Hungarian residents will notice a significant reduction in their 2022 taxes. Estimates indicate that the total tax cut will amount to 1,500 billion forints. This is the equivalent of 4 billion Euros.
The total of 1,500 billion forints will come from a combination of reductions and tax credits, including the following.
There will be a personal income tax rebate that applies to families who are raising children. This alone is estimated to save taxpayers 600 billion forints. For reference, the NAV, the Hungarian tax authority, received 835,000 applications for reimbursements last year on this tax.
This credit or rebate applies to more than just families who are raising children. It also applies to pregnant women and disabled people.
Tax Exemption for Under 25s
Those who are under 25 years old will also get to take advantage of a personal income tax exemption. This is expected to save young adults 140 billion forints.
For 2022, the Hungarian government is also cutting payroll taxes. They were previously set to 17% but will now be just 13%.
Vocational Training Contribution
Before 2022, there was a 1.5% contribution required for vocational training. This is completely eliminated for this year.
Social Contribution Tax
There will be a reduction in the social contribution tax as well. This will drop by 2.5%. That should give companies an additional 600 billion forints.
The rules for individuals who have to pay social contribution taxes are also different for 2022. Specifically, only 89% of their income is taken into account.
Hungary also already has rules in place for farmers that provide dual training or vocational training. They can claim their social contribution tax.
Simplified Contribution to Public Revenues
The simplified contribution to public revenues known as EKHO was previously 15.5%. For 2022, it will be just 13%.
Small Business Tax
The small business tax called KIVA was previously 11%. Starting in 2022, it will just be 10%. This should save small businesses an estimated 10 billion forints.
SMEs will also notice an extension of the local business tax relief. This applies to the HIPA tax. The extension of this relief should save small businesses an additional 150 billion forints.
For reference, this tax relief says that the maximum local business tax is just 1%. This applies only to businesses that don’t have more than 4 billion forints in total assets or sales revenue for the 2022-ending fiscal year.
Along with the various tax changes, there are also changes to the state aid for young people. The Start account, or baby bond, previously received 6,000 forints, about 15 Euros. For 2022, it will be 12,000 forints, or 33 Euros.
There are also increases to the allowances for children who are fostered or receive child protection benefits. These will double from the previous 12,000 HUF to 24,000 HUF. This is the equivalent of 33 and 66 Euros, respectively. This change applies no matter how much is paid into the child’s Start account.
Exceptional Tax Reduction
The Hungarian government has extended the exceptional tax reduction as well. This reduction applies to businesses that would not be able to remain open if they paid their taxes. Specifically, it only applies to businesses where that is the case due to the state of emergency (i.e., the pandemic). In this case, the tax authorities can lower their tax debt by 20%. They can do this once and not discount more than 5 million forints.
Overall Changes for Employers
Experts estimate that employers will have a total reduction of 4% on their tax burden for 2022.
Conclusion – The Hopeful Impact
The goal behind all of these tax cuts is to reduce the burden on Hungarian residents and businesses. The changes are mostly in response to the pandemic and the negative impact it has had on Hungarians.
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