate of social contribution tax was reduced from 15.5% to 13% from 1 January 2022, instead of the previously planned change on 1 July 2022.
- The 1.5% vocational training fund contribution as a separate contribution/tax was abolished as of 1 January 2022 (previously this change was also scheduled for 1 July 2022) and the related rules (e.g. discounts, partly changed) was incorporated into the Social Contribution Tax Act.
- However, in the context of the date of expiration, the vocational training fund contribution still has to be declared and paid for the month of December 2021, with a deadline of 12 January 2022. The difference between the advance paid in the 2021 tax year and the net liability for the 2021 tax year in favour of the taxpayer can be claimed back by the company in 2022.
- By the increase of the minimum wage, the maximum amount for social contribution tax payment be also increased to HUF 4,800,000 from 2022 (for 2021, this was about HUF 4 million).
Change in income tax and social contribution tax base for individuals increases to 89%
- For all income on which the individual is liable to pay personal income tax and social contribution tax (e.g. other income from a payer not qualifying as a disburser), 87% of the assessed income be considered the effective tax base in 2021. This rate (also for advance tax calculation purposes) was increased to 89% from 1 January 2022 as a result of the reduction in the social contribution tax rate.
Remuneration for remote working remains exempt from personal income tax
- The extension of the emergency situation continues to exempt from personal income tax the employer's reimbursement of the cost of the days spent remote working (in. home office), up to a maximum of 10% of the minimum wage.
Tax refund for persons raising a child
- Families with a child are entitled to a personal income tax refund in 2022 regarding the personal income tax paid for the tax year 2021.
- The tax refund is available to those who entitled to family allowances (spouse, registered partner, parent) and parents expecting a child, if the life expectancy of the foetus reaches 91 days by 31 December 2021.
- The refund also applies to small taxpayers (at 25% for KATA payers) and to taxpayers under the simplified income tax contribution (in Hungarian EKHO).
- Some individuals still have to fill in and submit the so-called "VISSZADÓ" form to the tax authorities by 31 December 2021. This can easily be done through the client portal. The refund will be paid by the tax authorities to the bank account or postal address provided no later than 15 February 2022.
- You can find detailed rules on the subject at the following link .
Crypto income rules
- The tax treatment of income (gains) from crypto transactions will change very favourably from 2022. You may read more about this rules here . The essence of the tax law changes is that crypto profits will be taxed as an income similar to income from Stock Exhange at 15% personal income tax, and there will also be a possibility to claim tax offset/relief. Furthermore, a kind of tax amnesty can be claimed for previous years crypto transactions within the statute of limitation period.
Personal income tax allowance for mothers with four or more children
- From 2022, a mother can also claim the full personal income tax exemption for a child living in a residential social institution if she maintains personal contact with the child and has parental custody.
- The mother does not have to make a declaration every year if the conditions have not changed and she has already made a declaration in 2021.
Personal income tax exemption for young people under age 25
- From 1 January 2022, people under the age of 25 are entitled to a personal income tax credit for certain types of income (e.g. the majority of income from non-self-employment) and up to a maximum amount, regarding which you can read more about here .
Cafeteria – SZÉP-card sub-accounts will remain interchangeable
- From 2022, the amount allocated to SZÉP-card is no longer exempt from social contribution tax, but the transfer between the individual sub-accounts of the card has been extended until 31 December 2022, meaning that payments can be made from any sub-accounts of the card.
- Another change relating to SZÉP-card is that 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).
- Similar to SZÉP-card, the social contribution tax exemption for business representation and business gifts seazes to exist by 1 January 2022. The relevant information from the tax authorities can be found here regarding the regulation.
Bicycle for private use
- A bicycle powered by human power or an electric motor of up to 300 W received by the employee for private use from its employer is considered a fully tax-free benefit from 2022. The tax exemption is applicable not only for the purchase of the bicycle, but also for the associated service/maintenance costs.
CORPORATE INCOME TAX (CIT), KATA, KIVA and lump-sum taxation
Main changes in CIT
- From 2022, a hybrid entity is also considered as a Hungarian resident taxpayer. You may read about this regulation in our earlier article
- The threshold for development tax relief regarding investments of small and medium sized enterprises (SMEs, in Hungarian KKVs ) is further reduced from 1 January 2022. For small enterprises, the tax relief is available for investments worth at least HUF 50 million instead of HUF 200 million, and for medium-sized enterprises for investments worth at least HUF 100 million instead of HUF 300 million.
- From 2022, the range of taxpayers who can opt for corporate tax grouping status is narrowed, i.e. non-profit business associations, social cooperatives, public interest pensioners’ cooperatives and school cooperatives are no longer allowed to be members of a group taxpayer.
- The number of countries considered as tax havens is reduced according to a government regulation adopted on the basis of the blacklist maintained by the Council of the European Union. From 31 December 2021, only 9 (nine) countries are included (such as – among others – the US Virgin Islands, Panama and Fiji), after Anguilla, the Dominican Community and the Seychelles have been removed from the blacklist. Foreign persons and premanent establishments (PEs) tax resident in blacklisted countries are not exempt from the so-called controlled foreign company (CFC) restrictions in the Act on CIT.
Increase in the supply fund for KATA taxpayers
- A full-time small taxpayer is considered insured and entitled to all benefits for the duration of this status. The basis for calculating benefits is HUF 102,000 per month in 2021 (if paying HUF 50,000 KATA/tax), and HUF 170,000 if paying the higher rate of tax (which is HUF 75,000 KATA/tax in 2021). These amounts are increased to HUF 108,000 and HUF 179,000 from 1 January 2022.
1 percentage point reduction in KIVA tax rate
- From 1 January 2022, the small business tax and its tax advance are reduced from 11% to 10%.
Favourable lump-sum taxation rules and expense ratios for self-employed
- From 1 January 2022, the rules on lump-sum taxation are more favourable, as the income of self-employed individuals subject to lump-sum taxation is tax-free up to half of the annual minimum wage, i.e. HUF 1,200,000 in 2022.
- As a general rule, self-employed lump-sum taxpayers can claim a 40% lump-sum tax on their income. If one takes into account the tax-free threshold mentioned above, he/she does not have to pay personal income tax up to HUF 2 million.
- For certain activities (e.g. hairdresser, photographer, computer repairer, taxi driver) the rate is 80%, and for retail activities only, 90%. Thus the tax-free income threshold is HUF 6 million for the first case and HUF 12 million for retailers.
- You may read more about the changes to the lump-sum taxation here .
THE SIMPLIFIED CONTRIBUTION FOR CERTAIN PROFESSIONS (EKHO)
EKHO is reduced to 13%
- In line with the changes in the rate of the social contribution tax, EKHO also changes. From 1 January 2022, 13% EKHO is payable instead of 15.5% on the amount of the EKHO base.
- A tax exemption is introduced for purchases made by the European Commission or an agency or body established by EU law which are necessary for the performance of the tasks entrusted to these institutions in order to respond to the Covid19 pandemic. The provisions for exemption also apply to transactions carried out before the entry into force and after 31 December 2020.
- The reverse charge rules continue to apply to the supply of certain cereals and steel products and to the transfer of a tradeable right (allowance) to the emission of greenhouse gases from 1 January 2022 until 30 June 2022. In order to allow the possibility of extension of this rule at a later date, the rule abolishing reverse charge for these sectors from 1 July 2022 has been repealed.
- The provisions on the draft electornic VAT (eVAT) return (which would have been entered into force as of July 2021 in the first round) were also repealed. This means that the preparation of draft VAT returns for taxable persons be postponed indefinitely.
- No receipt is required if the consideration for the productor service is collected through an automated system.
The 1% local business tax (LBT) for SMEs and the local tax moratorium remain in 2022
- For the 2022 tax year for SMEs the local business tax rate remains at a maximum of 1% on the basis of the same rules as in 2021.
- To qualify for the relief, a declaration must be made to the tax authority by 25 February 2022 (if not previously made), stating that the entrepreneur qualified as an SME in 2021 or expects to qualify in 2022, and must undertake to declare the address of its permanent establishment(s) under the Local Business Tax Act if it has not previously done so.
- Previously, moratorium regarding the introduction of new local and municipal taxes, furthermore, tax increases were introduced for municipalities with respect to 2021, which remain in force in 2022 as well.
RETAIL SALES TAX
Retail tax rate increases
- Amendments affecting food chains and retail sales taxes have been adopted in a fast-track procedure to reduce the environmental, economic and social impact of food waste and to reduce the overall amount of the food waste.
- The amendment covers retail sales tax, which increases from 2.5% to 2.7% from 1 February 2022 on that part of the tax base which falls on the amount exceeding HUF 100 billion.
RULES OF TAXATION
Administrative obligations to facilitate personal income tax refunds
- In order to ensure the swift and efficient implementation of the tax refund for families with children in 2022, and to minimise the administrative burden on the beneficiaries concerned, the law imposes a regular reporting obligation to the tax authority for the Treasury, which pays the family allowance, and the Ministry of Defence, which acts as the family subsidy disburser office.
- The information provided includes personal details of the eligible child, spouse, registered partner or common-law partner, marital status, the fact that the child is a student, bank account number, the fact of pregnancy, and data relating to the marriage/partnership.
Pandemic rules for the payment reduction
- Applications for payment reductions can be submitted until 30 June 2022 in view of the pandemic situation.
- Under this scheme, an individual may be granted a deferral of up to 6 months or an instalment of up to 12 months for a tax of up to HUF 5 million registered with the tax authority.
- A non-individual taxpayer is allowed to reduce the amount of tax due by up to 20% once, up to a maximum of HUF 5 million. A reduction may be applied for only in respect of one taxable amount.
Regional subsidy map
- The European Commission has adopted the regional subsidy map applicable from 1 January 2022 to 31 December 2027. A change compared to the previous period is that Pest county is included in the map as "a" region with an aid intensity of 50% (for large enterprises), but Budapest is still not eligible for any subsidy. The subsidy intensity is changed from 35% to 30% for Central Transdanubia and from 25% to 30% for Western Transdanubia. The subsidy intensity for the other regions remains unchanged at 50%. These regions are Northern Hungary, Northern Great Hungarian Plain, Southern Great Hungarian Plain and Southern Transdanubia. What also remains unchanged is that these aid intensities may be increased by 20 percentage points for investments made by small enterprises and by 10 percentage points for investments made by medium-sized enterprises. More information can be found on the TVI website regarding the regulation.
Special tax on financial organisations
- Stock exchange, commodity exchange and venture capital fund managers' special tax liability for financial institutions is abolished from 2022.
Support for young people starting their lives
- In 2022, the maximum amount of annual state subsidy for the amount paid into the Start account (commonly known as the baby bond) increases from HUF 6,000 to HUF 12,000, and the subsidy for children entitled to regular child protection benefits and children fostered in Hungary increases from HUF 12,000 to HUF 24,000, regardless of the amount paid into the Start account.