covid19

COVID-19 Countermeasures in Hungary

Summary

Area
Title
Description
Labour law
Employment scheme for reduced working time
Reduced-time employment subsidy is available if working time reduced to 25-85%. Maximum subsidy HUF 112,418
Employment scheme for R&D employees
Employers are entitled to subsidy up to HUF 318,920 per month per R&D employee
Social security incentives
Social security payments decreased in some sectors
Tax
Tax reliefs
Possible tax 20% reduction or 12-month instalment payment or a 6-month deferral of payment
Simplified lump-sum taxation amendments
Special rules will be applicable for entrepreneurs who opted for simplified lump-sum taxation (‘KATA’)
Extension of deadlines
A number of deadlines for taxes have been prolonged
Extension of deadlines
Social Contribution rate will be reduced from 17.5% to 15.5% as of 1 July 2020
Other measures
Loan incentives
A number of regulations protecting debtors have been implemented

Labour market

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

The employee:

  • has been employed since the date of the declaration of the emergency situation;
  • is not under a notice period;
  • is not subject to repayment of a subsidy ordered by a final resolution of a public employment authority.  

The employer:

  • has been operating for at least 6 months;
  • demonstrates that the reason behind the employment in reduced working time is directly and closely linked to the emergency situation, and provides credible evidence that the maintenance of headcount is essential to its continuous economic activity and thus of national economic interest;
  • undertakes that together with the subsidy, the wage of the employee reaches the employee's previous basic wage during the period of the subsidy and that he or she pays wages for the individual development time; unless the reduced working hours do not exceed half of the working hours under the employment contract prior to the amendment;
  • there are no ongoing liquidation proceedings against the employer (e.g. voluntary liquidation, liquidation, bankruptcy proceedings).
The subsidy is available for employment, including distant-working, and home-office, employees working in allocated cumulative working hours and for hired labour force as well.

The benefit cannot be paid for unpaid leave.

If the reduced working time does not exceed half of the working time under the employment contract prior to the amendment, the employee and the employer may agree on individual development time. If it exceeds, an individual development time must be agreed. In practice, this may mean that if an employee was originally employed for 8 hours and further employed for 6 hours, it is mandatory to agree on an individual development time of 3 months. If, on the other hand, a worker was originally employed for 8 hours and further employed for 2 hours, then individual development time is not mandatory, but an option. Trainings for the individual development time can be organized within two years of receiving the subsidy.

In respect of the same employment relationship, the employee may not receive other state or EU funded part-time employment related incentive, nor may the employer receive job-creating, job-maintaining or R&D headcount employment incentives.

The monthly subsidy amounts to 70% of the base salary and reduced by personal income tax advance and contributions. The maximum base that can be taken into account is twice the mandatory minimum wage reduced by taxes and contributions in force at the time of application. Thus, the maximum amount of the subsidy can be HUF 112,418 per employee per month (HUF 214,130 * 75% * 70% = HUF 112,418).

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.  

 

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 employee

  • should be a research-developer according to the provision of Act LXXVI on Scientific Research, Development and Innovation;
  • already have a R&D status at the time of declaring the emergency situation;
  • should be currently not spending a period of notice,
  • and should have received any other employment-related incentive in respect of the same employment.

The employer

  • should have been operating for at least 6 months;
  • should present its economic circumstances, their direct and close connection with the emergency situation, the measures taken and expected so far to overcome the economic difficulties;
  • should comply with sound labor relations,
  • should have no ongoing liquidation proceedings against it;
  • should not be classified as a company in difficulty on 31 December 2019.

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:

  • Hospitality and tourism;
  • Entertainment, film industry, performing art;
  • Sport services;
  • Event organization;
  • Gambling.

The rules for social security contributions in the above sectors have been amended as follows:

  • Employers will not be liable to pay their part of social security contributions (17.5%+1.5%) with respect to employment income provided by them in the March-June 2020 period.
  • Employees will only be liable to pay 4% healthcare social security contribution on the employment income received in the March-June 2020 period, instead of the aggregated 18.5% social security contribution. Nevertheless, the upper limit of the above healthcare social security contribution will be HUF 7,710/month. It should be noted that personal income tax will be still payable.

Tax provisions

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.):

Financial reports

 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

 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.

Tourist tax

 Guests shall not pay Tourist Tax for the remainder of 2020, but hotels’ reporting obligation remains in effect (without payment obligation).

Tax procedures

 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:

  • Companies can request (once) a 12-month instalment payment or a 6-month deferral of payment without a surcharge up to a tax debt of HUF 5 million, if it is proven or shown as reasonably likely that they got in a difficult situation due to the coronavirus. Applications may be submitted to the tax authority by the thirtieth day after the end of state emergency. The tax authority shall process the applications within 15 days;
  • Companies can request a tax liability reduction of 20% up to a maximum of HUF 5 million in respect of any type of tax, if the payment of tax would make it impossible for the company to carry on its activities due to the pandemic. Applications may be submitted to the tax authority by the thirtieth day after the end of state emergency. The tax authority shall process the applications within 15 days.

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:

  • HUF 400,000 per year, if the employee's employment lasts throughout the whole year;
  • the proportion of the amount of HUF 400,000 in line with the number of days spent by the employee with the given employer in the tax year on which the benefit is based, in case the employee's employment lasts only part of the year;
  • HUF 400,000 per year, if the employment of the individual is terminated due to the death of the individual.

The overall benefit amount that can be paid with preferential rate by other employers in 2020 is the following:

  • HUF 800,000 per year, if the employee's employment lasts throughout the whole year;
  • the proportion of the amount of HUF 800,000 in line with the number of days spent by the employee with the given employer in the tax year on which the benefit is based, in case the employee's employment lasts only part of the year;
  • HUF 800,000 per year, if the employment of the individual is terminated due to the death of the individual.

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:

  • to the accommodation sub-account of the SZÉP card up to HUF 400,000 per year;
  • to the food and beverages sub-account of the SZÉP card up to HUF 265,000 per year;
  • to the recreational activity sub-account of the SZÉP card up to HUF 135,000 per year.

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.

Other measures

 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.

  • Among areas falling within scope of ‘KATA’ exemption, are taxi-drivers, hairdressers, beauticians, decorators, glaziers, electricians, other human health care service providers, performing artists, plumbers, gas and heating technicians, carpenters, those working in inpatient care, floor and wall tilers, personal trainers, persons engaged in other sporting activities, and those catering for the needs of the elderly and persons with disabilities.
  • The deferment of ‘KATA’ debts incurred before 1 March is also authorised; taxpayers in arrears with such payment liabilities will be required to pay these debts in the quarter following the end of the state of danger.
  • Hungarian media providers will also be granted exemption due to their lost advertising revenues.

Other measures

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:

  • approval of the annual financial statements;
  • decision on dividend payment;
  • decisions falling within the competence of the general shareholders’ meeting, provided however that passing a decision is required to
  • maintain the lawful operation of the company; or
  • manage a situation, which evolved due to the state of emergency, or
  • make an economic decision that cannot be delayed.

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

  • A decision has been made about the suspension of evictions, confiscations and tax-related executions; existing tax debts will have to be paid after the end of the state of danger.
  • Property lease contracts cannot be terminated, nor can owner raise the rent.
  • Tourism development contribution would be suspended till June 30.
  • The various maternity entitlements expiring during the state of danger will be extended; mothers will be kept in their present status for the duration of the state of danger.

Loan incentives

  • A decision has been made about the suspension of evictions, confiscations and tax-related executions; existing tax debts will have to be paid after the end of the state of danger.
  • Property lease contracts cannot be terminated, nor can owner raise the rent.
  • Tourism development contribution would be suspended till June 30.
  • The various maternity entitlements expiring during the state of danger will be extended; mothers will be kept in their present status for the duration of the state of danger.
  • The government has decided to suspend until the end of the year the capital and interest rate payment obligations of both private individuals and businesses under effective loan agreements.
  • The government has also decided to extend short term business loans until June 30, and maximised the “total cost of borrowing” indicator, known by the acronym “THM”, for new retail loans at the national bank’s base rate plus 5 percent.

Pursuit and termination of private entrepreneurial activities

  • The government has decided to provide the following two extra options for private entrepreneurs, who notified the tax authority (between 11 March and 30 March) to terminate their entrepreneurial activities:
    • they can withdraw their notification for termination (the notification would be deleted from their records), or
    • resume their activities immediately.
  • The minimum one-month termination period rule shall not be applied.

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:

  • their declarable annual corporate tax charge (even down to zero).
  • the amount of future corporate tax advances (payable based on declared corporate tax charge).

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.     

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