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Commuting Allowance Doubled in Hungary

Commuting Allowance Doubled in Hungary

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Employees are entitled to compensation from their employers for commuting from another town or city. Due to the significant increase in fuel prices, the corresponding thresholds have been doubled by the end of the ‘state of emergency’ in effect (end of June 2023, for now).

Background

According to the provisions of the Hungarian Labour Code, the employer is obliged to reimburse the employee for the necessary and justified costs incurred in the performance of the employment relationship.

Such justified costs include, for example, the employee's travel expenses to and from work. If the term "commuting to work" as defined in the relevant Government Decree on the reimbursement of travel expenses in connection with commuting to work ("Decree") includes the employee's commuting to work, i.e. inter alia, the place of work and the place of residence are not located within the same municipality, the employer reimburses the cost of the pass or ticket for the employee's commuting to work at the rate specified in the Decree, provided that the additional conditions set out in the Decree are met.

Commuting allowance

Additionally, if the employee travels to the place of work by private car and if the conditions laid down in the Decree are met – for example, there is no public transport available or if the employee has a child in day-care or in a public education establishment under the age of ten – the employer is required to reimburse a minimum amount to the employee and is free to supplement this amount under the given threshold tax-free based on the actual distance from the place of work.

In accordance with the Personal Income Tax Act and the new legislation on the threshold, the corresponding amounts are:

• 18 HUF/km as minimum reimbursement to be paid by the employers (60% of the threshold);
• up to 30 HUF/km supplementary, tax-free compensation limit to 15 HUF/km (subject to the discretion of the employer).

Employers are entitled to apply the increased threshold from January 2023 and are required to do so from February, with regard to the minimum reimbursement respectively. Both increased amounts are formally applicable by the end of the ‘state of emergency’ – end of June 2023 – that might be prolonged or implemented in the regular legislation afterwards.
Furthermore, the benefit applies in particular, but not exclusively, to commuting to work by private car, i.e. the employer is entitled to provide a tax-free kilometre-based contribution for employees travelling to work by bicycle, scooter or other vehicles up to the above amount.

By Bálint Zsoldos, Attorney at Law, KCG Partners Law Firm

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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