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Reduction of the Social Contribution Tax in Hungary

Reduction of the Social Contribution Tax in Hungary

Hungary
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Subsequent to the previous reduction of the social contribution tax effective from 1 July 2019 (17.5%), which is the main labour-related tax burden of employers, the Hungarian legislation further decreases the social contribution tax as of 1 July 2020.

In line with the earlier plans, the new tax rate will be 15.5% defined by the modification. The new reduction affects also the tax burden of the cafeteria elements, which are subjects to social contribution tax. In case of this cafeteria elements the new tax rate is also applicable. One of the main long term goals of the Hungarian Government is to significantly improve the competitiveness of Hungary regarding the area of employment. The new modification is one of the steps of this goal but it was adopted under the special legislative procedure caused by COVID-19 situation.

The Hungarian Government plans to further decrease the tax burdens of employment (especially the social contribution tax) in the following years. The final proposed rate, which has been announced prior to the economic crisis caused by COVID-19, is 11.5% by 2022, provided that the economic environment allows it and other certain conditions are met.

By Gabriella Galik, Partner, KCG Partners Law Firm

Hungary Knowledge Partner

DLA Piper is a global law firm with lawyers located in more than 40 countries throughout the Americas, Europe, the Middle East, Africa, and Asia Pacific. This positions us to help clients with their legal needs around the world.

With more than 60 lawyers, including 14 partners, and a staff of over 140, DLA Piper Hungary is one of the largest international law firms operating in Hungary. What makes us stand out is that we offer not only legal services but also tax and business advisory support in a fully integrated manner. We maximize synergies between legal, tax, and business advisory services to offer a unique service for our clients, particularly in regulated industries such as energy, infrastructure, life sciences, banking, and telecommunications.

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DLA Piper Hungary has received numerous professional awards and is consistently ranked among the top law firms in Hungary by international rankings. We are ranked #1 by Mergermarket among the law firms active in Hungary based on the volume of M&A deals handled between 2005 and 2024.

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