Retaining or setting up a fringe benefit system could be a very important tool for motivating employees in 2018. Taxation rules pertaining to other benefits in the fringe benefit system have undergone favourable changes in Hungary, leaving more for employees. In this article we summarise the changes and rules regarding the fringe benefit system in 2018.
Fringe benefit system in 2018: what has not changed?
In 2018 the tax rules for fringe benefits within the fringe benefit system have not changed. As in 2017, 15 percent personal income tax and a 14 percent health care contribution are payable in Hungary on the value of the benefits x 1.18. This brings the total rate of taxes and contributions to 34.22 percent, similar to last year. The range of fringe benefits that employers can provide remains the same, as does the maximum amount. The Széchenyi Recreation Card can be granted with the familiar sub-accounts and limits, while cash can also be paid up to HUF 100,000 (approx. EUR 320) with the same taxes and contributions.
Lower health care contribution
A 15 percent rate of personal income tax is payable on the value of other benefits x 1.18, but the rate of the health care contribution in this case has been reduced from 22 percent last year to 19.5 percent. Consequently, the total tax burden has fallen in Hungary from 49.98 percent in 2016 to 43.66 percent in 2017 and 40.71 percent this year. Fringe benefits may also be provided without limitation in 2018 in the form of other benefits. For example, in addition to providing Erzsébet vouchers, local public transport passes, workplace meals, back-to-school support and formal training, employers can contribute to voluntary pension funds or health funds without any limitation.
Range of tax-free benefits expanded
The range of tax-free benefits has been widened in Hungary: within the fringe benefit system in 2018 benefits paid to employees contributing to the repayment of student loans taken out on the basis of a student loan agreement are tax-free, up to 20 percent of the minimum wage per month.
Tickets to cultural events, sports events, housing loan support and the funding of childcare services are still available options in Hungary. Strict rules on housing allowance to facilitate mobility have been alleviated, which means this can also be paid to employees from 2018 who have fixed-term labour contracts. In the first two years of employment, housing allowance to facilitate mobility can be tax-free up to 60 percent of the minimum wage.
Fringe benefit system in 2018: summary
2018 is a year of positive change both in terms of the fringe benefit system and its taxation.
The successful implementation and maintenance of the fringe benefit system requires efficient planning, possibly even a re-design. It is important for the eligibility rules to be easily manageable, and for employees to receive easy-to-understand and adequate information from the employer. This is the only way they can select and effectively use their fringe benefits.
To provide accurate services to clients, WTS Klient’s payroll specialists closely monitor legislative amendments, including the rules on the fringe benefit system. Not only may our clients outsource their entire payroll to us, but we also carry out specific payroll tasks.
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