Minimum wage and changes in social contributions of employers:

In Government Decree 508/2023 (20.XI.) the minimum wage applicable from 1 December 2023 was published:

Personal income tax

SZÉP-card

The annual recreational budget will remain at a net amount of 450 000 HUF per year in 2024.

The SZÉP-card allowance is considered as fringe benefit up to HUF 450 000. The benefit is taxed according to the rules in force at the time of payment.

The trend in public charges remains unchanged:

For fringe benefits: net amount of benefit x (15 % Personal Income Tax (PIT) + 13 % Social Contribution Tax (SOCCO)) = 28 %

For certain defined benefits: net amount of benefit x 1,18) x (15 % PIT + 13 % SOCCO)=33,04 %

The change is that the declaration of certain defined benefits and fringe benefits and the obligation to pay public charges changes from monthly to quarterly.

The monthly declaration and payment obligation remains:

- when the annual recreational allowance is exceeded

- upon termination of employment: if the individual's employment relationship entitling them to fringe benefits is terminated in such a way that the total value of the fringe benefits received from the employer during the tax year exceeds the annual recreational allowance, the excess amount is paid.

(Entry into force: 01.01.2024.)

Giving a gift of small value

Instead of once a year, this benefit can be granted three times a year, up to a maximum of 10% of the monthly minimum wage, even to close relatives.

(Entry into force: 01.01.2024.)

Daily posting allowance

From 01.01.2024, a change will be made so that, as in the case of persons engaged in international road haulage and passenger transport, a HUF amount of EUR 85 per day may be deducted without a certificate for individuals employed on board a vehicle engaged in international water and air transport and passenger transport and working abroad.

(Entry into force: 01.01.2024.)

Tax-free wine products

From 16 November 2023, wine products granted under the conditions set out in Government Decree 451/2023 (X.4.) are exempt from tax.

As of 1 December 2023, the tax exemption has been included in the Personal Income Tax Act. The obligation to keep records in the case of a benefit includes recording the source of the purchase and the use to which the product is put.

(Entry into force: 01.12.2023)

Social contribution tax

The social contribution tax rate remains unchanged at 13% in 2024.

Tax relief for labour market entrants

According to the amendment to the Social Contribution Tax (SOCCO) Act of 14 August 2023, a worker who is a national of a third country is not considered to be a labour market entrant, so the labour market entrant benefit cannot be applied to a worker who is a national of a country not covered by the bilateral social security agreement concluded between the European Economic Area and Hungary.

From 1 January 2024, however, the definition of persons qualifying as labour market entrants will be amended again, so that only Hungarian citizens and citizens of non-EEA countries (Ukraine, Serbia) bordering Hungary will be eligible to enter the labour market. In the future, too, the eligibility for the benefit will be subject to the existence of a certificate.

(Entry into force: 01.01.2024.)

Social security

Social security contribution rates

There are no significant changes in contributions, which will be as follows in 2024:

• Social security contribution rate 18.5%
• Pension contribution rate 10%

Taxable income in the case of posting

If Hungary has no taxing rights under an international treaty or no obligation to establish a tax advance in the absence of a double taxation convention, the following are added to the determination of the income on which the contribution is based:

The income earned by a third-country national as consideration for the activity in the reference month - in the case of an employment relationship, the income accounted for the reference month - will be the income forming the basis for the contribution.

(Entry into force: 01.01.2024.)

Health service contribution

The monthly amount of the health service contribution will increase to HUF 11 300 from 1 January 2024 (HUF 380 per day).

(Entry into force: 01.01.2024.)

Rehabilitation contribution

The amount of the contribution is nine times the statutory minimum amount of the basic wage for full-time employees on the first day of the year in question, which is HUF 2 401 200 per person per year, calculated at the minimum wage in 2024.

(Entry into force: 01.01.2024.)

Simplified employment

Minimum wage for occasional workers and changes in public charges:

From 1 January 2024, the public tax on simplified employment will be considered a social contribution tax, but the statutory exemptions and discounts applicable to social contribution tax will not apply.

(Entry into force: 01.01.2024.)

Corporate tax

Tax relief for investment and renovation for energy efficiency purposes

In the summer of 2023, Regulation (EU) No 651/2014 (General Block Exemption Regulation) was amended, as a result of which the rules on tax relief for energy efficiency investments and renovations have changed on several points.

In line with the Regulation, the concept of alternative investment and renovation was introduced into the Tao Law in order to better define the eligible costs of the tax relief.

As a result of the amendment, partially different rules apply to the tax relief for investment and renovation other than for a building and for non-buildings.

Non-building investment, renovation

The maximum amount of tax relief that can be claimed will be increased from 15 million euro to 30 million euro.

The method for determining eligible costs has also been changed, but two methods will continue to apply for determining eligible costs.

One method is that when the cost of the energy efficiency investment can be clearly identified within the nexus of the investment and there is no less energy efficient alternative investment or renovation that would be carried out in the absence of the tax credit, the full cost of the investment is eligible.

The other method, the so-called margin method, has also been clarified compared to the previous rules. Under the previous interpretation of the law, the extra cost had to be determined in relation to a less energy-efficient device performing the same function and available at the time of the investment. Under the new rules, the way in which eligible costs are determined is linked to specific cases of the alternative investment.

Tax relief is not available if the investment or renovation is carried out to comply with an EU standard that has already been adopted and is in force. In the case of an EU standard that has been adopted but is not yet in force, the tax relief is available if the investment or renovation was completed 18 months before the standard entered into force. A new rule is that no tax relief is available if the investment or renovation is for the promotion of cogeneration, district heating, district cooling or the installation of fossil fuel energy production equipment.

Investment carried out on buildings, renovation

The same general rules apply to investments and renovations for energy efficiency purposes in buildings, such as auditing and registration.

In this case, the eligible costs are the cost of the investment or renovation to improve the energy efficiency of the building, with the exception that costs not directly related to achieving a higher level of energy efficiency are not recognised.

To qualify for the tax relief, the investment or renovation must result in a 10-20% improvement in the energy efficiency of the building, measured in primary energy (depending on the nature of the building and the investment). An additional condition is that the taxpayer must have an energy certificate attesting the initial primary energy demand and its estimated improvement.

The amount of tax relief that may be claimed may not exceed 15% of the eligible costs of the investment or renovation per taxpayer, per investment or renovation, together with the total amount of state aid claimed for the investment or renovation, in present value, but may not exceed HUF 30 million, with the provisothat the tax relief may be increased by 20 percentage points for small enterprises and by 10 percentage points for medium-sized enterprises.

(Entry into force: 01.12.2023)

Tax relief for research and development activities

In connection with the introduction of the global minimum tax, a new tax credit was introduced in the Corporate Tax and Dividend Tax Law, the research and development tax credit, which is a recognised refundable tax credit. It can be claimed by the taxpayer, at his option, instead of applying the R&D tax base deduction per R&D project.

The taxpayer's election applies to the total eligible costs of the R&D activity incurred in five consecutive tax years.

This tax credit is claimed in the order in which the eligible costs are incurred.

The tax relief is available for the tax year in which the eligible costs are incurred and for the following three tax years.

The tax allowance is 10% of the eligible costs, or HUF 500 million in the case of R&D activities carried out on the basis of a written contract with higher education institutions and other organisations specified in the Act.

It can be claimed as a tax deduction up to the amount of the calculated tax for the tax year.

A new feature of the tax relief system is that taxpayers can claim reimbursement of the amount of unused tax relief if they are unable to exhaust it.

The law specifically defines the scope of eligible costs, so among the direct costs of the R&D activity, eligible costs include, for example, the accounting depreciation of the fixed assets used by the research and development company for the duration of the R&D project, personnel expenses accounted for the research and development company, the cost of patents used for the R&D activity, operating costs incurred directly in the course of the R&D project.

The tax relief is not available to, among others, companies in difficulty, companies active in the processing and marketing of agricultural products.

For the same eligible costs, this tax credit cannot be combined with other tax credits under the Corporate Tax and Dividend Tax Law and the tax base reduction item for R&D activities.

For the calculation of the local business tax, if the company has made use of the tax relief for R&D activities, it can no longer reduce the business tax base by the direct costs of basic research, applied research and experimental development charged in the tax year. Likewise, no social contribution tax relief is available for the research and development worker if the taxpayer has opted for the corporation tax relief.

The tax credit applies for the first time to eligible costs for the tax year 2024.

(Entry into force: 31.12.2023.)

Certain costs and expenses not incurred in the interest of the business

In order to avoid double non-taxation, interest and royalties paid by the company to a company resident in a non-cooperative state for tax purposes according to PM Decree 19/2020 (30.12.20) or in a state with a tax rate lower than the Hungarian corporate tax rate (9%) or without corporate tax are not considered as expenses incurred for the purpose of the business activity.

The taxable amount is the amount of interest or royalties paid to the extent that the foreign person or establishment has not paid the tax corresponding to corporate income tax.

(Entry into force: 01.01.2024.)

Global minimum tax

In connection with the transposition and application in Hungary of Council Directive 2022/2523 (14 December 2022) on ensuring a minimum level of global taxation for multinational enterprise groups and large domestic groups, Act LXXXIV of 2023 on additional taxes ensuring a minimum level of global taxation and amending certain related tax laws (hereinafter referred to as Act) was adopted.

Under the Act, from 1 January 2024, a member of a multinational group of companies or a large domestic group of companies whose annual revenue, including the revenue of the excluded entity, as reported in the consolidated financial statements of the ultimate parent company, equals or exceeds EUR 750 million in at least two of the four tax years immediately preceding the tax year will be subject to the global minimum tax rules.

The Hungarian government has opted for the application of the Qualifying Domestic Deductible Additional Tax (QDMTT), whereby the effective tax rate (for the relevant state) of a multinational group or large domestic group of companies subject to the regime is to be increased by the domestic group members to the prescribed minimum rate of 15%.

Under the Act, in addition to corporation tax, local business tax, income tax on energy suppliers and the innovation levy (but the wording does not exclude other taxes) are considered as covered taxes for the purposes of determining the effective tax rate under the global minimum tax system.

As an option, the Corporate Tax and Dividend Tax Act introduced the possibility for taxpayers to declare their shares not yet declared on 30 December 2023 by the statutory deadline for filing corporate tax returns and pay a one-off corporate tax on 20% of the difference between the market value or the book value of the holding. However, no deduction or loss can be claimed against this tax base and tax. On this basis, the rules applicable to notified shareholdings should be applied in the future (e.g. on sale).

The Accounting Act also introduces a system of deferred tax assets and liabilities, which will allow the tax effect of available carry-forward losses and tax base adjustments in future years to be recognised in the accounts and thus taken into account in the calculation of the effective tax rate for the global minimum tax.

(Entry into force: 01.01.2024.)

Value added tax

Changes related to real estate transactions, domestic reverse taxation

In connection with the current reverse charge of construction, installation and other installation services, Section 142 (1) (b) of the VAT Act is amended again. The provision has already been amended with effect from 1 January 2023, the essence of which was that the application of reverse charge will generally require an official authorisation and notification to the authorities, provided that the other conditions are met.

The rule, which will apply from the 2024 tax year, is supplemented by the fact that if the official authorisation and official notification do not apply to the entire project, but only to a subcontractor's part of the work, the subcontractor must make a declaration to the customer (main contractor).

(Entry into force: 01.01.2024.)

Introduction of the e VAT system

The tax authority will launch an electronic VAT system in 2024 to support the electronic preparation and submission of VAT returns. The digitalised solution will be available to users via a web interface and machine-to-machine (M2M) connectivity.

According to the amendment to the VAT Act, from the tax assessment period including 1 January 2024, the obligation to submit a VAT return will be fulfilled in one of the following ways:

1. by submitting the form provided for this purpose (VAT return form),

2. by supplementing or amending the data made available by the tax authority for the assessment of the tax by means of a declaration of the right to deduct and the exercise of the right to deduct, and by approving the draft return thus produced from the tax records as a return on the same electronic interface provided for this purpose,

3. by transmitting, in the manner and using the data structure published by the tax authority, the data at the document level on which the tax payable is based for the assessment of the tax due and the exercise of the right of deduction, and by approving the draft return compiled from this tax register as a return by machine.

The use of the above version 2 or 3 of the VAT return is only an option for companies, not mandatory. However, the use of the computer interface is subject to registration based on the taxable person's declaration to the tax authorities.

The approval of a draft return in the manner indicated in points 2 and 3 shall constitute the filing of the return.

Where a taxpayer submits a return in more than one of the above ways, the first return submitted shall be the final return.

As of 1 January 2025, no self-control surcharge will be levied if the return is filed as indicated in point 3 and the self-control is filed within 15 days of the return being filed, but no later than 15 days after the due date.

The Act on the Rules of Taxationprovides an additional discount for reliable taxpayers who, if they file the return in the manner indicated in point 3, are not subject to self-assessment by the tax authorities for 15 days from the due date.

(Entry into force: 01.01.2024.)

Mandatory redemption fee scheme

As part of the waste management system, from 1 January 2024, the mandatory return system (DRS) for products placed on the domestic market will be introduced at national level.

The introduction of the system will amend and supplement the VAT Act. Under the new rules, the taxable amount of the supply of goods will not include the redemption value of non-reusable goods subject to a mandatory redemption fee, so no VAT will be payable on the redemption value of the goods when they are supplied. In line with this, the taxable amount cannot be reduced on the refund of the redemption premium.

However, if a non-reusable product subject to a mandatory redemption fee is not redeemed, it is considered a supply of goods and therefore a tax liability. The tax liability is to be beared by the taxable person operating the compulsory redemption system, MOHU Zrt. The tax is assessed on the last day of the calendar year, based on the quantity of non-reusable products not redeemed in that calendar year.

The general rules of the VAT Act and the rules of the VAT Act relating to deposit fees apply to the redemption fee for reusable products subject to a mandatory redemption fee and to the redemption fee for products subject to a voluntary redemption fee, as well as to all other cases where a fee is charged on the roll when the product is sold, which fee is refunded when the roll is redeemed. This means that if a separate charge (deposit fee) is levied on the packaging of the product sold, it is included in the taxable amount of the supply of the product, and if the deposit fee is refunded when the packaging is returned, the taxable amount is subsequently reduced by the amount refunded.

(Entry into force: 01.01.2024.)

Other changes

In view of their public interest nature, the supply of services and dental prostheses by a dentist or dental technician acting in such capacity is exempt from tax.

(Entry into force: 01.01.2024.)

Local business tax

New regulation on temporary work agencies

Under the amended legislation, an entrepreneur engaged in temporary agency work under the Labour Code will have a local business tax establishment in the jurisdiction of the municipality where the employees hired out by the entrepreneur work for a total of at least 21 000 hours during the tax year.

(Entry into force: 01.01.2024.)

Other taxes

Vehicle tax

Under the amended legislation, from 2024, the car tax will be payable once a year until 15 April.

The deadline for filing the first quarterly company car tax return remains 20 April, so information on the payment of car tax should be available in time.

(Entry into force: 01.01.2024.)