Hungarian economy protection package, April 2020 - wage subsidies, retail tax

1. ‘Net’ wage subsidy scheme for employment protection *

For employers facing difficulties due to the coronavirus epidemic, the state has introduced wage subsidies in order to prevent redundancies. Under this new wage subsidy scheme, the lost income of part-time workers is taken partly over by the state under certain conditions.

What are the basic criteria of wage subsidy?

The wage subsidy is available under the following conditions:

• The amount of the subsidy is linked to the net salary (absentee payment) effective on the date of the emergency situation’s declaration (11^th March 2020).
• The wage subsidy is 70 percent of the proportionate wage for lost working time.
• The subsidy can be claimed if the rate of reduction in working time equals to 30, 40 or 50 percent.
• Reduced working hours must not be reduced to less than four hours a day on average.
• Both the employee and the employer must undertake that the employee takes part in training during a so-called individual development time (working time corresponding to 30 percent of the lost working time),the wage costs of which should be borne by the employer.

What is the monthly amount of the wage subsidy?

• The maximum monthly net amount of the wage subsidy may not exceed the proportional part of twice the net minimum wage (HUF 214,130),ie. HUF 75,000.
• The wage subsidy is tax-free and free of public charges.
• The duration of the wage subsidy is three months. The wage subsidy is paid to the employee on monthly basis subsequently. (The allowance cannot be paid for unpaid leave.)

How to apply for a wage subsidy?

• The employee can apply for the wage subsidy together with the employer through the Company Gate from 16 April to the competent government office.
• The employer should submit the wage subsidy application electronically on the form of the Public Employment Service (Nemzeti Foglalkoztatási Szolgálat) during the period of the emergency or within one month after the end of the emergency.
• The application for subsidy must be accompanied by an agreement between the company and its employee on reduced working hours and individual development time beyond it, at least for the duration of the subsidy.
• The government office should examine the existence of the criteria within eight working days and decide whether to grant the wage subsidy or reject the application. Important precondition that the wage subsidy cannot be granted in case of employment derogating from the employment contract (Section 53 of the Labor Code),as well as in case of temporary agency work (Point 1 of Section 214 of the Labor Code).

What conditions must the employer meet?

The employer shall undertake to the following commitments:

• reduced working hours and individual development time beyond reduced working hours are also agreed with the employee for at least the duration of the subsidy;
• employ the employee on a part-time basis to prevent a reduction in the number of employees;
• demonstrates that the reason behind the employment in reduced working time is directly and closely linked to the emergency situation, presents the measures taken and expected so far to overcome the economic difficulties,
• the company has been operating for at least six months;
• in connection with its employees, the company may not receive any other job-creating, job maintaining or R&D employment incentives;
• the employer must undertake the maintenance of headcount for a period of +1 month, as well that no extraordinary working hours will be ordered during this period and meets the mandatory reporting obligation to the government office in relating of the changes in the conditions of the subsidy;
• allocated cumulative working hours have expired or been closed between the employer and employees involved.

What conditions must the employee meet?

The employee shall undertake to the following commitments:

• the employee has been employed by the employer at least since the date of the declaration of the emergency situation and does not spend his notice period;
• may not receive other part-time employment related incentive;
• perform work in reduced working time and available to the employer during individual development time;
• is not subject to repayment of a subsidy ordered by a final resolution of a public employment authority.

The details of the wage subsidy for employees working in the field of R&D sector** are laid down in a separate government decree, in which case the monthly maximum amount of the subsidy may be HUF 318,920 and may be granted for a maximum period of 3 months.

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2. Further tax and administrative reliefs to be expected

• The social security contribution will be reduced by 2 percentage as of 1 July 2020.
• Exemption from risk guarantee obligation is ensured in the EKÁER system.
• The deadline for allocating the VAT refund is reduced in case of normal taxpayer from 75 to 30 days and from 30 to 20 days for taxpayers with reliable status.
• Simplifying of procedures and forms relating to payment facilitations is to be expected (such as instalment payment, deferral of payment, tax reduction). These facilitations are not granted automatically, but may become easier to access.
• Taxpayer rating will not be disadvantaged by omissions during the emergency period.
• The tourist tax liabilities will be suspended until 31 December 2020.
• Until 30 June 2020, the SZÉP Card's social contribution tax will be reduced to 4% as well the yearly limits will be increased: in the public sector from HUF 200,000 to HUF 400,000 and from HUF 450,000 to HUF 800,000 in the private sector.
• The submission deadline of the annual report and related tax returns will be likely postponed until 30 September 2020.

3. Changes affecting social security relationship, pension supplement, child care and family allowance

• It will be possible to apply for sick leave electronically, documents related to sick leave might be also submitted in the form of an electronic copy, which has not been possible so far.
• Social security relationship will be upheld for those who lose their job during the emergency period.
• Employees sent on unpaid leave stay covered by social security.
• Child care of parents raising a chronically ill or disabled child will be not terminated until the last day of the 2^nd month after the end of the emergency. If, in the meantime, entitlement to the family allowance ceases, it will also expire at the end of the month in which the emergency ceases, and not until the end of the school year.
• The right to buy a car for large families will expire on the 60^th day after the end of the emergency
• Extra pension is expected from February 2021.

4. Support for trainings and retraining

The government plans to launch trainings in response to business downtime, which will further train or retrain employees who are currently not needed in companies;

• immediate online trainings, such as IT training, for redundant workforce
• 95% of the tuition fees will be financed from the state budget
• 0% adult education student loans will be introduced.

One-off, free-use 0% student loan scheme has been created for university students in the amount of HUF 500,000, to be applied at the Student Loan Center (Diákhitel Központ). 
No need for a language exam in order to get the degree, thus 75 thousand students will be exempted from this obligation.

5. Tourism, health industry

HUF 600 billion will be allocated for the protection of tourism, the renovation of restaurants and hotels, as well for the establishment of a higher standard of service.

A Health Innovation Agency will be set up in order to provide support and coordinate universities and private research institutes by health and support research.

6. New preferential financing options: loans, equity funds

The corporate sector is supported by loan guarantees and capital programs (HUF 2,000 billion soft loan and more than HUF 500 billion state guarantee available)

• to provide liquidity for employers from micro to large companies,
• capital programs serve to protect domestic property, reorganize the strategic companies in difficulty, as well as to enable corporate and real estate acquisitions in Hungary and abroad.

7. Credit institution and retail tax***

The government plans to launch special taxes on retail and credit institutions in order to mitigate the economic impact of coronavirus epidemic through financing the relating economic package.

The retail tax should be calculated based on brackets determined in relation to their sales revenues as follows:

• 0.1% in proportion to the tax base of over HUF 500 million
• 0.4% in proportion to the tax base of over HUF 30 billion
• 2.5% above the tax base of over HUF 100 billion.

The special tax base of credit institutions (established in accordance with Act LIX of 2006 on the special tax and annuity improving the balance of public finances) is the part of the tax base in the tax year 2020 exceeding HUF 50 billion. The rate of which is 0.19 percent, which must be paid in 3 instalments by the affected credit institution by the 10^th day of relating months (June/September/December).

Details of the March economic package related to the coronavirus epidemic (small business tax and social security contribution reliefs) can be found here.