The Hungarian Gazette published on 8 July 2024, includes several government decrees, among which significant tax law changes can be found. One such change involves the government’s decision to significantly increase the amount of default penalties, which we have discussed in detail in our previous blog. Additionally, throughout the state of emergency enacted under Government Decree No. 424/2022, the rules for the benefit under Section 11 of Act LII of 2018 on social contribution tax will also be modified.
Changes to the social contribution tax in 2024: Observation period extended by three months
Under the current regulations, a labour market entrants is considered to be, amongst others, a Hungarian citizens who, on the basis of the data available to the Hungarian Tax Authority, had a maximum of 92 days of employment, sole proprietorship or a partnership, entailing an insurance obligation under the Act on Social Security (Act CXXII of 2019) within the 275 days preceding the month of the start of the preferential employment.
According to the government decree published on 8 July 2024, the maximum 92 days of employment must be examined within a 365-day period instead of the previous 275 days. All of this means that companies wishing to claim the social contribution tax benefit for labour market entrants will need to consider an additional 90-day period.
Utilization period: reduced from 3 years to just 1.5 years
According to the currently effective legislation, the social contribution tax benefit for labour market entrants can be claimed during the first three years of employment. The amount of the benefit corresponds to the amount of social contribution tax on the gross wage, but is capped at:
- the amount of social contribution tax on the minimum wage in the first two years of employment, and
- 50% of the amount of the social contribution tax on the minimum wage in the third year of employment.
However, pursuant to the government decree, the upper limits are modified as follows:
- the benefit can be claimed only during the first year of employment up to the amount of the social contribution tax on the minimum wage,
- a benefit of up to 50% of the amount of the social contribution tax on the minimum wage will apply for the subsequent six months.
Accordingly, the previous 2+1 years (36 months) utilization period is now reduced to 1+0.5 years (18 months).
The changes outlined above will be effective from 1 August 2024 and will apply to employment relationships established from 1 August 2024, during the state of emergency.
