Second phase of economy protection action plan launched in Hungary

Social contribution tax reduced and wage subsidy programme initiated

On Monday 6 April, Viktor Orbán announced a new set of measures to mitigate the economic impact of the state of emergency declared as a result of the coronavirus pandemic. The economy protection action plan reallocates 18-20% of Hungarian GDP in three phases. In the first phase the Hungarian government reduced the social security contribution in certain sectors, provided support for small business flat-rate taxpayers and suspended bank loan repayments. The second phase of the economy protection action plan published on Monday includes, among other things, a wage subsidy programme, the relaunch of key sectors in the national economy, and preferential, government-backed loans of more than HUF 2000 billion (roughly EUR 5.6 billion) to finance companies.

New funds for protection measures during pandemic and for restarting the economy

As we predicted in one of our recent articles the 2020 Hungarian budget will be amended as a result of the measures: the budget deficit has been raised from 1% to 2.7%. The regulation on this was published in the Hungarian Gazette on Monday night entitled “Amended rules of the Hungarian central budget for 2020 due to state of emergency”.

Pursuant to Government Decree 92/2020 (IV.6) three new funds have been created for the settlement of national and potentially European Union resources and expenses required to protect against the pandemic and for restarting the economy: Protection Against the Pandemic Fund, Economy Protection Fund, and the Fund for European Union Funding to Combat the Pandemic. The government is reallocating 50% of the funds previously assigned to support political parties into the Protection Against the Pandemic Fund, and it will channel vehicle taxes collected in 2020 for registered vehicles in Hungary as well as revenue from retail taxes into this fund too.

Key elements of the second phase of the economy protection action plan

Comprising many measures, the key economic measures of the economy protection action plan are the following (the detailed rules of the given measures were not yet released when the article was written):

  • The social contribution tax paid by employers will be reduced by 2 percentage points to 15.5% from 1 July 2020, as previously agreed.
  • To save workplaces, the Hungarian government will support shortened working hours (Kurzarbeit). If production is temporarily suspended (the exact definition of temporary has not yet been specified), the government will pay 70% of the lost wages for a maximum of three months. This assumption of expenses will probably be bound to a set of conditions.
  • The government shall provide a 40% wage supplement for employees and engineers working in the fields of research and development for no more than three months.
  • Financial reports and related tax returns can be submitted until 30 September, instead of the end-May deadline set for businesses whose financial year follows the calendar year. To our understanding, the deadline for filing annual tax returns (corporate tax, local business tax) will also be postponed.
  • Collateral exemption will be introduced to the EKAER system.
  • The process of VAT refunds will be accelerated: for regular taxpayers the procedure will take 30 days instead of 75 days, while for reliable taxpayers the 30-day period will be reduced to 20 days.
  • As part of the economy protection action plan, special payment relief, instalment payments, payment deferral and tax reduction options will be available, and forms will be simplified too.
  • No Hungarian taxpayer shall be downgraded in terms of taxpayer rating as a result of defaults arising during the state of emergency.
  • Under the new measures, anyone forced to take unpaid leave as a result of the pandemic will remain in the Hungarian social security system, meaning their social security status will not change.
  • Contrary to earlier practice, documentation of sick leave can be filed electronically.
  • For companies retaining their workforces, the government will launch tenders for technology development, environmental protection and energy efficiency investments amounting to more than HUF 100 billion (roughly EUR 280 million).
  • The Hungarian government is suspending payment of the tourism tax until the end of the year. The social contribution tax on SZÉP card payments will drop to 4% until the end of June, and the applicable threshold will be increased.
  • In the next three years the government will allocate extra resources for priority intervention areas in the form of investment subsidies, tax cuts, infrastructure developments, soft and guaranteed loans, and capital programmes.
  • The corporate sector will be supported through loan guarantee and capital programmes.

WTS Klient Hungary is doing everything it can to provide up-to-date information on the further details of the economy protection action plan launched as a result of the state of emergency, and to help its clients in these tough times too. If you have any questions on how the new measures will impact on your business, and what opportunities the current regulation brings with regard to tax payments for instance, feel free to contact us.

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