Page 2 - 20140114_PS-Newsletter_On-Changes-of-Taxation

PS Newslett er

14 January 2014

II Social security Social security contributions of foreign
employees
Family tax allowance Third country citizens will be able to be exempted from
As of 1 January the new rules will allow to claim the unu- individual Hungarian social security liabilities even if the
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tilized part of family tax allowance against contribution lia- period of their secondment exceeds two years, provided
bilities as well. As a result of this amendment, individuals that the extension is due to unexpected reasons occur-
eligible for family tax allowance will be able to deduct 16% ring in the second year of their assignment, and further-
(i.e. the personal income tax rate) of their unutilized fam- more, it is reported within 8 days to the Tax Office. Even
ily tax allowance from their 7% health care contribution so the social contribution tax (27%) shall have to be paid
liability and 10% pension contribution liability. Utilizing the after two years.
family tax allowance as contribution credit will not limit the This regulation does not apply to EC citizens.
individuals’ entitlement to social security services.
The rate of allowance remains unchanged. As a result of the previous transitional rule, until 2015,
third country assignees can be exempted from social
• One child or two children: security contribution liabilities while employed in Hun-
HUF 62,500 /child/month × 16% ⇒ HUF 10.000 gary. This is because the two-year period for current
• Three or more children: secondments has to be calculated from 1 January 2013,
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HUF 206,250 /child/month × 16% ⇒ HUF 33.000 meaning that the social security contribution liability will
Such utilization of the family tax allowance will have to be arise on the 1 January 2015 at the earliest.
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reported in the personal income tax return. Health services contribution
As a prerequisite for claiming family tax allowance filers
shall attach a written statement on the number of months Individuals who are not insured shall pay health services
in which their children are to be regarded as (beneficiary) contribution monthly. In 2014 the amount of this contribu-
dependent. The fact of sharing the allowance shall also tion is increased up to HUF 6,810 per month (HUF 227
be stated along with the tax code of the other party in per day).
case of sharing. Social contribution tax
The Act specifies that divorced or separated parents that
share custody are entitled to utilize the family tax allow- From 2014 the social contribution tax benefit available
ance in a 50:50 ratio. in respect of the expected wage increase will be phased
Who is affected by the changes? (Example) out. Also allowances once associated with START cards
will be cancelled.
Parents with 3 children, monthly gross total salary is In the same time tax allowances launched at the begin-
HUF 500,000. Family tax allowance is claimed both in
2013 and in 2014. ning of 2013 have been extended:
Companies operating in a free enterprise zone will
be able to claim the social contribution tax allowance
Monthly average net income in 2013 (HUF) also for employees living outside the zone but within a

(maximum of utilizable family tax allowance: range of 20 km, or living in the micro region hosting the
HUF 206,250 × 3 × 16% = HUF 99,000 per month) zone, provided that the employee has been resident in
Gross income 500,000 the said place for at least 6 months prior employment.
PIT (After claiming the allowance) 0 The amount of the allowance is 27% of the employee’s
Contribution (17%) 85,000 gross salary (capped at HUF 27,000) in the first two
Contribution (1.5%) 7,500 years of the employment and 14.5% in the third.
Net income 407,500 The social contribution tax allowance on research-
ers and developers can also be claimed for individuals
with PhDs, and doctoral candidates. The amount of the
Monthly average net income in 2014 (HUF)
allowance is the gross salary, but limited in 14.5% of
(maximum of utilizable family tax allowance: HUF 200,000.
HUF 206,250 × 3 × 16% = HUF 99,000 per month)
Gross income 500,000 Minimum wages in 2014
PIT (after claiming the allowance; 0 From 1 January 2014 the amount of minimum wage will
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remaining allowance is 19,000) be raised from HUF 98,000 to HUF 101,500, meaning an
Contribution (17%; after utilizing the remaining 66,000 increase of 3.57%. The guaranteed wage minimum pay-
amount of allowance) able for jobs requiring at least a high school education
Contribution (1.5%) 7,500 will be set at HUF 118,000 instead of the current amount
Net income 426,500 of HUF 114,100, an increase of 3.5%.

On changes Of taxatiOn 2