1.The amount of social security contributions payable by a Hungarian employer has changed with effect from 1 January 1997 as follows:

                                   1996         1997 

Health insurance contribution      18%          15%
Health contribution                -            HUF 1,800/month
Pension contribution               24.5%        24%

Total                              42.5%        39%+HUF 1,800/month

2. Social security contributions payable by a Hungarian individual will remain 10% in 1997.

3. There are no significant changes in the scope of contractual relations which are subject to social security. These include: employees, members of co-operatives, freelance workers and persons working on the bases of a specific contract. However, a significant change is that the taxable base for social security contributions has been extended from salary-type payments to income which is subject to personal income tax unless specifically exempt. The exemptions include the following for example:

  • dividends which are not subject to personal income tax at the 27% rate and interest (note point 4 below)
  • study scholarships
  • entertainment expenses
  • reimbursement of business expenses
  • company cars/reimbursement of private car use
  • commuting allowances
  • contributions to pension funds.

4. Social security contributions will be payable in relation to dividend payments that are subject to personal income tax at the 27% rate (see Personal Income Tax). This will apply to dividends paid from 1997 profits only and not to dividends paid from pre-1997 profits.

5. Expatriates working in Hungary will continue to be exempt from social security contributions (at both the company level and individual level) unless they specifically elect to be covered.

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.

If you require any further information on Hungary, please call Peter Gerendasi at Price Waterhouse, Budapest: tel: ++ 36 1 269 6910 fax: ++ 36 1 269 6938
E-mail: peter_gerendasi@europe.notes.pw.com
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