Hungary: Recent Tax Law Changes Show A New Health Care Finance Concept In Hungary?

Last Updated: 4 July 2018
Article by Laszlo Soos
Most Popular Article in Hungary, July 2018

The latest tax law changes in Hungary show that there might be a new health care finance concept on the desk of the Hungarian government.

Two current developments and an earlier, but decisive standpoint point to the fact that the financing of the Hungarian health care system might be undergoing fundamental changes.

The first draft of the 2019 tax law changes has just recently been published (please see below the details), which can also be seen through the issues discussed on a two-day health conference recently held in Hungary.

A two-day health conference has raised the question of how Hungary should have to finance its ever-expanding health care in the future. To do this, participants agreed that a supplementary insurance coverage should soon be available. Furthermore, according to health economists, the question is inescapable, and it is not a devil if the financier goes for the compulsory supplementary insurance.

The "Insurance System Development" was also presented in the presentation of the deputy director of the National Health Insurance Fund. "Within the framework of social security, but in addition to the basic insurance package" - can be read in the presentation. The competent also added that if the supplementary insurance is incurred in the system, the National Health Insurance Fund considers it important to be actively involved.

Tax law changes – first draft

The other current development is the government's 2019 tax package, which is just submitted to the Parliament last week. Because of the modifications planned for fringe benefits, the tax benefits of health insurance provided by employers to the employees will be eliminated, so it is unlikely to be offered health insurance in the future. This step can be felt not only by insurers, but also by private healthcare providers. The most spectacularly expanding market for private providers was the company-funded health insurance packages (according to some reviews, 30% was the growth over the past period).

In the light of the tax changes related to corporate health insurance submitted, it seems logical that there is a step towards bringing private sources into the health sector, whether it is a supplementary insurance.

Also, the staff of the central bank has formulated its proposal on health, the essence of which is: providing a surplus in the health system through the admission of private resources. The aim is to improve the quality of public financed benefits, which, in addition to improving efficiency, seems to be necessary to increase the resources available to the health care system. Taken into consideration of international examples and domestic opportunities, the primary way of doing this is to actively involve private sources in the healthcare sector, according to the central bank's economists' view as detailed in their Competitiveness and Growth book. In this it is stated: the Hungarian health system faces international confrontation with a lack of resources. However, the surplus income cannot be guaranteed by raising the income tax or by increasing the contributions, as the tax burden on domestic labor is still high.

In this volume, the central bank's specialists point out Germany's health insurance system as an example. The principle of the German health insurance system is that everyone is obliged who lives in Germany. The system is dual: it consists of a mandatory state insurance and a private insurance. People living there can choose private insurance or categorize them into the state system. The state system, like the Hungarian one, operates on a risk-sharing and solidarity basis, while the private system is based on a classical insurance principle.

Tax law changes in detail

Personal Income Tax

The draft would considerably transform the taxation of fringe benefits. Starting from January 1, 2019, basically, only the official fringe benefit card (the "SZEP" card) could be granted under a reduced public burden.

A limited range of allowances for employees or payers could still be granted as certain benefits, such as: the amount paid for voluntary insurance funds, the private use of a company phone, business travel-related meals or other services.

However, based on the draft, the tax-free qualification of many benefits would cease from 2019, eg: employer housing subsidy, housing support for mobility, for repayment of student loan, risk insurance premiums.

Regarding real estate leasing the draft simplifies the administrative tasks of the lessor and reduces the tax burden with the exclusion of utility charges from the tax base.

Social contribution tax

The employment relationship of a retired worker would be exempt from the social insurance obligation, thereby not entitling to social security benefits and neither social contribution tax would be incurred.

The amount of the health service fee would increase to HUF 7,500 a month, to HUF 250 per day (in 2018 this would be HUF 7,320 per 244 HUF per day).

A separate proposal aims at consolidating the current social contribution tax and the health contribution. In addition, new labor incentives would be introduced.

There would be a flat-rate social contribution tax, which means an increase of the tax on income previously taxed at 14% (e.g. capital gains, fringe benefits). This social contribution tax rate is expected to be decreased to 17.5% from July 1, 2019 from its current rate of 19,5%.

At present, the maximum amount of healthcare contribution payable on capital income is HUF 450,000 per year, including the amount of the health insurance contribution paid by the individual. According to the draft, such tax on capital income must be paid until the base of the combined tax base reaches 24 times the monthly minimum wage (which is a slight increase of the above tax amount).

Social tax credits applicable by the employers would also change and instead of the former HUF 100,000 income limit, the minimum wage would be available (which is a slight increase of these benefits).

Corporate Income Tax

There would be changes related to the tax-free benefits of reported shares: from January 1, 2019, shares newly acquired for the existing shareholding cannot be reported if the taxpayer has not used this possibility for the former shareholding. However, the possibility of reported an investment fund would cease to exist. The draft would, in many places, clarify the consistency with the directive on cross-border mergers and ensure the neutrality of taxation related to the shareholding reported.

Based on the draft, the concept of energy efficiency investment would include renovation. The rate of the tax reduction, will vary from region to region to the recognized cost of the investment, upgrading to the unified 30%.

The limit on the tax base related to the development reserve (which is a good opportunity for future investments) would increase from the current HUF 500 million to HUF 10 billion.

The tax base reduction of up to HUF 20 million for early-stage business investments could be considered in the future as per early-stage enterprise investment.

The tax base reduction associated with R & D could be split between the service provider and the customer by agreement. However, the tax credit reduction obtained in this way could not be passed on to a related party.

Innovation Contribution

The draft would restore the scope of innovation contributors by restoring the original provisions of the 2014 Act. Subjective exemption in the future will be again only for SMEs according to the complex set of conditions under the law and not only the metrics of certain points of law.

Local Business Tax

The draft would repeal the tax exemption for the extension of employment. However, It would be possible for municipalities to provide tax exemptions or tax allowances in the regulation for the costs of an investment. The rules of such tax relief should not be modified by the local government for at least three years to the detriment of taxpayers.

VAT

Under the rules previously adopted, the value level of mandatory data supply of invoices issued will fall from HUF 1 million of VAT to HUF 100,000 of VAT from July 1, 2018 (this rule also applicable for companies having only a VAT number in Hungary). This is also a further step to go totally online with VAT administration: with e-invoicing and e-VAT returns.

The draft would extend the provisions on the reverse charge for certain cereal and steel products until June 30, 2022. In addition, the draft would repeal the application of reverse taxation for temporary employment services from January 1, 2021.

The draft would, as a legal harmonization amendment, transpose the provisions of the EU rules on the VAT treatment of vouchers that will enter into force on January 1, 2019. The draft defines what a voucher, a one-time, or a multi-purpose voucher should be considered in the VAT system.

The draft would also implement the provisions of the e-commerce VAT Directive (Council Directive 2017/2455 / EU), which will enter into force on January 1, 2019, also in line with EU requirements. Accordingly, it would be possible for taxable persons not established in the Community to be registered in a one-stop-shop even where that taxable person already holds a tax number for another reason in a Member State of the Community.

The draft would standardize the tax rate for milk, so from January 1, 2019 a 5% tax rate would apply to such products.

The draft would stipulate that the exemption of services directly linked to products exported or to specific products under customs procedures (eg. transport, ancillary services linked to the carriage of goods) is applicable in cases where the service is directly provided to the person (s) who has the product or the taxable status.

The draft would stipulate that taxpayers could initiate a change in their choice (eg. taxable choice of sale of immovable property) prior to commencing a tax audit, provided that the amendment does not affect the amount of the tax base, the tax due and the deductible tax charged in advance, which they have established and declared.

Tax Procedure

The draft returning to the legislation in force before January 1, 2018 again requires the tax authority to pay interest payments when the decision of the tax authority is illegal and as a result of which the taxpayer has a claim for reimbursement.

The rate of overdue payment would increase from twice the rate of the central bank's base rate (0.90%x 2 = 1.80%) by five percentage points of the central bank base rate from January 1, 2019 (to 0.90% + 5% = 5.90%), further increasing the potential negative tax audit penalties.

Introduction of an Immigration Tax

The draft would introduce a new payment obligation and a special immigration tax to contribute to the public burden by organizations influencing immigration. The essence of this is that the tax liability is extended to financial support of immigration in Hungary (irrespective of the nationality of the donor and the immigration organization) and to the financial support of the organization assisted immigration in Hungary (regardless of where the organization is active).

The draft specifies the concept of immigration-related activity in relation to tax liability. This includes the continuation and participation of media campaigns and media seminars on the promotion of immigration, as well as networking and operation, as well as the promotion of immigration in a positive color to encourage it. Immigration does not include the relocation of persons with the right to move and reside freely.

The basis of the tax is the sum of the financial support and the amount is 25%. The taxpayer is primarily the provider of the aid, which is also obliged to state the beneficiary of the aid. If the organization fails to make this declaration, the recipient of the aid (a Hungarian-based organization providing immigration support) becomes a taxpayer.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions