Changes to taxation in Hungary in 2021 and 2022

Payroll tax decrease from July 2022

If you have employees, you will be glad to hear that starting from 1 July 2022 the employer’s tax on salaries will be reduced. Currently, employers pay 17% in taxes on top of the gross salary of each employee. (In fact, it has two elements, the social contribution tax at 15.5% and the vocational training levy at 1.5%.) From the next summer on, employers have to pay only the social contribution, and that only at 15%, which is a 2 percentage point decrease in total.

Tax relief for more new entrants to the labor market

The employment of people who are freshly entering the labor market has been for some time promoted by favorable taxation. Now, as of 10 June 2021, the definition of “new entrant to the labor market” has been extended to include those who were employed for at most 92 days in the 183 days preceding employment, which is supposed to be an incentive for employers to employ more people who have been struggling to find a steady job.

• In the first 2 years of the employment, social contribution tax will not apply to the minimum wage. If your employee earns minimum wage, you do not have to pay the social contribution tax after them. If they earn more, you pay the social contribution tax only for the part above minimum wage.
• In the third year of the employment, you pay only 50% of the social contribution tax after your employees who earn minimum wage.

New option for reducing the tax base of your company

Starting from 2022, you will be able to reduce the tax base of your Hungarian company by 300% of what you donate to foundations managing universities in Hungary. The only limit to this is the amount you are supposed to pay in taxes.

E.g. when you have calculated the corporate tax your company has to pay, you may decide to donate one third of the sum, and pay nothing to the Tax Authority.

More scrutiny on non-EU purchases

Until July 2021, non-EU purchases under EUR 22 were exempt from VAT. Since then, customers must pay VAT after all non-EU purchases, and the IOSS scheme has been set up to facilitate the operation of importers, especially if they sell goods in various EU member states. In line with these changes to taxation, starting from 2022 banks will be required to provide data to the Tax Authority about cross-border money transfers if they have completed more than 25 such transaction for a client in a given quarter.

Flat-rate tax available to more freelancers

Starting from 2022, paying a flat-rate tax will be available to more freelancers. They can choose this tax scheme if their yearly revenue remains under 10 times the yearly minimum wage (or 50 times, if they have a retail activity).

Eligible freelancers will be allowed to deduct their costs from their tax rate – the percentage of maximum reduction is as follows. (For details, see paragraph 53 here.)

• General: 40%
• Certain services and some retail activity during the year: 80%
• Primary agricultural production: 90%
• Retail activities throughout the year: 87%
• Retail activities throughout the year for certain types of merchandise (e.g. groceries, drugs, medical products, manufactured goods): 93%

E.g. if you are a freelancer without any retail activities, you can reduce your tax base by 40% at most. If you have fewer costs, you can reduce it less; if you have more costs, you can still reduce your tax base by 40% at most.

Taxes on cryptocurrencies

Cryptocurrencies are taxed when they are exchanged for traditional currencies. The tax is currently 30.5%, which is made up of the social contribution tax at 15.5% and the personal income tax at 15%. Starting from 2022, only the 15% personal income tax will apply. Moreover, costs and losses can be deducted from your tax base. Learn more about the changes here.

Does this seem a lot to take in?

With the latest changes to taxation, business owners may save a lot on various aspects of their operation. Helpers Hungary has been providing business assistance to foreign owned companies, and we would be happy to help you too! Our experienced accountants are at your service, and we also provide business planning and advisory. Just fill in the form below and let us know what you need!