Employment scheme for reduced working time
As part of the economy recovery plan easing the economic issues caused by the COVID-19 outbreak, the Hungarian Government has announced an economy plan to maintain jobs in companies facing difficulties due to the COVID-19 outbreak. The subsidy is available from the 16th of April. The original regulation was amended making it significantly easier to apply for and administer the job retention subsidy.
According to the modified regulation the reduced-time employment subsidy is available at the joint request of the employee and the employer, at the competent government office where the employee is employed.
Only one application per employee can be submitted on the standardized form during the so-called emergency situation or within 1 month after the emergency situation ended.
The form is available at the following link: https://nfsz.munka.hu/Allaskeresoknek/Lapok/ak_tamogatasok.aspx
The government office shall assess the application within 8 working days and should take a decision in the form of a resolution. From the date of the resolution, the employment contract is automatically amended for the duration of the subsidy regarding the reduced working hours and the individual development time, unless the parties have already amended the employment contract before the application was submitted.
The basic criteria of the subsidy is that the employer and the employee agree on reduced working hours and – if the reduced working time exceeds half of the working time under the employment contract prior the amendment – on individual development time beyond the reduced working hours.
Subsidy can be requested if the part-time work reaches at least 25% of the working time but does not exceeds 85% compared to the prior employment contract calculated in a three months average.
The employer may submit an application together with the employee if
Employment scheme for research and development employees
As part of the economy recovery plan easing the economic issues caused by the COVID-19 outbreak, the Hungarian Government has announced an economy protection plan, with a focus on maintaining research and development jobs. The original regulation was amended by Government Decree 141/2020. (IV. 21.). The subsidy is available from the 16th of April.
According to the modified regulation if an employer employs R&D employees, one subsidy application per corporate site may be submitted to the government office (defined by the geographical location of the employer’s headquarter/registered site) during the so-called emergency situation or within 1 month after the emergency situation ended.
The form is available at the following link: https://nfsz.munka.hu/Munkaadoknak/Lapok/ma_tamogatas.aspx
The application shall be evaluated by the government office within 8 working days and if the decision is positive, a contract will be concluded with the employer.
The subsidy may be used for a period of max. 3 months after the submission of the application, for max. HUF 318,920 per month per R&D employee, which will be paid monthly posteriorly. If the employee's monthly gross salary is less than HUF 670,000 on the date of the declaration of the emergency situation, the maximum subsidy amount may be applied according to the ratio of the employee's monthly gross salary and HUF 670,000.
An important provision is that no other job-creating, job-maintaining or reduced-time employment support can be claimed for the same employee in addition to the wage subsidy for R&D employees.
The scope of the regulation has been extended until the end of the emergency situation defined in Decree 40/2020 On the declaration of a state of emergency. (III. 11.), and the changes must be applied to the ongoing subsidies.
Social security incentives
Modified social security rules shall be applied for the period of March-June 2020 to the following sectors:
The rules for social security contributions in the above sectors have been amended as follows:
Tax related measures introduced under the Economic Protection Action Plan
As part of the economic rescue package, the following tax relief measures were announced under Government Decree of 140/2020. (IV. 21.):
The disclosure deadline of annual financial report is postponed to 30 September 2020. As a result, the deadline for annual tax returns related to these financial statements is also postponed as detailed in the following sections. The annual financial report deferral does not apply to taxpayers of public interest.
Social Contribution rate will be reduced from 17.5% to 15.5% as of 1 July 2020. Social Contribution will not be levied on benefits paid to Széchenyi Holiday Card by 31December 2020, so these benefits will only be subject to 15% personal income tax. The overall benefit amount that can be paid with preferential rate is raised from HUF 450,000 to HUF 800,000 in 2020 with the following allocation: HUF 400,000 to the accommodations account, HUF 265,000 to the food and beverages account and HUF 135,000 to the recreational account. The overall benefit amount that can be paid with preferential rate is raised from HUF 200,000 to HUF 400,000 for State Institutions in 2020.
Corporate Income Tax
Corporate Income Tax return filing (and tax paying) deadline is postponed to 30 September 2020. Taxpayers will have to pay corporate tax advance in accordance with the tax advance obligation set in the latest tax return until the tax return for 2019 is filed. A taxpayer can request a reduction in the tax advance payments (before these become due) if the taxpayer calculates that the projected tax for the tax year beginning in 2020 does not reach the amount of the tax advance. The same applies to Small Enterprise Tax advance, Energy Suppliers’ Income Tax advance, Innovation Contribution advance.
Local Business Tax
Local Business Tax return filing (and tax payment) deadline is postponed to 30 September 2020. However, taxpayers still have to pay tax advance by 15 September 2020. If the taxpayer does not submit annual Local Business Tax return by 15 September 2020, thereby does not declare an advance payment amount, the amount of the previously declared business tax advance must be paid. A taxpayer can request a reduction in the tax advance payment (before it becomes due) if the taxpayer calculates that the projected tax for the tax year beginning in 2020 does not reach the amount of the tax advance.
Small Enterprise Tax
Small Enterprise Tax return filing (and tax payment) deadline is postponed to 30 September 2020. For details of tax advance payment obligation, please see the section on Corporate Income Tax. Small Enterprise Tax rate will be reduced from 12% to 11% as of 1 January 2021.
Guests shall not pay Tourist Tax for the remainder of 2020, but hotels’ reporting obligation remains in effect (without payment obligation).
Taxpayers' reliable tax classification cannot be revoked due to default payment of taxes during the state of emergency (or within 30 days thereafter).
Taxpayers can request tax payment reliefs due to the pandemic:
SZÉP card incentive
From the date of entry into force of the decree until 31 December 2020, the benefits granted to the SZÉP card will be taxed differently and the annual limits will also change.
The overall benefit amount that can be paid with preferential rate by State Institutions in 2020 is the following:
The overall benefit amount that can be paid with preferential rate by other employers in 2020 is the following:
The employer does not pay social contribution tax on the amounts qualified as fringe benefits transferred to the SZÉP card between 22 April and 31 December 2020.
The amount of HUF 800,000 can be divided between the individual pockets in order to qualify the given amount as fringe benefit as follows:
The amount provided in excess of the limit is taxed as specific benefit.
Under a previous decree, for overdue amounts not spent by 31 May, banks will not charge a fee to the employee until the 60th day after the end of the emergency.
Road transporters do not have to pay risk guarantee for their Electronic Public Road Trade Control System (“EKÁER”) reports until the thirtieth day after the end of the state of emergency, and previously paid guarantees will be refunded.
Software review and on-site inspection do not need to be performed for online cash registers and vending machines during the state of emergency. These activities should be carried out within 120 days of the end of the state of emergency.
Employees on unpaid leave are still entitled to public health care. The HUF 7,710 health care contribution will have to be paid by the employers as of 1 May.
Simplified lump-sum taxation amendments
Special rules will be applicable for entrepreneurs who opted for simplified lump-sum taxation (known as ‘KATA’ in Hungarian). Based on the amendments such entrepreneurs are not obliged to pay lump-sum tax in the March-June 2020 period.
Simplified decision-making procedures for companies during the COVID-19 epidemic
As part of the economy recovery plan easing the economic issues caused by the COVID-19 outbreak, the Hungarian Government has announced a new government decree (Government Decree No. 102/2020. (IV.10.) that provides generally applicable flexible rules on the decision-making procedures for the companies.
The purpose of the new regulation is to simplify the decision making process, to provide alternative decision-making methods instead of personal meetings (i.e. written decision-making, or holding meetings through electronic devices) even if such methods were not previously regulated in the governing documents of the company.
The new regulation applies to all legal persons regardless of their corporate form (associations and foundations as well), however does not apply to those legal persons, that already implemented sufficient regulation on written decision-making or holding meetings through electronic devices prior to the outbreak of the epidemic, and consequently are able to operate without breaching the curfew restrictions.
The new regulation applies to all types of decision-making bodies, including general shareholders’ meetings, management meetings and supervisory board meetings as well.
If the alternative decision-making methods are of no help for securing the continued operation of a company, the company’s management may take over the following decision-making competences from the general shareholders’ meeting under certain limitations:
However, the management’s decision-making authority is limited in multiple ways, e.g. amending the articles of association, decreasing the registered capital of the company, or terminating the company without legal successor are excluded from the management’s decision-making options. Furthermore, shareholders having majority influence may prevent the decisions of the management in any of the above listed matters by way of written objection. Also, the supreme body may amend or annul the decisions made by the company’s management upon the upcoming meeting of the supreme body convened until the 90th day following the termination of the state of emergency.
Suspension of procedures
Pursuit and termination of private entrepreneurial activities
Cash-flow Savings via Development Reserve
In series of COVID-19 measures the Hungarian financial administration has more recently introduced favourable amendments to the so-called development reserve incentive.
Accordingly, whilst previously the amount of development reserve (capped at HUF 10 Billion) tied down by taxpayers for future investment could be offset against 50% of their pre-tax profits now this limit has been dismissed for any corporate tax declaration periods started after 1 January 2019 retrospectively.
The advantages of setting up a development reserve that is deductible from pre-tax profits up to HUF 10 Billion are twofold since by this means corporate taxpayers can significantly reduce:
Even if it is only a possibility for deferring corporate tax liability because the value of investments put into operation from development reserve cannot be expensed for future tax purposes, these more favourable rules on development reserve provide for excellent opportunity even for significant cash-flow savings which appears very helpful in these critical days.