A CIKK MAGYAR NYELVŰ VÁLTOZATA

The most recent changes in the Hungarian tax legislation will introduce flat tax rate system from the beginning of next year, with a rate of 16%. However, in addition there will be some other changes in the taxation of contribution in kind, the corporate tax, social contributions.

Personal income tax

The flat tax rate will be a great advantage to the tax return since it can even shrink to only 1 page. This simplified version will be available for taxpayers for the tax return of the 2011 tax year the first time which will be submitted in the beginning of 2012. This option will be available for those who have onlz salaries from one source, and do not earn other type of income. The simplified form will enable the taxpayers only for declaration of their salaries and the deduction of tax credit.

For those taxpayers who have no possibility for the simplified version hence earn not only consolidated taxable income but other type, they will also have some simplification at least in the tax rates. Although there is no possibility to shorten the declaration, instead of the currently applied, two different tax rates only one 16% will be used.

This change is positive in overall since in most cases, it will result in tax rate reductions. For instance, the previously 25% dividend tax and 20% exchange gain tax will be reduced to 16%. In case of dividend on company shares which are listed on the stock exchange, the current 10% rate will increase to 16%. There is only one exception from this rule, the tax on the long-term investment accounts, which in case of a t least three-year holding will remain 10%, and after 5 years will have 0% tax rate.

Corporate tax

From 2013, 10% corporate tax rate will be adopted under Tax Code amendment.

Health service contribution

The health service contribution will increase to HUF 5,100 per month in 2011 from the current HUF 4,950.

Maximum limit for Contribution payment

The current rules set maximum limit only for the pension fund contribution, however from 2011 all the other contribution will have maximum limit for contribution payment, which means that above the preset amount  no further contribution has to be paid.

Benefits in kind

The most visible change in the Contribution in kind system is the name, which will chage to non-cash allowance.

The classification applicable this year will remain in force (details about the current system can be found HERE currently only in Hungarian). However, the rates applicable will change.  

A range of non-reduced tax contributions in kind has a rate of 54+27% so far, which will be decreased to 16 +27% next year. The base will be the gross-gross salary based which will be calculated as the gross salary multiplied by 1.19). This group will include items which value can not be accurately determined, such as the private usage of telephones.

The range of reduced tax contributions in kind are currently taxed at 25%, which next year will also be reduced to 16% over the gross-gross tax base. These earnings however will be free of social contributions. These include items such as holiday vouchers, warm food vouchers. (Detailed list of current legislation and classification can be found HERE currently only in Hungarian) Good news is that the cold meal vouchers will get back to this group under reduced tax rate. The not so good news is that the internet vouchers will not be tax exempted anymore and become part of the reduced tax group with an upper limit of HUF 5,000.

Other benefits, such as passenger transport, benefit for sport activities become part of the consolidated tax base from next year, i.e. employees have to pay tax at 16%  rate on the value of these benefits and this amount will be deducted from the salary.

“Reform card” (“megújulási kártya”)

As of next year a relatively new device will be introduced in the taxation system, the so-called “Reform card” which will give the possibility to the employers to pay particular amount on this card as a remuneration or part of the benefits in kind which will be taxed on a reduced rate. The card holder will be able to use this card for predetermined purposes thus this card will function similar to a bank card. Currently the list of products and services available with this card is not yet determined.

A CIKK MAGYAR NYELVŰ VÁLTOZATA