Government approves 25% tax on “extra-wage” compensation

The government decided at a cabinet meeting on Wednesday to tax extra-wage compensation, such as meal and vacation vouchers, at a rate of 25pc, while eliminating the HUF 400,000 annual limit on the compensation, government spokesman Domokos Szollar said.

The preferential rate will apply to the extra-wage compensation up to the monthly minimum wage for public transportation passes and vacation vouchers, up to a monthly HUF 18,000 for hot meal vouchers, up to half of the monthly minimum wage for voluntary pension fund contributions, up to two and a half times the minimum wage for training and up to 30pc of the minimum wage for support for school-starters.

Free or discounted computer and internet use provided by employers will remain exempt.

The government will decree that the 20pc VAT rate will apply to the entire value of contracts on the sale of homes submitted to the Land Office by June 30. (Hungary’s main VAT rate is to rise to 25pc from 20pc on July 1.)

Hotel and catering activities will fall under the new 18pc preferential VAT rate, with a tentative introduction of the new rate on July 1.

The government approved the introduction of a bracketed tax on property valued at HUF 30m or more. The wealth tax rate will be 0.25pc on the value up to HUF 30m, 0.35pc on the value between HUF 30m and HUF 50m and 0.5pc on the value over HUF 50m. Homes where the owner lives will be exempt, however, from the tax up to HUF 30m, and a second property will be tax exempt up to the value of HUF 20m.

The government approved exemptions from the wealth tax for vacation property owned by unions as long as at least half of union members use the facilities.

The government decided tax office APEH would collect the Local Business Tax, taking over the task from local councils. Local councils will still have the right to declare exemptions from the tax for some companies, he added.

APEH will be required to transfer 100pc of the revenue from the tax to local councils by December 20.