Minimum wage regulated until 2027

From 1 January 2025, the minimum wage will increase by 9%, and the guaranteed wage minimum by 7% in Hungary. This means the minimum wage will be HUF 290,800 gross per month, while the guaranteed wage minimum will be HUF 348,800 gross per month. Agreements were also reached to increase the minimum wage by a further 13% and 14% in 2026 and 2027 respectively. The aim is to reach 50% of the average wage in three years. 

Changes to fringe benefit rules for housing

Perhaps the most significant change to the fringe benefit rules in Hungary is that employers can contribute to housing loan repayments and rental costs of employees under 35 years of age at a reduced tax rate on the grounds of a housing benefit. The benefit is granted based on the 28% tax rate applicable to SZÉP cards, up to HUF 150,000 per month, or the pro rata part of an annual sum of HUF 1,800,000. The benefit may not exceed the employee’s verified spending on such grounds. This element will be optimally integrated into fringe benefit schemes, thereby avoiding any inequalities that might arise between those eligible and those ineligible.

Also linked to this housing objective is the possibility in 2025 for employees to use the funds on their voluntary pension fund account as of 30 September 2024 to buy or renovate a home. Since this option applies to existing funds, it does not necessarily affect the 2025 benefit scheme, but it may be useful to inform employees about it.

The third amendment to the fringe benefit rules, also for housing purposes, is that 50% of the funds on a SZÉP card as of 1 January 2025 or transferred thereafter can be used for home-renovation projects. This could further increase the appeal of the already popular SZÉP card among employees.

Yet another change in the fringe benefit rules affecting SZÉP cards is that in addition to the general annual allowance of HUF 450,000, an Active Hungary wallet will be created, which can be credited with HUF 120,000 per year at a reduced tax rate. This amount can be used specifically for services linked to leading an active lifestyle.

Zoo and gym

Among the more limited changes to the fringe benefit rules, from 2025 – in addition to admissions to sporting and cultural events – it will now also be possible to offer tax-free admission to the zoo. Services offered by the payer through providing free or reduced-rate use of a sports facility (e.g. a fitness gym in the office building) and the sports equipment therein could also become tax-exempt in Hungary.

For more details and up-to-date information on the changes to the fringe benefit rules, as well as advice on how to incorporate them into your company’s benefit scheme, please contact the colleagues of our HR services business line!

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Who can give such benefits and to what extent?

According to the Act on Personal Income Tax, an employer or paying agent may provide tax-free tickets or season tickets for sporting events covered by the Act on Sports to the same individual up to the amount of the minimum wage per fiscal year. This is not new, but before 2019 there was no limit on the value of such tickets and season tickets that could be given to employees. The minimum wage as the upper limit was introduced in 2019. However, the tax exemption is subject to strict conditions.

What tickets to sporting events abroad can be given tax-free?

The fact that a particular match takes place abroad is not a problem in itself since the tax exemption can be applied to tickets for sporting events abroad as well. However, as stated in the NAV information published on 5 April, only the following benefits qualify for tax exemption under the HungarianAct on Personal Income Tax:

• Tickets to sporting events abroad concerning matches involving a Hungarian club team or the national team at a foreign venue, as the relevant Hungarian association or sports organisation is involved in organising them;

• Tickets for events which only have foreign participants but are organised in Hungary, since the relevant Hungarian association or sports organisation is involved in organising them;

• Tickets or season tickets for a series of events or a match of a series of events in a competition which is included in the calendar of the Hungarian association, involves a Hungarian individual or team, but the Hungarian participant may not reach the level (e.g. the final, semi-finals) for which the tickets were purchased in advance.

According to the NAV, an employer can legally provide tickets for the matches of the European Football Championship to be held in Germany in 2024 and the events of the Paris Olympics up to the 2024 minimum wage, i.e. up to HUF 266,800, tax-free. Any Olympics event can be attended since it is a single competition covering many sports. In other words, it is not possible to stipulate that only events in which a Hungarian competitor or team will be competing are eligible events for the public. Consequently, tax-free tickets can also be granted for Olympic sports events without Hungarian competitors and for the opening or closing ceremonies.

Further conditions for tax exemption

As shown by this information from the NAV, it is important that the employer or paying agent buys the tickets and has an invoice issued in their name. If the ticket is purchased by an individual, an invoice must be requested in the name of the employer or paying agent.

However, if – for any reason – the purchase of digital tickets can only be invoiced in the name of the individual, the reimbursement of the digital ticket is considered a reimbursement of expenses, not an employer or payer benefit, and therefore does not qualify for the tax exemption. If the employer reimburses the price of a ticket purchased in this way, the amount paid will be taxable as employment income for the individual and as other income if paid for by a paying agent. 

It is also good to know that free tickets cannot be converted into cash, and that benefits given by the employer in excess of the minimum wage are taxable as wages. Paying travel or accommodation expenses incurred in connection with tickets for sporting events abroad is also considered employment income given the legal relationship between the parties, which is subject to 15% personal income tax, social contribution tax and other contributions. Please also note that when attending a match during a business trip, mixing business with pleasure, it is risky to treat travel or accommodation expenses as tax-free benefits.

If you have any questions regarding tickets for sporting events abroad or any other benefits given by the employer, our tax experts are here to help.

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Remote work in Poland: 24 days a year

Remote work in Poland will be performed fully or partially in the place indicated by the employee and approved by the employer. For all employees, there is a limit on the number of days in a year when work can be performed remotely. This limit has been set at 24 days. For some employees (e.g. parents raising children under four years of age), remote work is unlimited as long as it is compatible with their type of work.

To duly implement remote work in Poland, it is crucial to assess the opportunities and challenges for a given employer, prepare internal regulations, review employment contracts and take care of training.

Tax impacts of the new labour rules

In terms of tax impact, employers will be required to:

• provide the materials and tools necessary for remote work; or
• pay cash compensation or a fixed sum for the employee to use their own personal tools.

The provision of tools and materials or the payment of compensation or a fixed sum to the employee by the employer as per the above may not lead to the generation of any additional taxable income for the employee.

However, questions have already been raised about how to calculate the compensation and the fixed sum so that it is tax free. The amount should correspond to the employee’s estimated costs of working remotely. According to the Polish law, major items to be taken into account in such an estimation are standard wear and tear of materials and tools, including technical equipment, their documented market prices, the quantity of materials used for the employer’s purposes, the market prices of the materials, as well as standard consumption of electricity and costs of telecommunication services.

Employers’ organisations have already asked for official guidelines regarding compensation for employees and other aspects of the new law.

Increased mileage rates in Poland

Apart from the changes to the status of remote work in Poland, due to the Infrastructure Minister’s regulation on 22 December 2022 to rules on business trips have been amended in Poland, too. Consequently, after 15 years without changes, the per-kilometre rates were increased on 17 January 2023 to reach the following caps:

• PLN 0.89 (previously PLN 0.5214) for passenger cars with an engine cubic capacity of up to 900 cm3
• PLN 1.15 (previously PLN 0.8358) for passenger cars with an engine cubic capacity of more than 900 cm3
• PLN 0.69 (previously PLN 0.2302) for motorcycles
• PLN 0.42 (previously PLN 0.1382) for mopeds

If an employee in Poland uses a private car during a business trip (in which case, the vehicle mileage record is obligatory), such an allowance is exempt from personal income tax and social security only up to certain limit according to the Polish PIT Act. The limit for a passenger car is as follows:

• For cars with an engine cubic capacity of up to 900 cm3 = PLN 0.89 (previously PLN 0.5214) × number of kilometres
• For cars with an engine cubic capacity above 900 cm3 = PLN 1.15 (previously PLN 0.8358) × number of kilometres

Thus, the tax-free allowances have just increased due to the change in the law.

A respective change has also increased the allowance limits for local travel, calculated as a fixed monthly sum or a sum based on mileage.

If you would like to know more about the new rules on business trips or remote work in Poland, or need any tax advice regarding the country please visit the homepage of WTS&SAJA Sp. z o.o., the exclusive representative of WTS Global for Poland and contact their experts.

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Conditions of tax-free bicycle use

However, tax-free bicycle use is subject to strict conditions in Hungary. For example, it matters who gives the bicycle to whom. The tax-exemption is applicable for use ensured by the paying agent. The good news, though, is that tax-free bicycle use can be provided not just for employees, but also for their family members, private individuals engaged with the paying agent, as well as managing directors and members not in an employment relationship.

Another condition is what type of device can be handed over tax-free. The Act on Personal Income tax does not define the term “bicycle”, so we have to consider the definition set out in the Hungarian road traffic rules, according to which a bicycle “is a vehicle with at least two wheels powered by the user and potentially aided with an engine of up to 300W”. The tax-exemption does not apply to scooters and mopeds.

The legislator exempted the use of bicycles from tax, so if the employer transfers ownership of the bicycle to the employee or another individual, this will not be deemed a tax-free benefit. On the other hand, it is not necessary for the paying agent to own the bicycle: tax-free bicycle use is also lawful if the paying agent rents the bicycle or uses a bicycle sharing service. In the case of tax-free bicycles, the given bicycle does not have to be assigned to a specific user, it is also possible for the bicycles always to be used by the individuals who need them at a given moment.

If the above conditions are met, tax-free bicycle use could also be applicable even if the private individual uses the benefit exclusively for private purposes.

Tax-free bicycle use in other tax laws

Tax-free bicycle use appears not only in the Act on Personal Income Tax, the Corporate Tax Act of Hungary was also amended as of 1 January 2022. The costs incurred by acquiring and operating the bicycles are deemed business-related costs.

As a general rule, based on the Hungarian VAT Act, the VAT on purchased bicycles can be deducted by the company, if it has a right to deduct VAT and the product is used for business purposes. If a bicycle is used entirely for the business purposes of a company, for instance a courier company uses a bicycle for delivery services, the VAT on that can be deducted in full. If a bicycle is used for business as well as private purposes, the VAT can be deducted at the ratio the asset is used for business purposes. So for example, the VAT on bicycles received and used exclusively for commuting and free-time activities may not be deducted.

The payroll team at WTS Klient Hungary has been carrying out payroll activities for large international companies for nearly 25 years, and has diverse experiences with fringe benefit systems too. Feel free to contact us if you have any questions regarding tax-free bicycle use or any other issues related to tax-exempt benefits, or would like to entrust us with your company’s payroll activity.

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More time for exporting goods for which a prepayment has been received

According to the Polish VAT regulation, if an exporter receives a prepayment then in order to apply the 0% VAT rate for the export transaction the goods should be transferred within two months. Under the proposal of the SLIM VAT package, the exporter will have six months to move the goods across the border applying the 0% VAT rate.

Possibility to choose currency translation for VAT purposes

The regulations on currency translations for VAT purposes will now allow the same translation rules as those applicable for income tax. As proposed in the SLIM VAT package, taxpayers will be able to select the option where currency invoices are translated in accordance with the same rules as those applicable for income for income tax purposes. If choosing this option, it should be used for at least 12 months from the first day of the month in which it is applied.

More time for input VAT deduction

Taxpayers in Poland presently have three months to deduct input VAT in current VAT returns. According to the SLIM VAT package they will be entitled to deduct input VAT within four months, i.e. in the month of receipt of an invoice and the three following periods.

Changes concerning correcting invoices

In respect of downwards adjustments correcting invoices, to reduce the output VAT suppliers are obliged to receive confirmation that the purchaser has received the correcting invoice. This obligation will be eliminated as the SLIM VAT draft allows the supplier to reduce output VAT based on the date the correcting invoice is issued, on the condition that the reduction in transaction value is agreed with the purchaser.

The Polish VAT Act will be also complemented by regulations concerning the recognition of upwards adjustments correcting invoices. This issue is currently only based on the business practice and approach of the tax authorities, so these regulations are more mandatory in nature.

Tax free documents in electronic form

The SLIM VAT proposal provides among other things for the electronic form of documents in the tax free system. It improves the procedure of VAT refunds for travellers. Within this solution, the whole process of VAT refunds would be simplified and automated, both for sellers and travellers. However, from the perspective of tax authorities it allows them to counter fraud and irregularities in this area.

Other changes in the SLIM VAT package

The SLIM VAT package also introduces changes in respect of:

• the limit for low-value gifts – this will be increased from a PLN 10 (roughly EUR 2) to PLN 20 (roughly EUR 4) per unit cost (low-value gifts do not need to be included in VAT records);
• the possibility to deduct input tax on accommodation services purchased for resale;
• clarifying the definition of value that determines the obligatory split payment mechanism, i.e. the value of an invoice equal to or higher than PLN 15,000 (roughly EUR 3,375).

Most of the changes are expected to enter into force on 1 January 2021.

The proposal is currently undergoing the intra-cabinet approval process. However, as there is not much time left until its introduction, it is expected that the final scope of changes will be established soon.

If you would like to know more about the introduction of the SLIM VAT measures in Poland, please visit the homepage of WTS&SAJA Sp. z o.o., the exclusive representative of WTS Global for Poland.

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