Hungary’s biggest tax cut is being implemented by the government

Hungary’s biggest tax cut is being implemented by the government
Hungary’s biggest tax cut is being implemented by the government

On December 14, 2021, the National Assembly passed the autumn tax law package, voting for an amendment to the law on the largest tax cut of all time, which will take effect on January 1, 2022. Millions of individuals and at least seven hundred thousand businesses will be affected by this year’s tax cuts, which will leave the government with HUF 1,500 billion in the economy and the population. In the compilation below, we have collected the most significant tax changes.

The Minister of Finance emphasized that the relaunch of the Hungarian economy is one of the fastest in the European Union. In order to maintain this advantage and strengthen Hungarian families, young people and businesses, the government is implementing Hungary’s largest tax cut this year.

IllustrationPhoto: Origo

The major changes and tax changes that will take effect in 2022 are as follows:

1. Personal income tax, public charges, family support: The most far-reaching changes are aimed at reducing the public burden of work and, to some extent, compensate for the reduction in the burden on employers, given the planned increase in the minimum wage and guaranteed minimum wage this year. These provisions also apply to employers and employees.

The minimum wage in 2022 will increase to HUF 200,000 gross, while the guaranteed minimum wage will increase to HUF 260,000.

  • The rate of social contribution tax will be reduced from 15.5 percent to 13 percent.
  • The rate of ekho to be paid by the payer will decrease from 15.5 per cent to 13 per cent.
  • An important change is the abolition of the 1.5 per cent vocational training contribution. The latter shall last be established, declared and paid by 12 January 2022.
  • From January, the earnings of young people under the age of 25 will increase by tens of thousands of forints a month, as they no longer have to pay personal income tax at all, which in the case of an average salary can reach an additional 40,000 forints a month, which means more money for young people. The tax exemption also applies to student work and traineeships.
  • At the beginning of 2022, parents raising a child can get back the amount of their personal income tax (PIT) paid in 2021 up to the level of the average income, up to HUF 809 thousand per parent. All parents of children entitled to a family allowance in 2021 will be entitled to a tax refund. In addition to employees, they are also available to sole proprietors, primary agricultural producers, landlords, cathos and echo taxpayers. Until 15 February 2022, NAV will automatically pay the refund to the parent from whose income the employer deducts the PIT advance or the echo during the year. Those whose eligibility, account number or address is not known to NAV could make a statement by the end of the year. The RETURN form could be submitted until December 31, 2021. NAV will not issue the tax refund as an advance until 15 February 2022 if the individual has not declared by the end of the year and therefore NAV does not know the details required for the allocation. In this case, the person entitled can claim the tax refund in the tax return of the 21SZJA until 20 May 2022.

2. NICE card: The interoperability between the SZÉP card sub-pockets has been extended until 30 September 2022, ie the fringe benefit transferred to certain sub-accounts of the Széchenyi Pihenő Card can be used to settle services specified in any other sub-account, such as spa and swimming pool or the accommodation fee can be paid. The most important change, as announced by Prime Minister Viktor Orbán before Christmas, is that food can be purchased with a SZÉP card from February 2022.

3. Start Account: From 1 January 2022, after making payments to the Youth Start account, the maximum amount of state support will double to HUF 12,000 per year, and the amount of state support for children raised in Hungary entitled to regular child protection benefits will increase to HUF 24,000.

4. Changes in legislation related to teleworking: The PIT rules related to telework will be enacted into law: The administration of telework will be reduced, and with the introduction of a flat fee, the employer will not have to account for 10 percent of the current minimum wage item by bill. Thus, from January next year, teleworkers can receive up to HUF 20,000 per month for expenses related to the performance of their duties (overhead, internet, insurance, etc.).

IllustrationSource: George Milton / Pexels

5. Value added tax: Until 30 June 2022, the application of reverse sales tax on greenhouse gases and steel products will be extended, as well as on cereals and oilseeds, which the government intends to use to help the agricultural sector.

6. Local business tax: The local business tax credit for small and medium-sized enterprises will be extended. Next year, a lower tax rate of up to 1% of the local business tax will automatically apply to those affected: SMEs whose turnover or balance sheet total does not exceed HUF 4 billion.

7. Corporate tax, small business tax (kiva), itemized tax on small tax enterprises (kata):

  • Flat-rate taxation will change significantly from 2022 and will be a more favorable form of taxation for many sole proprietors, even against kata.
  • The small business tax rate will be reduced from 11 to 10 percent.
  • The basis of the benefits due to the full-time taxpayer changes from HUF 102 thousand to HUF 108 thousand, and from the payment of the higher itemized tax from HUF 170 thousand to HUF 179 thousand.
  • The sectoral wage subsidy rules for operators in certain sectors affected by the coronavirus epidemic are applicable until 31 December 2022.
  • From 2022, a non-profit business company, a social cooperative, a public pensioner cooperative and a school cooperative may not be a group corporate taxpayer.

8. Under the new rules, cryptocurrency transactions are taxed: From 1 January 2022, the income of individuals from cryptocurrency transactions is considered to be a separate taxable income. This means that a 15 percent PIT must be paid on income, certified expenses for the current year are eligible, and a tax equalization may be applied. The tax must be declared and paid annually in the PIT return.

The content of this article does not constitute tax advice.

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