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Jun 08, 2016

Hungary implements largest VAT reduction in over a decade

Next year’s tax package will save every family 80-85,000 HUF each year

Mihály Varga, minister for National Economy, has said that next year’s tax package will save  80-85,000 HUF per family with two children each year.

 

The minister said that about one-third of tax reductions stemmed from lowering VAT on certain products and services, while two-thirds came from increasing allowances for families with children.

In 2017, VAT on poultry, eggs and fresh milk will be cut to 5 percent, while that on internet and restaurant services will be reduced to 18 percent. As a result of these measures, 55 billion HUF is expected to be saved by Hungarian households.

Employers will be exempt from paying tax on contributions to kindergarten charges, one of the available fringe benefits. This will save one billion HUF for families with children.

This practically means that in case an employee presents a bill for nursery or kindergarten services issued on behalf of the employer, neither the employee nor the employer are to pay any tax on the refunded amount, the minister said.

Through the package of measures aimed at stimulating labor force mobility, enterprises and employees are set to gain nine billion HUF.

Small enterprises are going to benefit from a business-friendly tax package next year, he pointed out.

Thanks to the new, simplified fringe benefit scheme (sometimes referred to as the “cafeteria” scheme), in 2017 more than four million employees may receive 100 000 HUF per year in cash.

Besides that amount, 100 000 and 350 000 HUF per year may be transferred to the SZÉP vouchers of public sector and private sector employees, respectively.

One of the major measures aimed at combating the black economy, Mihály Varga underlined the “Hungarian Google-tax”, a kind of advertisement levy. This amendment ensures that global companies with advertisement operations shoulder some of the public burdens in Hungary.