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Hungarian Tax package - CIT, PIT, fringe benefits

The Hungarian government introduced its summer tax package on 19th June. The most important proposed changes for 2019 in the field of taxation of individuals and corporations detailed below.

Corporate Income Tax

Important and very favourable changes pertain to the rules of notified participations. From next year, notification of any additional share may be submitted even if the taxpayer has previously not notified the former acquisitions of shares in the same entity to the tax authority. Further clarifying change is that an investment certificate issued by an indefinite-term investment fund may not qualify as notified share.

Tax allowances pertaining to energy efficiency investments expand and will include restoration works too.

The amount of development reserve (a tax base decreasing item) will increase from HUF 500 million to HUF 10 billion.

The tax base allowance pertaining to the acquisition of shares in a start-up company will change in a way that the limit of HUF 20 million will apply per investment.

R+D allowances may be divided between the customer and the service provider on the basis of a joined written declaration.

The tax base may be decreased by the costs of the kindergarten operated in the workplace. In order to make use of this provision at least 80% of the kindergarten pupils must be the children of the employees.

Local Business Tax

The local government is entitled to pass law and grant tax exemption or tax allowances in order to improve investments in its territory and also entitled to make this allowances available to taxpayers in later years if they have not enough tax obligation to make use of the tax allowances in 100%.

Tax allowance pertaining to the increase in employment would cease to exist. However, should the taxpayer have made use of the tax base exemption in the former years and have decreased the number of employees by more than 5% later, it will be obliged to increase back its tax base. Taxpayers that are obliged to top-up their CIT advance, will be obliged to top-up their LBT advance as well.

Personal Income Tax

The newly introduced principle in the remuneration of employees is ‘wage for work’. Therefore the number of tax favoured non-wage benefits proposed to be reduced, as well as certain popular tax-exempt benefits.

Fringe benefits

According to the proposed legislation cash payment as part of the cafeteria system will be terminated. However, the three sub-accounts, i.e. accommodation, food and beverages and recreation of Széchenyi Holiday Card will remain in effect.  The taxable base of Széchenyi Holiday Card benefits will decrease as the income would not be multiplied by a factor of 1.18.

Certain defined benefits

Taxable insurance premium paid by the payer on the basis of a personal insurance policy to the benefit of a private individual will no longer classify as certain defined benefit.  Gifts of negligible value may be handed out not 3 times but only 1 time per year. The employer may not provide as certain specific benefit income in the form of goods and/or services free of charge or at a reduced cost to all employees or to those governed by internal regulations. Holiday allowances and pre-school benefits will also cease to exist as certain defined benefits. These benefits will be taxed similarly to wages from 2019.

Tax-exempt benefits

The following allowances will cease to exist: nursing fee, housing allowances, benefit with regard to employees’ mobility, ticket or season ticket to sports events, benefits related to repayment of student loans.

Tax rate

As of 2019, the remaining fringe benefits and certain defined benefits and also other income will remain to be taxed with 15% personal income tax but 19,5% social contribution tax instead of healthcare contribution.


Private entrepreneurs will also be eligible for the draft tax return prepared by the tax authority. The amount of family allowance will increase to HUF 133,330 per child in case of 2 children families.

Social Contribution Tax

The government wants to put more emphasis on the widespread employment of people therefore certain allowances will be introduced with regard to persons employed in agriculturural jobs and in jobs not requiring any qualifications, persons getting into the labour market including women raising 3 or more children or employees under age of 25, employees with disabilities, employees employed in public services. 

The limit of impairment in order to be eligible for the allowance for entrepreneurs with impaired working abilities will be increased to 60% of impairment.

Social Security Charges

Some changes are introduced in order to stimulate employment in the country. Main changes are:

  • Retired persons employed are exempt from the social security charges and only taxed with 15% personal income tax.
  • No labour market contribution is to be paid by the self-employed person who is enrolled in education in an EGT member state or Switzerland.
  • Pension contribution paid under an agreement decreases from 34% to 24%.
  • The monthly amount of health service contribution increases to HUF 7,500 (HUF 250 per day).

Several technical and clarifying modifications will also come to effect from 2019.

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