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FinMin submits bill reducing payroll tax

Government

Hungary's Finance Ministry has submitted a bill to lawmakers that would reduce employers' social security contribution by 2.5 percentage points and scrap the 1.5-percentage point vocational training contribution from January 1, 2022, according to a report by state news wire MTI.

The combined four-percentage-point reduction in employers' tax burden on labor to 13% was a condition of an agreement reached earlier in November to raise the minimum wage by over 19%.

The minimum wage for unskilled workers is set to rise to a gross monthly HUF 200,000, while the minimum wage for skilled laborers climbs to HUF 260,000 from the start of next year.

The bill tabled by the ministry would also reduce the small business tax (KIVA) rate by one percentage point to 10pc and the simplified contribution to public revenues (EKHO) from 15.5% to 13%.

The bill would extend local business tax (HIPA) relief to SMEs into 2022.

As part of coronavirus crisis relief, the central government halved the local business tax in 2021 for companies with annual turnover of under HUF 4 billion and fewer than 250 people on payroll. The central government automatically compensated settlements with fewer than 25,000 residents for revenue loss because of the measure, while compensation for larger cities was weighed on a case-by-case basis. 

The bill would double the annual top-up cap for baby bonds, a high-yield security available to newborn Hungarians since 2006, from HUF 6,000 to HUF 12,000.

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