EY Payroll Newsletter

Our fifth newsletter this year contains important changes published in recent days for employers, with particular focus on the two-stage increase in family tax allowance and changes in the areas of SZÉP card usage.  

Increase in the family tax allowance

Act LV of 2024 on the amendment of certain tax laws details, among other things, the changes in family tax allowance. The law introduces an increase in the amount of family tax allowance based on the number of children (dependents), in two steps. The table below shows the two-step increase:

From 1 January 2025, only citizens of EEA states and non-EEA states bordering Hungary (Ukraine and Serbia) can claim family tax allowance. Going forward, third-country nationals will not be able to claim the allowance.   

Wider SZÉP card usage options

Több ponton változik az is, hogy mire lehet a SZÉP kártya feltöltött összegét felhasználni. Az egyes adótörvények módosításáról szóló 2024. évi LV. törvény mutatja be a SZÉP-kártya felhasználásának változásait is:

• In addition to the recreational sub-account (450,000 HUF per year), the Active Hungarians sub-account will also be introduced, with the maximum top-up amount of HUF 120,000 per year (the amount can be prorated if the employment started or ended during the year, except in the case of the employee’s death). It is subject to tax at 28%, and amounts in excess of that limit are considered certain defined benefits. The expected application of the budget includes the rental of sports and leisure equipment, as well as the use of sports facilities, but we are still waiting for details on this.
  
  
• A housing budget has also been specified (for rent payments and loan repayments), allowing up to HUF 1.8 million to be provided annually for employees under the age of 35 (the amount can be prorated if the employment started or ended during the year, except in the case of the employee’s death). It is subject to tax at 28%, and amounts in excess of the upper limit are considered certain defined benefits.
  
  
• Individuals need to present the rent or mortgage agreement to their employer when applying for housing support. If the amount of housing support utilized by an individual in the year in question exceeds the documented amount due and paid by the individual for rent or mortgage payments, 50% of the excess amount should be shown in the individual’s tax return under differential penalty and paid as personal income tax. If housing support is granted, the employer is obliged to report the identification data of the property subject to housing support and the support aim to the tax authority by 31 January of the year following the tax year, in the manner determined by the tax authority.
  
  
• The specifics will be outlined in a forthcoming government decree.
  
  
• In 2025, SZÉP card balances can also be used for home renovation purposes as follows: up to 50% of the total value of amounts registered on the SZÉP card account on 1 January 2025 and of any amounts transferred to the account during 2025.
  
  
• The details will be presented later in a government decree, but based on the draft legislation, it appears that services will be out of scope and the balances can be used for items such as building materials, ironware, furniture or lightening devices. 

New tax-exempt elements

• Income received by private individuals as a service charge under special legislation and tips received for serving in a catering business directly from consumers, including tips provided to employees of the catering business as evidenced by records kept by the catering business operator, will be exempt from tax (Section 4.21 of Annex 1 to the Personal Income Tax Act).
  
  
• The following items are tax-free based on the government decree on the student loan system:
  a) the amount of student loan debt forgiven in connection with having children.
  b) the benefit paid by the employer to the employee for the repayment or early repayment of a debt arising under a student loan agreement on restricted-use loans (Section 7.38 of Annex 1 to the Personal Income Tax Act).
  
  
• Tax exempt services are those that:
  a) the paying agent provides at sporting events organized in sports facilities maintained or used by the paying agent (excluding travel and accommodation).
  b) the paying agent provides by allowing people to use the sports facility it maintains and the sports equipment placed therein for free or at a reduced charge (Section 8.7 of Annex 1 to the Personal Income Tax Act).
  
  
• Entrance tickets and passes to zoos subject to the Act on the Protection and Welfare of Animals are exempt from tax up to the minimum wage in the tax year (Section 8.28 of Annex 1 to the Personal Income Tax Act).

Use of voluntary pension savings for housing purposes

The amendment of Act XCVI of 1993 on Voluntary Mutual Insurance Funds allows voluntary pension fund savings to be used tax-free for housing purposes in 2025, to support:

• The repayment and early repayment of mortgages and employer-assisted housing loans.
• The downpayment of mortgage or housing loan agreements
• The modernization, renovation or extension of properties situated in the territory of Hungary with use as dwellings or residential houses recorded in the land register as their primary purpose, or the residential buildings of properties registered as farm or estate centers as their legal status
• the purchase of dwellings or building plots serving as a construction site for a dwelling located in the territory of Hungary, as well as the construction of the dwelling.

The legislation details the areas of use and specifies that the amount of the support may not exceed the member’s balance outstanding on 30 September 2024. The date of issue of the invoice to be submitted should not be earlier than 1 October 2024, and invoices may be submitted from 1 January 2025 onwards. Support for mortgage repayment and early repayment can be applied to repayment obligations due after 1 January 2025 at the earliest.

Amendment of Act LII of 2018 on Social Contribution Tax

• Reduced social contribution tax allowance for labor market entrants
  The social contribution tax allowance has been reduced as of 1 August 2024 for labor market entrants for the time during which the state of emergency is in place. This has now been enacted in the Social Contribution Tax Law as well, regardless of the state of emergency. Namely:
  A labor market entrant is a Hungarian citizen who, according to the data available to the tax authority, had employment, individual entrepreneurial or partnership relationship subject to insurance obligations under the Social Security Act for a maximum of 92 days within 365 days prior to the month in which the employment giving rise to allowances commenced (a person who is a citizen of a non-EEA country bordering Hungary is also considered to be a labor market entrant).
  For the first year, the allowance amount is determined based on the salary but is capped at the minimum wage, subject to tax at the rate set out in Section 2 (1), and for the subsequent six months of employment, the amount is based on the minimum wage, subject to 50%  of the tax rate set out in Section 2 (1) of the Act on Social Contribution Tax.
  
  
• Change in tax relief for vocational education and dual training
  The legislation is supplemented by one paragraph (2): “The tax relief provided for in paragraph (1)(a) may be claimed for a maximum of 12 months in respect of an employer’s employee who participates in their own employer’s vocational training within the meaning of Article 90/A of the Act on Vocational Education and Training, provided that after the completion of vocational education they take a vocational qualification exam in the second examination period at the latest.” The tax relief will therefore be available for 12 months for courses that start after 31 December 2024. There will also be an exam requirement.
  
  
• Quarterly social contribution tax returns
  The tax on certain defined benefits not qualifying as non-wage benefits [Section 70 of the Personal Income Tax Act] and on non-wage benefits [Section 71 of the Personal Income Tax Act] must be determined by the payer quarterly and declared and paid by the 12^th day of the month following the quarter.

Employers can request the tax identification number of third-country nationals

Section 37 of Act CL of 2017 on Tax Procedures has been supplemented with the following paragraph (4a):

(4a) If a foreign employee within the meaning of the Act on General Rules for the Entry and Residence of Third-Country Nationals does not have a tax identification number, the employer may also request the National Tax and Customs Authority to establish the tax identification number for the natural person. To establish the tax identification number, the applicant should report the natural person’s data pursuant to Section 32 (1) and attach the document specified in Section 32 (2) to the request. The tax authority will also inform the employer about the foreign employee’s tax identification number.

Data reconciliation procedure

Paragraph 138/A has been added to the Act on Tax Procedures:

At the request of the National Tax and Customs Authority, the taxpayer is obliged to clarify the data discrepancy indicated in the notice by providing data as part of the data reconciliation procedure. The taxpayer is obliged to perform the data reconciliation within fifteen days of receiving the request, on the electronic interface designated for this purpose. The tax authority will provide the taxpayer with the data necessary to complete data reconciliation on the electronic interface, including data received from other taxpayers.

The National Tax and Customs Authority will impose a default fine of HUF 300,000 on taxpayers that fail to comply with the obligation set out in Section 138/A (2) of the Act on Tax Procedures. (Section 229/B)

Violation of the rules on employee registration

Section 225/A has been added to the Act on Tax Procedures:

If a taxpayer fails to comply with the tax return filing obligation pursuant to Section 50 (1) in respect of an employee or business partner registered by the taxpayer, the tax authority will call upon the taxpayer to lawfully comply with the return filing or reporting obligation by setting a deadline of fifteen days and will point out the legal consequences of the default.

If the deadline referred to in paragraph (1) has expired without result, the tax authority will impose a default penalty of HUF 100,000 on the taxpayer. If the default affects several employees or business partners, the amount of the default penalty will equal the number of employees or partnerships concerned multiplied by the amount of the penalty.

The tax authority will refrain from giving notice pursuant to paragraph 1 and imposing a default penalty pursuant to paragraph 2 if the taxpayer is under liquidation, dissolution or compulsory winding-up proceedings and at the time of the request it is no longer able to lawfully comply with the filing or reporting obligation.

Late payment interest

Section 125/H (5) of the Act on Enforcement Proceedings to be Implemented by the Tax Authority (Avt.) will be replaced by the following provision: (5) The late payment interest rate for each calendar day will be one 365^th of the central bank base rate in force at the time of delay plus five percentage points.

Government Portal+ (Ügyfélkapu+) and Digital Citizenship Scheme (DÁP) is coming

On 16 January 2025 the Government Portal will be discontinued in its current form and two alternatives will be offered to take its place: Government Portal+ (Ügyfélkapu+) and a new scheme known as Digital Citizenship (DÁP). Government Portal+ is essentially the same as the currently used Government Portal, but as of 16 January 2025 a more secure two-step verification will be introduced for logging in to the e-administration system. This means that in addition to your user ID and password, a verification application will also be required. The app must be installed on a mobile phone or tablet and will generate a temporary code for log-in. Registration for Government Portal+ is open until 15 January 2025. Those who miss this deadline will be able to register only for the Digital Citizenship Scheme (DÁP).

The Digital Citizenship scheme and Government Portal+ will both be available simultaneously for a while. However, it is worth looking ahead and registering for Digital Citizenship too.

To register, you need to download the Digital Citizenship (DÁP) application and have an e-ID card, or else you need to identify yourself in your local Government Office. Digital Citizenship represents a digital environment that makes it easy for citizens and government agencies to connect. It currently allows citizens to apply for digital certificates of good conduct and verify themselves using a QR code. However, from the second half of 2025, the plan is to enable Digital Citizenship to be used on the interface of financial institutions, public utility service providers and telecommunication companies as well.

Employers are also advised that as of 16 January only Government Portal+ and Digital Citizenship will be available, so it is imperative to complete registration and provide any missing power of attorneys as soon as possible.