Foreign employees living in Hungary based on a work permit are eligible for the same tax benefits as Hungarian citizens. This applies to child benefits too, which might be relevant if the family of an employee is also in Hungary on residency for family unification.
The principle of equal treatment
When it comes to paying taxes, equal treatment means that a foreigner living and working in Hungary cannot be required to pay more taxes than a Hungarian citizen under the same circumstances. This applies to tax benefits as well, including child benefits, provided that at least 75% of the employee’s income is generated in Hungary.
Dependent children in Hungary
You can apply for child benefits in Hungary if both you and your children reside in Hungary legally, for a long term.
For the applicant:
- EEA citizens need a registered address in Hungary
- Non-EEA citizens need a work permit valid for at least 6 months, or an intra-corporate transfer permit for at least 9 months
At the same time, children of the applicant must:
- be minors (under 18)
- be dependent on the applicant
- live in the same household in Hungary as the applicant (so if you live in Hungary and your child lives in your country of origin, you are not eligible)
- attend kindergarten or school in Hungary if they are the right age (at least 3 years old)
Child benefits available while working in Hungary
There are various forms of child benefits available in Hungary. Below we list the most important ones that have the greatest impact on the earnings of an employee. Some of them can be shared between the two parents, especially both of them are working in Hungary. Make sure you consult your accountant for details.
1. Family allowance (“családi pótlék”)
This is an allowance your employee may receive directly from the state every month. It can be requested either through the employe or directly from the government; in either case, your accountant can probably help your employees take care of the application. Moreover, other child benefits are often defined on the basis of eligibility for the family allowance.
The sum of the family allowance depends on the number of eligible children, and whether you are raising your children together with your partner or as a single parent.
|number of children||raised by two parents||raised by a single parent|
|1||HUF 12,200 / child||HUF 13,700 / child|
|2||HUF 13,300 / child||HUF 14,800 / child|
|3+||HUF 16,000 / child||HUF 17,000 / child|
2. Family tax benefit (“családi adókedvezmény”)
This tax benefit is relevant for calculating the net salary of your employee in Hungary. It is based on how many children the employee has who are eligible for the family allowance. As a result, employees who receive the family allowance should keep your accountant up to date about their status so their salaries may be calculated right.
Based on the number of children, the net salary of the parent can increase by HUF 10,000, 20,000, 33,000, or even more. Since this is not an allowance but a tax benefit, it can only be used to reduce taxes. As a result, if both parents work in Hungary, it makes sense if the parent earning more applies for it to maximize the family income.
3. Personal income tax exemption for mothers of four (“NÉTAK”)
This is another tax benefit relevant for salary calculation, since you as the employer will not have to deduct the personal income tax from the gross salary of your employee. This tax benefit is only available to women who have at least 4 dependent children eligible for the family allowance. Moreover, women remain eligible even after their children grow up, providing they were eligible for the family allowance for at least 12 years each. Employees who are eligible should let your accountant know so their salaries may be calculated right.
The sum of this child benefit equals 15% of the gross salary of the employee, since it is an exemption from the personal income tax, which is 15% in Hungary.
Helpers at your service
The Helpers Team provides assistance not only with work permit application, but also several other HR related tasks, including payroll administration and accountancy. Whatever your needs are in Hungary, make sure to let us know, so we can offer you a tailored solution.