The Far-Reaching Reform of Cafeteria Allowances in 2019 in Hungary

The Far-Reaching Reform of Cafeteria Allowances in 2019 in Hungary

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The Hungarian Parliament enacted the tax package for 2019 in July 2018, which contains, inter alia, a significant modification in the cafeteria allowances. The aim of the reform is to simplify the proliferated cafeteria system and to reduce the associated administrative burden.

The most important change is that only the so-called ‘Széchenyi Pihenő Kártya’ (i.e. ‘SZÉP Card’) will be considered as a non-wage benefit falling under the favourable tax category of 34,5%. The amount of the allowances provided by the employer in this category might be maximum HUF 450,000 per year. Some exceptional allowances will fall under the tax category of 40.71%; such as the gifts of small value provided by the employer once a year (the value of which does not exceed 10% of the minimum wage). However, all other allowances shall be considered as salary with the application of the general tax rates. The commonly used allowances (such as housing allowance, aid for the repayment of student loan, culture vouchers) will be deemed as salary and will be subject to taxation under the general rules. Only the reimbursement of the costs of nursery school will remain exempted from tax.

In order to comply with the new provisions, the employers now should review and modify their internal policies on cafeteria allowances

By Rita Parkanyi, Partner, KCG Partners Law Firm