As a result of the third wave of the coronavirus pandemic, further restrictions were introduced in Hungary effective from 8 March 2021. Under Government Decree 86/2021 (II. 27), the allowances applicable to businesses operating in vulnerable economic sectors will remain in effect also for the month of March 2021. The scope of these allowances include exemptions from the payment of social contribution taxes, vocational training contributions, rehabilitation contributions, as well as the provision of wage subsidies, rent waivers, as well as a subsidy to cover internet costs.

Pursuant to Government Decree 86/2021 (II. 27.), the wage subsidy already in place under Government Decree 485/2020 (XI. 10.) is extended for March 2021 without a separate application, if the employer submitted an application during the state of emergency, before Government Decree 86/2021 (II. 27.) entered into force, and does not submit a declaration until 5 March 2021 to the effect that it does not wish to use the subsidy with respect to the employees identified in their application. All beneficiaries must provide proof of their eligibility for the subsidy by the end of the second month after the last day of the subsidy, which means that the sectoral wage subsidy constitutes an advance under the current rules.

What allowances can be used in the sectors concerned?

1. Businesses engaged in the activities concerned may qualify for wage subsidies equalling to 50% of the gross wage wage of their employees for March 2021.

The maximum amount of the monthly subsidy is HUF 251,100 per employee, provided that:

• the employer pays the wage to the employee, and
• the employment is not terminated by 30 April 2021 by the employer or with mutual agreement.

2. Companies and sole traders with their principal activities in the sectors listed are exempted from the payment of the social contribution tax (15.5%) and the vocational training contribution (1.5%) after their employees (regardless of the position they are employed in). Businesses required to pay rehabilitation contribution are also exempted time-proportionately for March 2021, and they do not need to pay the quarterly advance either.
3. Subjects of the small business tax (KIVA) pursuing principal activities in vulnerable sectors do not need to take into account the personnel expenses when determining their KIVA tax liabilities in March 2021 (it does not constitute part of the KIVA tax base).

Who are currently eligible for the subsidies?

The subsidies are available to businesses whose actual principal activities in March 2021 are in one of the vulnerable sectors. The list of these sectors is provided at the end of our newsletter.

Actual principal activity is defined as the activity from which the taxpayer derived most of its revenue, but at least 30% of its revenue, during the six-month period preceding the Decree entering into force.

What is the deadline for submitting the application?

Wage subsidies may be requested by businesses affected by the restrictions from 8 March 2021. The time period during which applications may be submitted is from 8 to 31 March 2021. In case of all other principal activities concerned, the applications may be submitted by 10 April 2021. The applications should be submitted, depending on the seat or the business premises of the employer, to the Budapest or the relevant county government office, which will make a decision on the application within 8 working days. The enforcement of the tax allowances and the submission of the related declarations will take place in the framework of the monthly contributions returns.

Rent waiver

Businesses engaged in the activities specified in Government Decree 52/2021 (II. 9.) are exempted from the obligation to pay rent for March with respect to their business premises rented from the state, local governments, or businesses in the majority ownership of these. A further condition is that the lease agreement had to have been concluded before 6 March 2021, and the tenant had to be engaged in one or several of the activities listed in the Decree already on 3 March 2021.

Tax allowance for KATA tax subjects

Companies that, already in February 2021, were subject of the itemised tax of small businesses (“KATA”) Act and engaged in any of the exempted activities listed (not necessarily as their principal activity) are exempted from the payment of KATA and the social contribution tax for March 2021. This exemption does not affect the revenue threshold of HUF 12 million or the entitlement to social security benefits. In line with its previous practice, the Hungarian Tax and Customs Administration (NAV) will probably cancel the itemised tax of small businesses for March if the business activities of the small taxpayer, as registered by NAV, include one of the exempted activities.

Free internet service

Students in online education and their family members, as well as teachers, on the basis of their legal relationship with an institute of public education at primary level are exempted from the fee of wired internet service for a period of 30 days in March 2021. The application for the free internet service is to be submitted to the service provider electronically.

Pursuant to Section 5 (1) of Government Decree 485/2020 (XI.10.), businesses engaged in the following as their actual principal activities are considered as belonging to vulnerable sectors:

• Restaurants and mobile food service (TEÁOR 5610),
• Event catering (TEÁOR 5621),
• Beverage serving (TEÁOR 5630),
• Film screenings (TEÁOR 5914),
• Organisation of conventions and trade shows (TEÁOR 8230),
• Sports and recreation education (TEÁOR 8551),
• Performing arts (TEÁOR 9001),
• Support activities to performing arts (TEÁOR 9002),
• Operation of arts facilities (TEÁOR 9004),
• Museums (TEÁOR 9102),
• Operation of botanical and zoological gardens, nature reserves (TEÁOR 9104),
• Operation of sports facilities (TEÁOR 9311),
• Activities of sports clubs (TEÁOR 9312),
• Fitness services (TEÁOR 9313),
• Other sports activities (TEÁOR 9319),
• Amusement parks and theme parks (TEÁOR 9321),
• Services aimed at improving physical well-being (TEÁOR 9604),
• Amusement and recreation activities not elsewhere classified (TEÁOR 9329),
• Hotel services (TEÁOR 5510),
• Holiday home and other short-stay accommodation services (TEÁOR 5520),
• Services of camping sites (TEÁOR 5530),
• Other accommodation services (TEÁOR 5590),
• Activities of travel agencies (TEÁOR 7911) or
• Activities of tour operators (TEÁOR 7912),
• Other passenger land transport not elsewhere classified (TEÁOR 4939),
• Other retail trade in non-specialized stores (TEÁOR 4719),
• Retail sale of audio and video equipment (TEÁOR 4743),
• Retail sale of textiles (TEÁOR 4751),
• Retail sale of electric domestic appliances (TEÁOR 4754),
• Retail sale of furniture, lighting equipment and other household articles (TEÁOR 4759),
• Retail sale of books (TEÁOR 4761),
• Retail sale of paper goods, stationery, office supplies and forms (TEÁOR 476203),
• Retail sale of music and video recordings (TEÁOR 4763),
• Retail sale of sporting equipment (TEÁOR 4764),
• Retail sale of games and toys (TEÁOR 4765),
• Retail sale of clothing (TEÁOR 4771),
• Retail sale of footwear and leather goods (TEÁOR 4772),
• Retail sale of watches and jewellery (TEÁOR 4777),
• Other retail sale of new goods not elsewhere classified (TEÁOR 4778)
• Retail sale of second-hand goods (TEÁOR 4779),
• Renting of video tapes and disks (TEÁOR 7722),
• Renting and leasing of other personal and household goods (TEÁOR 7729),
• Other reservation service and related activities (TEÁOR 7990),
• Gambling and betting (TEÁOR 9200), with the exception of lottery and sports betting
• Repair of consumer electronics (TEÁOR 9521),
• Repair of footwear and leather goods (TEÁOR 9523),
• Repair of furniture and home furnishings (TEÁOR 9524),
• Repair of watches, clocks and jewellery (TEÁOR 9525),
• Repair of other personal and household goods (TEÁOR 9529),
• Hairdressing and other beauty treatments (TEÁOR 9602),
• Other personal service activities not elsewhere classified (TEÁOR 9609),
• Retail sale of flowers, wreaths and ornamental plants (TEÁOR 477601),
• Other food service activities in case of businesses operating in educational institutions (TEÁOR 5629),
• Driving school activities (TEÁOR 8553),
• Other education not elsewhere classified (TEÁOR 8559), or
• Educational support activities not elsewhere classified (TEÁOR 8560).

If you need any assistance in connection with the above or have any further questions, please do not hesitate to contact our experts.