“Beginning on 1 July, the favourable tax regulations will become valid for all working pensioners, and accordingly they will not have to pay health insurance contributions or pension contributions. The reduction in tax burdens could leave a total of ten billion forints (EUR 28 million) in the pockets of those affected during the remaining six months of this year”, the Ministry of Finance’s Parliamentary State Secretary András Tállai said in a statement to Hungarian news agency MTI.
The State Secretary pointed out that according to the current regulations, only the 15 percent personal income tax is deducted from the earnings of working pensioners; employee contributions are not deducted. “From 1 July 2020, not just pensioners who are in employment, but all people who are pensioners in their own right and who perform work irrespective of the form of employment will also become exempt from having to pay insurance and social contributions”, Mr. Tállai explained.
He underlined the fact that pensioners today can count on the government, which is thinking in terms of a multi-generational country in which old people are afforded more appreciation. As he explained, the change will mean a saving of 14 percent for those affected compared to their current income. “71 thousand forints currently remain in the pockets of pensioners from a gross monthly wage of 100 thousand forints, after the dedication of personal income tax and employee contributions. Beginning on 1 July, only the income tax will be deducted, meaning net income will increase to 85 thousand forints. This means that, remaining with the same example of a gross monthly salary of one hundred thousand forints, an additional 168 thousand forints will remain in the pockets of the working pensioner over a period of a year”, the State Secretary explained.
According to the available data, there are currently over 36 thousand pensioners working outside the framework of an employment contract, and the change in regulations will be increasing their net wages by 14 percent from July. According to the administration’s calculations, the expansion of exemption from contribution payments will leave some twenty billion forints (EUR 56 million) in the pockets of those affected each year.
Mr. Tállai told the press that when the exemption from the need to pay employee contributions was introduced for employed pensioners in 2019, 75 thousand older people were active in this manner. By this February, the number of pensioners employed by enterprises within the framework of employment contracts had risen to 129 thousand. This number fell somewhat to 109 thousand in April as a result of the coronavirus pandemic, but even during the month that was the low point of the epidemic, there were significantly more pensioners in employment than in 2018.
According to the State Secretary, this is a further reason why extending the exemption from contributions payments to all working pensioners is particularly timely. “The regulations also favour businesses”, he noted. “On the one hand, because through employing previously retired experts, enterprises could acquire experience and knowledge that represents the highest possible added value. And secondly because from 1 July they will be saving 17 percent in tax contributions if they employ a pensioner in view of the fact that enterprises and organisations will be exempt from having to pay social contributions tax and the vocational training contribution”, he added.
“The favourable regulations will also extend to individual and group enterprises founded by pensioners”, the State Secretary said. “From 1 July, retired entrepreneurs will not have to pay social security contributions, and the enterprise will also not have to pay healthcare service contributions with respect to their pensioner partner entrepreneurs”, he detailed.