From 2019 the scope of benefits provided for employees by Hungarian employers on a tax-free basis or with tax allowances is to change significantly. Among other issues, the tax exemption of employer housing support will be discontinued.


Employer housing support

Up until 31 December 2018, Hungarian employers may still provide non-refundable support to their employees for housing purposes without any personal income tax implications. Employer housing support can be used for purchasing or building homes, renovating them or improving their accessibility, but can even be used to pay instalments of a loan taken out to buy a property.

Employer housing support can cover up to 30% of the costs, but no more than HUF 5 million (roughly EUR 15,000) over a period of five years. Any support from other employers also needs to be considered when defining the upper threshold. The number of the rooms in the property may not exceed the legitimate housing need as prescribed by law.

Based on the legislative amendments adopted in the summer (clarified by the autumn tax changes), the tax exemption of employer housing support will be withdrawn as of 1 January 2019.

Employer housing loans

Employers will still be able to provide interest-free or low-interest loans for housing purposes with tax allowances though. These will probably gain in significance thanks to the removal of the tax exemption for employer housing support.

According to the provisions of the Hungarian Act on Personal Income Tax, the income gained from the interest allowance must be assessed, and tax paid thereon if the paying agent calculates an interest rate on the receivable from a private individual which is lower than the key interest rate of the Hungarian central bank (currently 0.9%) plus 5 percentage points. Any related tax obligations shall be met by the paying agent.

However, if the receivable stems from a housing loan given to a certain private person not exceeding HUF 10 million (roughly EUR 30,000) in the year of payment and the preceding 4 years, the income from the reduced interest rate does not have to be considered as interest allowance income. Consequently, if an employer provides an employee with a loan that is interest-free or which bears interest lower than 5.9%, through a bank or the Hungarian State Treasury and based on confirmation therefrom, for the purpose of building, buying, extending or renovating a property, making it accessible, or to repay or pay instalments of a loan taken out for such purposes, no tax-payment liability arises because of the low interest rate.

Further terms and conditions

The law clearly defines the kind of property to be bought using such a loan, and outlines what exactly is meant by extension, renovation or accessibility. Legitimate housing needs conditions (e.g. number of rooms per family) do not have to be fulfilled.

If you want to find out more about how your company may be affected by the change in the system for providing benefits to employees tax-free or with tax allowances, and would like to optimise the current benefit system at your company, please contact the tax experts of WTS Klient Hungary.


Tamás Gyányi
Tel: +3618873736