As of 1 July 2025, a default penalty of up to HUF 100,000 may be imposed for each unreported employee.
The legislative amendment aims to strengthen the Hungarian Tax Authority’s (NAV) enforcement tools and reduce undeclared employment.
The new procedure may affect all employers, particularly those who hire seasonal workers or fail to give due attention to fulfilling their reporting obligations.
New sanction for taxpayers: default penalty to clarify insured status, effective from 1 July
Under the legislative amendment effective from 1 July 2025, the Hungarian Tax Authority (NAV) may independently initiate proceedings to determine the existence of an employment relationship.
The purpose of the new regulation is to enable the Hungarian Tax Authority (NAV) to more effectively monitor and sanction cases where employment data is not properly reported or declared.
Section 225/A is added to Art with the following key provisions:
1. Warning and setting a deadline
If a taxpayer fails to fulfil his reporting obligations regarding employees or partners in a business entity, the tax authority will warn them of the legal consequences of such omission. Additionally, it grants a 15-day deadline to fulfill the reporting or declaration obligation.
2. Imposing a non-compliance penalty of HUF 100,000/employee
If the taxpayer fails to meet his obligations after the deadline, the tax authority will impose a default penalty of HUF 100,000 per employee.
Consequently, if the omission affects several employees or business partners, the penalty will be calculated as the product of the number of individuals affected and the penalty amount.
3. Exemption in individual cases
The tax authority will not impose a penalty or issue a warning in cases where a taxpayer is under liquidation, voluntary dissolution or striking-off proceedings and can no longer legally fulfil its reporting obligations.
Disadvantages of unregistered employment
Unregistered work can have adverse legal implications for employees, including:
- In the absence of a written employment contract, there is a loss of rights: no notice period, no severance pay, no vacation or sick leave.
- lack of access to a labour tribunal,
- shorter period of service,
- insecure access to a health care plan,
- lack of eligibility for tax credits,
- work safety risks.
Illegal employment also causes economic distortions, as businesses that comply with the rules are at a competitive disadvantage compared to those that evade taxes and contributions.
The introduction of the above sanctions is intended, among others, to regulate this situation in a more meaningful way.
More stringent administrative burden and frequent tax authority audits make accurate and regular processes a top priority.
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Why is this important for employers?
In recent years, the Hungarian Tax Authority (NAV) has issued tens of thousands of warnings; however, from 2025 onwards, it will no longer be limited to warnings and may also impose penalties.
The penalty is applied on an employee level, meaning it may be imposed separately for each unreported worker.
This may pose particular challenges for:
- companies with high employee turnover,
- employers engaged in seasonal work,
- those hiring casual or temporary workers,
- organisations with non-compliant or outdated administrative processes.
How can companies avoid default penalties?
It is essential that companies, when planning to outsource their activities, choose a reliable partner—one that complies with all legal requirements and has strong references. As employers, they may face significant financial and reputational risks if they rely on an unqualified or non-compliant external service provider.
RSM’s Payroll division offers comprehensive solutions to help employers fully comply with these new requirements. Our services go beyond full payroll process management and include:
- Ongoing compliance through internal audit:
Our experts continuously monitor legislative changes and ensure that employers' reporting obligations are fulfilled accurately and on time. - Data verification systems:
We use advanced technological tools to ensure data accuracy and detect errors or omissions at an early stage. - Expert support during inspections:
When needed, RSM professionals represent our clients during tax authority or labour inspections, helping to minimise potential risks. - Preventive risk advisory:
Through proactive consulting and audit services, we help clients prevent default penalties before they arise.
RSM Payroll is not just a service provider, but a trusted partner in the day-to-day operations of companies. Our solutions help our customers avoid administrative tasks overburdening their internal resources, while ensuring compliance and reducing risks.
