In response to the COVID-19 outbreak, the Hungarian government declared a state of emergency to deal more effectively with the resulting challenges and enacted several employment-related measures.
Before the pandemic, any type of remote work was agreed on between employers and employees. Now, employers can instruct employees unilaterally to work remotely. In addition, the government suspended the application of the latest date when a change in the work-schedule can be communicated and extended the upper limit of the term of the working time frame up to 24 months. Accordingly, any change in the work-schedule can be communicated even on the day prior to the day affected by the change without considering such work as overtime. By introducing a longer working time frame, the employer can instruct employees to stay at home for a longer period, and the days off could be scheduled as working days following the return to the workplace.
Three types of subsidies for businesses have also been introduced. The first is applicable for businesses in research and development with a capped monthly amount of HUF 318,920 (approximately EUR 910) per employee. Secondly, a subsidy is available upon the reduction of the daily working hours of an employee within a specified range, to the maximum monthly amount of HUF 112,418 (approximately EUR 321) / employee. Lastly, employers hiring registered job seekers may be eligible for aid to a capped amount of HUF 200,000 (approximately EUR 570) / month. Employers must meet several preconditions to be eligible for these subsidies; one of which is that all the subsidies are linked to lay-off prohibitions for different periods.
The state of emergency is planned to end soon, and by May 26 a decree will be issued defining the “surviving” outbreak-related measures. However, it is certain that the lay-off prohibitions linked to the subsidies will be applicable even after the end of the state of emergency. If employers introduced a longer working time frame, they can terminate it before its expiry date. Home office has become more popular due to the outbreak but remains unregulated by the Labor Code. It is likely that new legislation will be passed to establish its main rules.
The following tax measures have been enacted to mitigate the effects of the outbreak on the economy and state revenues.
The deadline for declaring and paying corporate income tax, local business tax, energy suppliers’ income tax, small business tax and the innovation contribution for 2019 that would otherwise be due between April 22 and September 30 has been postponed until September 30 to ease the cash-flow pressure on businesses.
The rules on the development reserve have also been relaxed, i.e., businesses may account for development reserve up to 100% of the pre-tax profits instead of the previous 50% threshold, but its amount may still not exceed HUF 10 billion (approximately EUR 28.5 million). Businesses subject to corporate income tax may benefit from this scheme starting from the 2019 tax year. Based on a recent legislative proposal, this relaxation is not a one-off measure and may be utilized in subsequent tax years.
The reduction of the rate of the social tax by 2% to 15.5% effective from July 1 is yet another preferential measure. Certain industries (e.g., media, tourism, airlines) also received additional temporary benefits reducing the tax burden on wages (e.g., 17.5% social tax, 18.5% social security contribution).
Additionally, businesses may be granted a tax reduction or payment facilities on a one-off basis on their request submitted by the 30th day following the lifting of the state of emergency.
Besides preferential tax measures, a steeply progressive retail tax has been introduced. This levy will also apply to the handing-over of goods to customers in Hungary by a foreign resident, where such goods are not supplied via a Hungarian branch office, i.e., certain webshops may be subject to retail tax. This tax will likely have a significant impact on the profits of large retail businesses, as they have limited room for renegotiating the contractual terms with suppliers to shift the tax expenses due to recently introduced legislative constraints.