When planning for salaries in Hungary, you should keep in mind the various tax benefits available to employees. Since they increase net salaries without extra costs to the employer, they also function as incentives for employing certain demographic groups.
Tax benefits and gross salary
The tax benefits available in Hungary apply to everyone who is a tax resident in Hungary. In most cases, you and your employee can take advantage of them regardless of nationality. In some cases, conditions apply – consult your payroll specialist when planning salaries for employees who are not Hungarian nationals and who may be tax residents in other countries.
While you as an employer can and should consider tax benefits, they usually apply to the taxes paid by the employee. When you know certain tax benefits will apply, you must still observe the current minimum wages, and cannot pay less. Learn more about that here.
Since tax benefits usually apply to the taxes payable by the employee from gross salary, strictly speaking they are not the employer’s concern, and they do not have to be listed in the labor contract. However, since it is the employer who forwards taxes to the Tax Authority on the employee’s behalf, you must have a procedure to get these data from your employee to your payroll specialist so the tax benefits can be properly implemented in the salaries.
1. Tax benefit under 25
With the tax benefit of young people, those under the age of 25 do not have to pay the personal income tax at all. Considering this, you can make an attractive offer to career entrants and young talent while still allocating funds to their appropriate training. Learn more here.
2. Student workers
When a student works through a student organization, you as an employer do not have to pay the social contribution tax after them, while they are not required to pay either social security or the personal income tax (if they are under 25). Instead of paying your student worker directly, you have to pay at least 117.8% of their wage to the organization, which will take care of the payroll administration as well as the recruitment. Please note that if your student workers are third-country nationals, their weekly working hours are limited. Learn more here.
3. Tax benefit of newlyweds
After getting married for the first time, employees are eligible for a tax benefit of newlyweds for 2 years after their wedding. In this case, their joint tax base for the personal income tax will be decreased by HUF 33,335 monthly, making for an extra net HUF 5,000 with their salary. This benefit can be shared by the couple or can be applied to the salary of one of them.
4. Family tax benefit
The family tax benefit is a type of child benefit that applies to the personal income tax of parents raising children. Its sum depends on the number of children. Eligibility for the family tax benefit depends on eligibility for the family allowance, which is a kind of financial support paid to parents raising children, and which is not available to foreign nationals in all cases. An important condition is that at least 75% of their taxable income is generated in Hungary. Learn more here.
5. Tax benefit of the mother of four
Mothers of at least four children are exempt from paying personal income tax in Hungary. Eligibility is verified based on eligibility for the family allowance, so the same conditions apply to foreign nationals as above. As opposed to the family tax benefit, however, this tax benefit continues to apply even after the children have grown into adulthood, based on at least 12 years of previous eligibility. Learn more here.
6. Fringe benefits
Above their salaries, you can offer various fringe benefits to your employees. Fringe benefits can mean various things, including vouchers and financial support for various services. These items are taxed more favorably than regular salaries, while they also function as boosters for the economy. Although the precise type and amount of fringe benefits does not have to be listed in a labor contract, at least the existence of a fringe benefit plan should be indicated. Learn more here.
Assistance with planning and implementation
The Helpers Team offers foreigners assistance related to business and immigration in Hungary. Not only we help with work permit and other residency applications, but also with business planning and accountancy. Our services include HR support and payroll administration, complete with labor contract and modification templates, both in English and Hungarian.