As of 1 January, 2021, there are only a few tax changes that apply to employees, surprisingly compared to previous years.
From 1 January 2021, the gross minimum wage was HUF 161,000 and the gross guaranteed minimum wage was HUF 210,600.
According to decision of the Hungarian Government a 4% increase applies from 1 February, 2021. From this date the minimum wage is HUF 167,400 gross and the guaranteed minimum wage was is HUF 219,000 gross.
Social contribution tax
The rate of the social contribution tax is 15.5 percent, and from 1 January, 2021, this contribution rate will also apply.
In the case of employees with a student contract, the rules of 31.12.2019 applies, ie the employer has a social contribution tax obligation on the income paid.
In the case of retired employees, the employer does not pay social contribution tax in respect of old-age retired employees who are employed. From the gross wages paid to the retiree, the employee only has to pay a personal income tax advance of 15 percent.
Personal Income Tax benefits
1. The available gross family tax benefit does not change from 1 January, 2021.
Depending on the number of dependents, per beneficiary and per month of entitlement:
• HUF 66,670 in the case of one dependent,
• HUF 133,330 for two dependents,
• HUF 220,000 for three and each additional dependent.
2. From 1 January 2021, mothers raising four or more children will have the opportunity to reduce their consolidated tax base, thereby obtaining a tax exemption.
A child of a foster or adoptive parent raising four or more children who is entitled to family allowance or no longer is entitled to family allowance in respect of the children she has raised is entitled to it for at least 12 years or has ceased to exist due to the death of the child, and the number of children that can be considered based on the above reaches four people.
The tax exemption does not apply automatically to all payment entitlements, such as real estate leases, dividends, EKHO, KATA income, etc.
3. The personal (disabled) tax benefit must be taken into account as a tax base reduction item.
This means that the eligible individual can reduce the consolidated tax base by an amount equal to one third of the minimum wage, rounded to the nearest HUF 100 (= it was HUF 53,700 gross for January, and it is HUF 55,800 gross from February going forward).
Eligibility conditions have not changed (the person who has a serious disability for which has a medical certificate, and receive an invalidity benefit or disability allowance.)
The method of calculation also changed, and the amount of the tax credit is monthly net HUF 8,370 from February (it was HUF 8,055 until January).
4. First marriage tax benefit
All couples where one of the parties marries for the first time can jointly claim a tax credit of HUF 5,000 per month of entitlement, so they can reduce their personal income tax base by HUF 33,335 for a maximum of 24 months. Thus, the tax amount can be reduced by a total of HUF 120,000 over the two years.
It has not changed, from 2017 the credit for first spouses can be used even if the individual becomes entitled to the family tax credit at the same time.
Order of tax benefits
In the case of multiple entitlements, the tax credits must be taken into account in the following order:
1. Tax base benefit for mothers raising four or more children
2. Personal (disabled) tax benefit
3. First marriage tax benefit
4. Family tax benefit
Statements in January VS year-end validation
For the year 2021, individuals will be able to claim back the tax benefits (family, first married, personal, mothers with four or more children) not validated during the year in their annual tax return in the spring of 2022.