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Publications Determination of local business tax, calculation of retirement pension, changes to SZÉP-card benefits

Determination of local business tax, calculation of retirement pension, changes to SZÉP-card benefits

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​Published on: 21.11.2023 / Reading time approx. 5 minutes


Determination of local business tax base in Hungary

In addition to corporate tax, companies in Hungary have to pay local business taxa as well. In contrast to Germany, for example, the starting point for determining the assessment basis is not the earnings before tax but the sales revenue generated in the financial year reduced by certain expenses up to a specified amount. 

The following information is relevant for calculations based on domestic sales revenue; differences may be seen for export transactions.

Determination of local business tax base:



It should be noted that the incurred cost of goods sold and intermediary service costs could be deducted from the net sales revenue only to a certain percentage of the relevant values.

Deductible proportion of expenses (from cost of goods sold, intermediary service costs):



Example for calculating local business tax:



Determination of the maximum deductible costs (goods, services):



Calculation of local business tax:



Determining the local business tax base could be challenging for tax-payers as a number of requirements must be taken into account to calculate the allowable cost values. Services provided by other companies can only be recognized as a tax-deductible amount if the precisely defined requirements were considered. Since local business tax payment is usually a significant amount for companies, it is important to pay attention to the correct calculation of it. 

Incorrect local business tax calculations could result in additional tax payments and penalties, as well in significant tax overpayments if legally permitted options for deductions were not applied for. 

Should you
  • have specific questions about the deductibility of expenses when determining the local business tax basis, or
  • be unsure about the requirements to be used in relation to cost of goods sold and intermediary services, 

our tax experts would be happy to assist you. Please do not hesitate to contact them.


Minimum wage

It will increase from December 2023 
  • the minimum wage from currently HUF 232,000 to HUF 266,800 and
  • the wage minimum for skilled workers from HUF 296,000 to HUF 326,000.

Calculation of the Hungarian state retirement pension

After the political change in Eastern Europe, a large number of foreign employees began to work and pay social security contributions in Hungary which results in an entitlement to state pension. The procedure for determining state pension in Hungary is briefly outlined below without going into specific details.

The Hungarian pension formula


To determine Hungarian state retirement pension entitlements, a formula similar to the German pension calculator could be created:



1) Multiplier based on insurance years 

 
In Hungary, a so-called full pension entitlement is achieved if there are at least 20 years of social security contribution payments. If the requirement of 20 years is fulfilled, the pension entitlement amounts to 53% of the average  “lifetime net salary/month”. If there are less than 20 years and certain conditions are met, the minimum pension amount is HUF 28,500 per month.

Ratio of insured years - pension level:



2) Access factor

The access factor is usually 1.0. A different i.e. higher rate could be achieved if the person renounces the payment of the state pension when achieving the minimum retirement age and continues his/her activity with paying social security contribution.

3) Average net salaries during working life

In Hungary, determining the average net salaries of an insured person's working life requires a comprehensive calculation, which can only be presented here in a simplified form:

Step 1.
In the first step, the insured person's gross earnings relevant for pension calculations  must be determined for each calendar year from 1988 up to the last day before claiming retirement state pension, taking into account the social security contribution payment limits.

Step 2.
As a second step, the remuneration for the individual insured years needs to be decreased by social security contribution paid (year by year).

Step 3.
In a further step, the remaining amount needs to be reduced by personal income tax paid. 

Step 4.
Next, the real value of the net income per year must be determined by valorization (value preservation)  of each insured year using the real value table published annually.

Step 5.
In a further step, it should be taken into account that if the net income is exceeding the value of HUF 372,000 determined based on the real value table, the excess value would be not considered in full when calculating the final pension amount.

Step 6.
Next, the average daily value also needs to be determined, from which an annual value and then the average monthly value would be calculated.

4) Pension type factor

This factor determines the amount of pension payment depending on the type of pension. For a pension due based on reaching retirement age, the factor is considered as 1; lower factors are used, among other things, if the calculation is made for widow's pension or disability pension. 


Additional points be taken into account for Hungary, as an example:
  • When calculating the state pension insured years, only full years of social security contribution payments are taken into account,
  • not all insured years are taken into account equally,
  • there may be some cases when the state pension amount could be decreased although additional insured years were achieved,
  • the state pension is exempt from personal income tax and other contributions,
  • recently 13 monthly installments of pensions are paid,
  • periods of university and college study completed before 1998 can be taken into account as insured period for the calculation,
  • if average wage increase exceeds the inflation rate, new pensioners are in a better position as existing pensioners.

Favourable changes to the SZÉP-card benefit and wine products

Between 1 August and 31 December 2023, the employer may grant a one-off subsidy of up to HUF 200,000 as a non-wage benefit for the employees' SZÉP-card.

This can be transferred in addition to the HUF 450,000 annual recreational allowance. If the employee has more employers, he can receive the HUF 200,000 financial support from each employer. If the employee's employment relationship does not last for the entire tax year, it can still be paid in full. If the employee starts the employment at a new place of work during this period, the new employer can also transfer HUF 200,000 to the employee's SZÉP-card. The employer can transfer HUF 200,000 to the employee in several installments.

From 16 November 2023, wine products sold in bottles can be given as a gift and served for representative purposes tax-free. From 16 November 2023 until the end of the emergency situation, „the supply of bottled wine products with a protected designation of origin or a protected geographical indication, purchased in bottles for the purposes of catering, for representative or non-representative purposes, furthermore as a business gift or gift of a small value” will be exempt from tax. The benefit is not tax-free if the discounted product is purchased from a retailer (e.g. a wine house, a retail or wholesale store, a chain of stores, a specialist store for wine products)

During this period, wine products are not considered as certain specific benefits.

The following wine products are included in this scope:
  • wine
  • liquer wine
  • sparkling wine
  • quality sparkling wine
  • semi-sparkling wine etc.

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