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A favourable allowance for employees in Hungary

Contributed by Company Express kft
20 August, 2020


The so-called cafeteria system is a type of allowance which can be granted to the employees of an enterprise on top of their basic salary, and which can be used for specified purposes, for such as hospitality, accommodation, etc. The main point of this system is that the employer defines a budget, which it assigns to a selection of the allowances. Using this type of allowances can be really auspicious for the employers, since these allowances has much more favourable taxation conditions than the basic salaries of the employees.

The cafeteria system has begun to spread internationally in the 1990s, and it has also reached Hungary in the middle of the decade. Ever since the Hungarian government has established a suitable operation and favourable taxation conditions for it, therefore making it an auspicious form of allowance for the employers.

The most popular cafeteria element in Hungary is the so-called ''Szchenyi pihenokartya'', which can be easily obtained from almost every Hungarian bank by the employers. This type of card has three sub-accounts (the hospitality, the accommodation, and the leisure sub-account), where the employers can make the allowances available for the employees. The maximum limit for the accommodation sub-account is HUF 225,000, HUF 150,000 for the hospitality sub-account, and HUF 75,000 for the leisure sub-account on a yearly basis. This type of card is also acceptable at most of the Hungarian hotels, restaurants, etc., making it a more simple form of payment for the employees.

Generally the personal income tax, the social security tax, the social contribution tax, and the contribution to vocational training is payable after the wage of an employee in Hungary. However in case of the allowances of the cafeteria system, the only payable taxes are the personal income tax and the social contribution tax after the amount of the allowance. The current rate of personal income tax is 15%, and the rate of social contribution tax is 15.5% in Hungary.

Due to the current pandemic situation the Hungarian Government has suspended the obligatory of paying the social contribution tax until 31st of December this year, making the Hungarian employers taxation situation more favourable. According to this, currently the 15% personal income tax is payable only when the employee's allowance provided within the cafeteria system.

The use of the Hungarian cafeteria system can be really auspicious for foreign entrepreneurs who are considering to set-up a business with employees in Hungary, since the government has established favourable taxation conditions within this system. Apart from this, the Hungarian Government is also working on making the country an appropriate tax haven for the foreign entrepreneurs, with the extremely low corporate tax rate, and the simplicity of obtaining an EU VAT number. To sum it up do not hesitate if you are planning to set up a business in Central Europe with significantly favourable taxation conditions.




 


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