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Fringe benefits in Hungary – Cafeteria 2018

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Fringe benefits in Hungary – Cafeteria 2018

To see fringe benefits in Hungary in 2019, click here.

In Hungary, fringe benefits are regularly referred to as cafeteria. This means that apart from  salary, employees can receive a “non-salary compensation”. The various fringe benefits or cafeteria elements offer more favorable taxation options than regular salary – this is why many employers decide to offer cafeteria to their employees.

What exactly is cafeteria in Hungary?

When you receive money in exchange for the work you perform for your employer, you can spend that money any way you want, no questions asked. When you receive cafeteria, the way you can spend it is determined. For example, you can spend it only on hot meals. This helps economy become more transparent, and in exchange the government provides tax redemption, or even tax exemption to the users.

How cost-effective is cafeteria?

In Hungary, ca. 45% of the total salary cost is taxes and contributions (part paid by the employee, part paid by the employer). In comparison, cafeteria elements are taxed at lower rates. Moreover, in this case, tax payment is the employer’s liability, while cafeteria elements are tax free for the employees, this way further increasing their net income.

In the below list, the amount are net amounts, on which the employer pays the indicated taxes to the authorities.

Cafeteria elements at a tax rate of 34.22%

  1. Cash payment up to HUF 100,000 (EUR 330) per year
  2. Széchenyi Recreation Card (“SZÉP” Card). This card has 3 “pockets”, so you may choose 3 purposes in which to use cafeteria (the employer and the employee have to agree on this beforehand). These are:
  • SZÉP Accommodation (max. HUF 225,000, ca. EUR 750 per year), for paying for accommodation when on holiday where the provider accepts is
  • SZÉP Catering (max. HUF 150,000, ca. EUR 500 per year), for paying for food and meals where the provider accepts it
  • SZÉP Leisure (max. HUF 75,000, ca. EUR 250 per year), for paying for theater tickets or museum entrance fee, exhibition, etc where the provider accepts it

The cafeteria elements listed above may be combined in any amount, but they are limited in HUF 450,000 (ca. EUR 1,500) per year. For example, you can offer your employee HUF 100,000 in cash and HUF 350,000 on the SZÉP card (distributing it among the 3 pockets in any way you agree on).

Cafeteria elements at a tax rate of 40.71%

  • Reimbursement of the monthly local travel pass (for local public transport)
  • “Erzsébet” vouchers (which may be used to purchase food, clothes, electronical devices, school starting support, cultural and sport programs, etc.)
  • Contribution to a voluntary health fund
  • Contribution to a voluntary pension fund
  • Hot meals at the work place
  • Spending holidays at a company resort

Cafeteria elements that are tax free (tax rate 0.00%)

  • Tickets to cultural events, programs, services (max. HUF 50,000/year/family member)
  • Tickets or passes to sport events (unlimited)
  • Children’s daycare
  • Housing support (max. HUF 5,000,000 or ca. EUR 16,600 over 5 years)
  • Rental support for employees living at a distance
  • Financial support for student loan repayment
  • Life insurance for whole life (unlimited)
  • Risk insurance (monthly 30% of the current minimum wage)
  • Computer usage (unlimited)

Tax free cafeteria elements are often subject to more thorough investigation, so make sure you meet all conditions before deciding on them.

Developing your Cafeteria Plan

When you are developing the cafeteria plan for your Hungarian company, ask for the expert help of your English-speaking accountant, who can explain all the current regulations. This way you can optimize the amount of taxes you pay after your employees. There is no government regulated cafeteria structure you have to apply, but the cafeteria plan structure at your company should be transparent and available to all your employees. In any case, ask your accountant, or especially your payroll advisor about your options.

If you already have a cafeteria plan: it is January, make sure to update your cafeteria plan, and send a notice to your employees!

Last updated: 12 January, 2018.

To see fringe benefits in Hungary in 2019, click here.

The post Fringe benefits in Hungary – Cafeteria 2018 appeared first on HELPERS.

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