How to reduce payroll taxes in Hungary in 2019?
This is an updated version of our previous article here. Read on to find the most up-to-date information.
In this article we will show 4 ways your Hungarian company can reduce payroll taxes. Previously we have already written about the payroll taxes and the components of salary in Hungary. A Hungarian company has to pay the following two taxes on top of the gross salary (contracted salary):
- 17,5% social contribution tax
- 1,5% vocational training tax
Reduce payroll taxes
The 17,5% social contribution tax is a major payroll cost for companies. However, in some special cases it can be reduced to 8,75%, or sometimes even to 0%, as the authorities may grant a significant payroll tax relief for certain disadvantaged groups. Before you recruit staff, we recommend you consider the following options.
Option 1: Hire career entrants
A career entrant is now defined as someone who has less than 92 days of employment in the last 275 days before the starting date of the employment, regardless of age or former employment. The company has 0% social contribution tax liability on the gross salary up to HUF 149,000 in the first two years of the employment and 8,75% liability in the third year.
Option 2: Hire employees with disabilities
The company pays 0% social contribution tax on their gross salary up to HUF 298,000 as long as the employee has a valid rehabilitation card.
Option 3: Hire women returning from maternity leave (who have 3 or more children)
The company pays 0% social contribution tax on the gross salary up to HUF 149,000 in the first three years and 8,75% in the fourth and fifth year. A verification of the family allowance received after 3 or more children is required.
Option 4: Hire unqualified workers
The company pays 8,75% social contribution tax on the gross salary as long as the workers are registered under a certain code of the job classification system (called FEOR).
Payroll tax relief in Hungary
People who have difficulties entering the labor market may prove as eager, skilled, and earnest employees as anyone else. At the same time, since authorities want to encourage their employment, they will provide significant payroll tax reliefs to your Hungarian company.
Keep this information in mind when planning recruitment, since it also helps you with more conscious business planning. In any case, please always contact your accountant in time, and ask your questions if you would like to know more details or would be interested in further tax deduction options.
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