Modified wage subsidies and tax reliefs in Hungary

The conditions for wage subsidies have become more favourable

The terms of wage subsidy for job prevention have been amended on several points by the latest regulation*. The amount of wage subsidy cap has changed, the conditions have been modified and supplemented as follows.

Prerequisites for wage subsidy:

• Instead of the previous 30/40/50 percent reduction in working hours, the subsidy will be applicable in a wider range, even in case of working hours reduced by 15-75 percent.
• Wage subsidy is available even in case of 2 hours of employment per day, instead of the previously defined minimum threshold of 4-hour working day.

• The subsidy is based on the net salary in force on the application submission day instead of the previously defined absence fee (the latter includes, in addition to the net salary, wage supplements and performance wage).
• In contrast with the earlier rules, it is not always necessary to agree on individual development time. This will only be needed if the reduced working time exceeds half of the working time under the employment contract prior to the change. If the reduced working time is less than half of the working time prior to the change, development agreement and related trainings are optional. If there is such, trainings shall be organised within two years of receiving the subsidy.
• Wage subsidy can be applied for in case of both working remotely and working from home.
• The restrictive clause on working time frame has been removed by the amendment, so working time and wage subsidies can also be applied in parallel.
• Temporary employment agencies are also covered by the new wage subsidy scheme, however, it is still not possible to employ the employee at a workplace / a job / an employer other than defined in the employment contract.

What will be the amount of wage subsidy?

• The amount of subsidy has not changed, it is 70% of the proportionate net wage for lost working time. The maximum amount of monthly net wage which can be taken into account, may not exceed twice the net minimum wage (HUF 214,130). However, the wage subsidy cap has increased to nearly HUF 112,400 in case of 75 percent lost working time and to HUF 22,500 in case of 15 percent lost working time.
• The amount of wages and subsidies paid during the eligibility period does not have to reach the amount of net wage prior to the change only if the reduction in working hours is at least 50%. I.e. in the case of 2-hour instead of 8-hour employment per day, the employee's wage may be lower than it was originally, nonetheless if the employee continues to be employed 6 hours instead of 8 hours a day, the employee is entitled to the full amount of the previous net wage.
• The duration of the wage subsidy is three months. The wage subsidy is paid to the employee on a monthly basis subsequently. (The allowance cannot be granted for unpaid leave.)
• The wage subsidy is tax-free and free of public charges.

What conditions must be met by the employer and the employee?

The wage subsidy application no longer has to present:

• the circumstances justifying employment in reduced working hours,
• in addition, that the company has already exhausted the possibilities for rescheduling working time.
  

However, the wage subsidy application shall prove:

• that the economic reasons for employment in reduced working hours are  directly and closely linked to the emergency situation,
• and credibly demonstrates that the retention of employees is in the national economic interest associated with its continuing economic activity.
• Employers' statistical headcount maintenance obligation applies to employees participating in the wage subsidy scheme, not to all employees in the workforce.
• There is no need to amend the employment contract for the subsidy as this automatically takes place by the decision of the Government Office. Unless the employment contract was amended beforehand.

The exclusion criteria have clarified the subsidy for job creation and preservation, this means subsidies received from EU funds.

• The employee must be employed by the employer at least from the date of the declaration of the emergency and cannot serve his notice period.

The amending decree published on wage subsidy has been in force as of 16 April, but the newly introduced elements shall be effective as of 29 April. The deadline for the assessment of wage subsidies remains 8 working days, however this period shall start again in case of ongoing proceedings. You can read our previous blog about economy protection package here.

Deadlines and facilitations - reports, taxes **

• The regulation extends the deadline of tax return related obligations (reporting, submission, payment) to 30 September 2020 for corporate income tax (TAO),small enterprise tax (KIVA),Robin-Hood tax (income tax on energy providers) and  local business tax (HIPA) due by 30 September 2020.
• The deadline for the innovation contribution will also be extended to 30 September, 2020.
• If the return is delayed, the previously assessed installment amount to be paid as contribution and tax pre-payment due.
• Tax reduction application may be submitted in respect of the above taxes prior to the due date, if it is justified and supported by the financial data of the company.
• The regulation also enables to postpone the preparation and publication of the annual reports until 30 September, 2020.

Need help?
Contact our tax advisors!

SZÉP card changes, social contrubution tax rate reduction **

The contribution burden of SZÉP card, which can be granted among fringe benefits, is temporarily changing, i.e. social contrubition tax will be removed in case of such a benefit between 22 April to 30 June, so only 15 percent of personal income tax rate to be paid for the time being.The total annual frame amount will change to HUF 800,000 for companies in private sectors while in public sector it will rise to HUF 400,000.

The decree also announces the rate of social contribution tax effective as of 1 July 2020, which will be reduced to 15.5 percent from the second half of the year.

Eligibility for health services **

Workers on unpaid leave as a result of emergency are entitled to health services during the period of emergency. From 1 May, employers will determine, declare and pay health service contributions for the respective employees.

Taxpayer classifications, tax reliefs **

The classification of reliable taxpayers cannot be ceased due to the breach of tax liabilities in the course of the emergency +30 days.

The tax authority may grant the taxpayer a one-off, surcharge-free, six-month payment deferral or a 12-month installment payment possibility up to a maximum tax amount of HUF 5 million, upon request. For this purpose the applicant must prove that his payment difficulty is related to the emergency.

In order to reduce the tax debt, a one-off reduction of up to 20 per cent, not exceeding HUF 5 million, may be requested for one tax type, if the inability of business activity can be expected.

EKAER and tourist tax change**

The regulation also provides relief in the area of EKAER, taxpayers do not have to ensure risk guarantees temporarily during the emergency and within one month of its cessation.

The tourist tax will be suspended throughout the year - neither collection nor payment is needed, but tax return must be submitted. Due to the loss of tax revenue, subsidies can be granted to municipalities based on these returns.