Four types of tax contribution are being merged on 1 July 2020, in addition to which the rate of social contribution tax will also be falling to 15.5 percent and all working pensioners will be exempt from paying contributions from Wednesday.
“In addition to working pensioners, families with children can also count on receiving a tax break in view of the fact that the family tax subsidy received according to the number of children in the family will also become more favourable from Wednesday”, the Ministry of Finance’s State Secretary for Tax Affairs Norbert Izer said in a statement to Hungarian news agency MTI.
“The introduction of the new contributions act on 1 July means the start of a new, much clearer and simpler era within the social security system”, the State Secretary declared.
“One of the most important tax simplification changes included in the new Act on Social Security is the fact that the pension contribution, the in kind and in cash health insurance contributions, and the job market contribution will all be merged into a single tax beginning on 1 July 2020”, Mr. Izer highlighted.
“Businesses are saving a significant amount of time and money as a result of the reduction of bureaucratic burdens”, he pointed out. “Beginning on Wednesday, the rate of the new unified contribution, the social security contribution, will be 18.5 percent. In addition to the significant simplification of the tax system, the introduction of the unified contribution also assures, for instance, that primary agricultural producers and people working under a contract of engagement will receive the right to job market services following 1 July”, the State Secretary explained.
“In addition to the reduction of bureaucratic burdens, the tax concessions being introduced as a result of the new, unified contributions act will be affecting practically everybody”, the State Secretary said, pointing out that as a result of the changes families with children, pensioners and enterprises will all be able to save on their taxes from Wednesday.
“Enterprises will be saving 7.5 billion forints (EUR 21 million) a year thanks to the loosening of regulations of the minimum limit for the payment of healthcare and job market contributions. While enterprises currently pay these contributions with respect to one and a half times the minimum wage, from 1 July 2020 they will be paying them with respect to the minimum wage”, he explained.
“The extension of exemption from paying contributions to all working pensioners will leave some 20 billion forints (EUR 56.2 million) in pensioners’ pockets annually. Beginning on 1 July, all working pensioners can expect to enjoy a 14 percent increase in their income compared to previously”, Mr. Izer continued.
“The tax concession received according to the number of children in a family will also be becoming more favourable from Wednesday. Currently, the subsidy cannot be deducted from the 1.5 percent job market contribution, but from 1 July the family tax subsidy can be deducted up to the full extent of the 18.5 percent social security contribution”, the State Secretary detailed.
Mr. Izer also spoke about the 2 percent reduction in the rate of social contribution tax, which will also come into force on 1 July, noting that the new tax rate of 15.5 percent could prove to be one of the most effective tax policy measures with relation to the rebooting of the economy. “The tax cut will be leaving 160 billion forints (EUR 450 million) in the pockets of enterprises over the next six months, thereby also helping to protect jobs and facilitating the creation of new workplaces”, he pointed out.
“Beginning in July, the social security system will switch to a transparent and secure system, and accordingly from now on nobody will be able to make use of state healthcare services without being eligible to do so”, Mr. Izer highlighted.
He added that Parliament will be deciding on Friday concerning the government’s proposal on easing the system of sanctions relating to the unauthorised use of healthcare services. If Parliament adopts the bill, then, amongst others, private individuals will have double the time available to acquire the necessary eligibility. People who are in arrears with relation to social security payments will have six months available to get their payments up to date, compared to the original three months.