Economic relief measures in Hungary during the COVID-19 pandemic

Last updated on 11 May

The government of Hungary introduced new measures to relieve the economy of Hungary, protect work-places, and make sure it is easier for everyone to get through these difficult times and pick up work once the situation clears up. The new decree concerns the sectors most affected, a moratorium for debtors, and labor law.

The industry most affected: hospitality

Hospitality is an umbrella term in the service industry that includes lodging, tourism, entertainment, sports, event planning, film industry, and gambling. The measures intended to promote social distancing as the most important factor in hindering the spread of the virus, and indoor social gatherings of 100+ are forbidden, just like theater performances and cinema screenings. Restaurants and cafés close at 3 pm. These are all severe hits for everyone working in these sectors, but the measures are necessary to protect the health of the general population.

To relieve the burdens this poses on the industry, which concerns about than 500,000 people in Hungary, the following measures have been introduced as of 18 March, 2020:

• The requirement for paying a contribution for the development of tourism is waived between 1 March and 30 June.
• Employer’s payroll tax is waived between 1 March and 30 June.
• Employees’ payroll contributions are waived, only the personal income tax (15%) and the healthcare contribution (max HUF 7,710, ca. EUR 22 / month) are to be paid between 1 March and 30 June.
• Rental agreements for non-residential real estate (e.g. shops, restaurants, etc.) cannot be cancelled until 30 June (or until the end of the current crisis).
• The rental fees for such real estate cannot be raised.

While transportation is also a sector of the hospitality industry, here only self-employed small taxpayers (in the “KATA” construction) are mentioned, meaning mostly taxi drivers, who do not have to pay their contributions for March through June 2020.

*Small businesses not operating in the sectors listed here may also apply for a moratorium for paying some taxes and contributions or for payment in instalments with a valid reason. Consult your accountant about your options.

Financial measures and moratorium for debtors

Since credit and staying creditable is an important element of the economy, the following measures have been introduced to help debtors not lose their collaterals due to late payment:

• The payment of all fees, interests and capitals related to credit agreements, loans, and finance lease contracts receives a reprieve until 31 December of 2020. Debtors are allowed to pay if they want to, but they cannot be required to do so.
• Related deadlines are also extended to 31 December, 2020.

It is important to note that only agreements concluded before 18 March midnight are concerned: new contracts will have to be concluded as agreed between the banks and the debtors.

Another important financial measure is that the interest on unsecured loans (which means mostly personal loans) cannot be higher than 5% above the base rate of the central bank, currently 0.9%. This in itself might bring an end to easy small loans, where the annual percentage rate of charge (APRC) has until recently been above 13%, and a 5.9% limit may not be viable for banks.

Changes to labor law

The changes to labor law intend to facilitate accommodation to the current situation for both the employer and the employee. As of 18 March,

• Organizing working time becomes more flexible, as until now working time had to be agreed upon at least 4 days (96 hours) before start; now the schedule can be changed within the 96 hours preceding the start of work.
• The employer has the right to order the employee to work remotely or from home.
• The employer may check on the health of the employee.
• The employer and the employee are allowed to conclude an agreement that is not in accordance with the labor law.

These changes remain in force until 30 days after the end of the current emergency.

How to proceed?

If you are operating a business in Hungary, you should consult your accountant to check if any of these measures are relevant to you. See if your business operates in any of the sectors listed above, or if the effect of the safety measures recently introduced may be alleviated by the industrial reliefs or financial moratoria. Your payroll specialist will be able to tell you if paying salaries and payroll taxes is affected.

Click here to read about further economic relief measures in Hungary announced on 23 March.

Or click here for a full list (with TEÁOR codes) of sectors concerned.

In April, a 3-month state-aid was offered for employees working in reduced working hours due to reduced business during the state of emergency.

In May, some payroll taxes were reduced and restructured to improve job security.

In the meantime, travel ban to Hungary was partially lifted, and now citizens of 6 countries allowed to enter Hungary.

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