On 11 December 2019 the Parliament enacted the social security related tax law amendments. In our present newsletter we provide a summary overview of these amendments, and discuss the most important changes. Please contact our experts in case you need further information about the details, the entering into effect, or the transitional rules.

SOCIAL SECURITY CONTRIBUTIONS

The Act on Social Security Contributions has been amended in such a way that the new act is drawn up incorporating the current Act on Social Security Contribution and its implementing decree, supplemented with new, modifying rules. The new act will enter into force on 1 July 2020, in such a way that incomes earned until 10 July 2020 and constituting the base of contributions for June 2020 will still be governed by the rules in effect on 30 June 2019.

The general rules applicable to the payment of benefits will be amended in accordance with the following:

• The earlier pension, health insurance and labour market contributions have been combined under a single 18.5% social insurance contribution, thereby reducing the administrative burdens. A further advantage of the combination of the contributions is that the family benefit allowance will now cover the 1.5% labour market contribution as well.
• Apart from the social insurance contribution, only the pension contribution will be specifically prescribed, which is to be paid after certain benefits (childcare benefit, childcare assistance fee, child raising support, jobseeker’s allowance, etc.), the rate of which will remain 10%.
• The monthly amount of the healthcare services contribution will increase to HUF 7,710 (i.e. HUF 257 per day).
• The income generating activities of pensioners in their own right will be now fully exempted from social insurance and contribution payment obligations (earlier only their employment income was exempt). In addition, the income payer is also exempted from its obligation to pay the social contribution tax when paying independent or non-independent remuneration to such pensioners.

The lower limit of the contribution payment has been redefined, and the base of the income serving as the basis of contributions has been changed.

• From 1 July 2020, in case of employment income, the lower limit of the contribution payment defined as 30% of the minimum wage will be the income constituting the minimum contribution base, on which the social insurance contribution must be paid, with any derogations from this rule only permitted in the cases listed in the law. This provision has a disadvantageous effect for employees who are not pensioners, work less than 12 hours per week in positions not requiring vocational qualifications and do not receive benefits such as GYES or GYED, and are not in full-time education or in vocational training programmes. The scope of the provision does not cover cases where the legal relationship started or ended during the month, or where the insurance coverage did not exist for the whole month, or when – in the given month – the private individual received sick leave / accident sick pay / took an unpaid leave for taking care of a sick child aged under 12 years.
• A favourable change for both incorporated and self-employed (non-incorporated) entrepreneurs is that the social insurance contribution must be paid, in a unified manner, at least on the amount of the minimum wage (guaranteed wage minimum). Currently, the minimum wage (guaranteed wage minimum) constitutes a minimal contribution base only in case of the pension contribution, while in case of the health insurance and labour market contributions, this amount is one and a half times the amount of the minimum wage (guaranteed wage minimum). Simultaneously with the above change, the use of the expression “lower limit of contribution payment” will be discontinued in case of both incorporated and self-employed (non-incorporated) entrepreneurs.

It will be an administrative simplification in the rules governing family contribution allowances that private individuals do not have to recalculate and repay family contribution allowances applied during the year if they assess in their annual tax return that they still have a personal income tax payment liability. In such a case, only the personal income tax needs to be paid.

The rate of the pension contribution to be paid on the basis of agreements pertaining to pension benefits (agreements concluded with the purpose of accumulating service time for retirement purposes and making pension contributions, as well as agreements for accumulating service time) will be reduced from 24% to 22%.

In the system of healthcare services contribution, the following changes have been made:

• the scope of those required to pay the healthcare service contribution will be changed;
• after 1 July 2020, if a person required to pay healthcare service contribution fails to perform his or her payment obligation, and the amount of the arrears exceeds three times the amount of the contribution, the TAJ (social security number) will be invalidated, and as a result the person concerned cannot use the healthcare services supported by Social Security free of charge. The latter does not apply if the person paid up the contribution debts before using the healthcare services;
• persons insured in another member state of the EEA can use healthcare services in Hungary with their European health insurance cards. The amendment makes it clear that in case a person does not proceed in accordance with the above, but pays a healthcare service contribution (even though he or she is not required to do so) and uses healthcare services in Hungary on the basis of the above, then such person will be required to reimburse the costs of the healthcare services charged to the Health Insurance Fund.

The provisions concerning the application of the social security agreements and of the coordination decrees, earlier regulated in a government decree, have been enacted into statutes, without any change in their content. The minimum requirements pertaining to the certificates and documentation accepted by social security agencies as proof of certain facts and statements have been moved from the government decree into the annex to the act.

SOCIAL CONTRIBUTION TAX

From 1 July 2020, there will be no social contribution tax payable on the income generating activities of pensioners in their own right.

In accordance with the lower limit of contribution payment introduced in case of the social insurance contribution, the Act on Social Contribution Tax has also been amended with the requirement that from 1 July 2020, the social contribution tax must be paid by the employer after at least 30% of the minimum wage even in case the income earned is lower than that.

We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!