Social contribution tax allowance system
In general, we can say that in 2019:
- the rate of social contribution tax allowances increased as it is now tied to the minimum wage instead of the previous rate of HUF 100,000,
- in the case of part-time employment, no proportioning is applied and
- the use of certain allowances (e.g. that of new-entrants to the labour market) was also simplified in terms of administration.
The system of social contribution tax allowances was transformed substantially from 1 January 2019. The interim reduction of the social contribution tax rate obviously only concerns the contributions applicable under the new Social Contribution Tax Act from 1 January 2019. As presented in the table below, the allowances available under the new Act on Social Contribution Tax promote, above all, entry to the labour market, however, based on temporary provisions currently existing allowances are applicable from 2019 which were applied by the taxpayer on 31 December 2018. If the certificate necessary for the application of the allowance is not available for 2018, the allowance may be applied by way of self-revision.
| Tax allowances that may continue to be applied, based on transitional rules, according to the "old Social Contribution Tax Act" after 1 January 2019 (on the basis of eligibility on 31 December 2018) | |
|---|---|
| 2-year allowance applicable with regard to a career starter employee under the age of 25 years in employment with at least 180 days of insurance obligation | The rules in force on 31 December 2018 are applicable in the period of eligibility if application of the tax allowance was already in progress on 31 December 2018. |
| 2+1 year allowance applicable with regard to the employment of long-term job seekers | The rules in force on 31 December 2018 are applicable in the period of eligibility if application of the tax allowance was already in progress on 31 December 2018. |
| 2+1 and 3+2 year allowance applicable with regard to employees receiving maternity benefit | The rules in force on 31 December 2018 are applicable in the period of eligibility if application of the tax allowance was already in progress on 31 December 2018. |
| tax allowance of enterprises operating in free enterprise zones | The rules in force on 31 December 2018 are applicable in the period of eligibility if application of the tax allowance was already in progress on 31 December 2018. |
| R&D allowance under Section 462/H of the old Social Contribution Tax Act | May be applied according to the rules in force on 31 December 2018 until the end of the application period provided that the amount of the tax allowance may not exceed the amount of tax liability remaining after the R&D allowance as defined in Section 16 of the new Social Contribution Tax Act in respect of employees working under employment and recognized under the direct costs of the research and development activity. |
| Allowances available from 1 January 2019 under the new Social Contribution Tax Act | |
| public employees' allowance | Unchanged content relative to former regulation; Rate: 50% of the tax rate (8.75%) on 130% of the public employment wage but maximum the guaranteed public employment wage; no other allowances may be applied at the same time |
| allowance of workers employed in jobs not requiring qualification and in agricultural jobs | Group 9, sub-group 61 of group 6 and items 7/7333 and 8/8421 of the professions listed in the classification system FEOR-08; Rate: 50% of the tax rate (8.75%) on the employee's gross wage amount but maximum the minimum wage (HUF 161,000) |
| allowance of new entrants to the labour market | 92 days of insurance relationship in the last 275 days (infant care fee, child care fee, child care support, public employment not included); re-entry to the labour market is eligible also; a certificate is required, HU TA will certify based on announcement or a request submitted in the return form 08; Rate: amount calculated applying the tax rate (17.5%) on the employee's gross wage amount but maximum the minimum wage (HUF 161,000) in the first two years of employment and 50% (8.75%) in the third year. |
| allowance of women raising 3 or more children entering the labour market | Rate: amount calculated applying the tax rate (17.5%) on the employee's gross wage amount but maximum the minimum wage (HUF 161,000) in the first three years of employment and 50% (8.75%) in the fourth and fifth year; Condition: a certificate from HU TA and family support authority; eligibility for the allowance is not affected by the mother's eligibility for family allowance ending during the period of applying this allowance. |
| allowance of employees with altered working capacity | Available for employees, private entrepreneurs and partnership with regard to their members; a rehabilitation authority certificate is required stating a max. 60% health condition (or the employee must receive disability rehabilitation benefit); Rate: amount calculated applying the tax rate (17.5%) on twice the tax base but maximum the minimum wage (HUF 161,000); the allowance is not applicable from the month following the termination of eligibility |
| allowance on the employment of researchers | Available under unchanged conditions; Rate: amount calculated applying the tax rate (17.5%) on the gross wage of employees with an academic degree but maximum HUF 500,000; amount calculated applying 50% of the tax rate (8.75%) on the gross wage of students or doctor candidates but maximum HUF 200,000 |
| R&D allowance | Rate: amount calculated applying 50% of the >tax rate (8.75%) on the direct wage cost of the R&D activity; corporate tax base allowance may not be applied at the same time |
| allowance of protected-age workers | Rate: amount calculated applying the tax rate (17.5%) on 4 times the employee's wage amount but maximum the minimum wage (HUF 161,000); a certificate is required |
From 31 December 2018, the following allowances were eliminated - meaning that they are not applicable this year even under transitional rules:
- allowance relating to employees under the age of 25 and above the age of 55;
- Career Bridge allowance;
- allowance relating to the employment of holders of a rehabilitation card,
- allowance of part-time employees (relating to the employment of e.g. career starting youth, employees above the age of 50, job-seekers after a period of taking care of children or family members).
We note that from 2019, no vocational training contribution is payable in the cases when no social contribution tax payment obligation arises. No vocational training contribution is payable, for example, in respect of new entrants to the labour market or women raising 3 or more children entering the labour market in the first two or three years of employment.
To all allowances, the theoretical restrictions will apply, which provide that the payer will only be able to apply one type of tax allowance on one natural person and that in the case of a change in the employee, the replacing employee may continue to apply the tax allowance for the remaining period.