Tax changes in Hungary from 2022
As of 1st January 2022, there are some tax changes that apply to employee and employer.
The amount of the minimum wage and the guaranteed minimum wage will be raised from 1 January 2022. The gross minimum wage will be HUF 200,000 and the guaranteed minimum wage will be HUF 260,000 gross. (It is a significant change, more than 18%, in 2021 it was HUF 167,400 and HUF 219,000)
Employee personal income tax and social security contribution
Employee taxes remain the same as they were in 2021, the personal income tax is 15% and the social security contribution is 18,5% (these taxes are deducted from the employee gross salary).
Social contribution tax
The rate of the social contribution tax (payable by the employer) is reduced from 15.5% to 13% from 1st January 2022.
This tax is terminated from 1st January 2022. (In 2021 the rate was 1.5%, payable by the employer)
Personal Income Tax benefits
1. The available gross family tax benefit does not change from 1st January 2022.
Depending on the number of dependents, per beneficiary and per month of entitlement:
• HUF 66,670 in the case of 1 dependent,
• HUF 133,330 for 2 dependents,
• HUF 220,000 for 3 and each additional dependent.
2. From 1 January 2022, mothers raising 4 or more children will also have the opportunity to reduce their consolidated tax base, thereby achieving full tax exemption.
Eligible persons include mothers raising four or more children (either by birth or adoption) who are eligible for family allowance with respect to their children raised, those who are no longer eligible for family allowance but used to be eligible for family allowance for more than 12 years, and those who are no longer eligible due to the death of a child, provided that, in either case, the number of eligible children based on the above is at least 4.
The tax exemption does not automatically apply to all payment entitlements, such as real estate leases, dividends, EKHO, KATA income, etc.
3. Tax base exemption for persons under 25 years of age
This is a newly introduced tax allowance as of 1st January 2022, young people under the age of 25 will not have to pay personal income tax.
The tax credit can be claimed up to the level of the average gross earnings registered in July of the previous year. This was gross HUF 433,700 in July 2021. The tax credit is validated automatically by the employer, and the young people can last take this advantage in the month in which they turn 25.
The tax exemption for young people is unique in the world, only Poland applies it.
4. The personal (disabled) tax benefit is considered as a tax base reduction item.
This means that the eligible individual can reduce the consolidated tax base by an amount equal to 33.3% of the minimum wage, rounded to the nearest HUF 100 (= HUF 66,600 gross).
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 amount changed as of 1st January 2022, as the minimum wage has been raised to HUF 200,000 from 167,400, so the amount of the tax credit is monthly net HUF 9,990 (in 2021 it was net HUF 8,055).
5. 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 considered in the following order:
1. Tax base benefit for mothers raising 4 or more children
2. Tax base exemption for persons under 25 years of age
3. Personal (disabled) tax benefit
4. First marriage tax benefit
5. Family tax benefit
Statements in January VS year-end validation
For the year 2022, individuals will be able to claim back the tax benefits (family, first married, personal, mothers with 4 or more children, persons under 25 years of age) not validated during the year in their annual tax return in the spring of 2023.
If you wish to validate any of the tax benefits during the year, please fill out the dedicated statement for each and provide your employer with it by the end of January each year.
Other changes in taxation from 1st January 2022
KIVA (small business tax)
As of 1st January 2022, the rate of KIVA is reduced from 11% to 10%.
Local Business Tax
The reduced 1% tax rate for local business tax remains for 2022 as well.
Those SME companies whose net revenue or total assets & liabilities do not exceed HUF 4 billion according to the 2020 annual report are entitled to pay 1% LBT instead of 2% for the year 2022.
This reduction also applies for the tax advance payments what is due on the 15th March and 15th September.