The Hungarian Prime Minister has recently announced a tax package which decreases the burden of the taxes levied on employment.
Personal income tax. According to the intention of the Government the present system of income ranges and tax rates will gradually change along the following lines: as of 1 July 2009, for incomes below 2,200,000 forint, a tax rate of 19% will apply and for incomes above 2,200,000 38%. As of 1 January 2010 the tax rate for incomes below 3,000,000 forint will be 19% and for income above this level 38%. Tax rate
Next year, however, the tax allowances will probably decrease to a significant extent, except the family allowance for families with three or more children. As of 2010, the tax exemption of in-kind benefits provided by employers and of other incomes exempt from tax will be limited significantly.
Contributions. According to what has been so far disclosed, the contributions which have to be paid by employers and currently amount to 32% (29% social insurance contribution + 3% contribution to the Unemployment Fund paid by employers) should be decreased to 27% as of the middle of the year.
With this regard, health insurance contributions should decrease by 3%, and the contribution to the Unemployment Fund by 2%. As of July 2009, the contribution decrease could be applied to salaries below twice the minimum wage, while above this amount the 32% rate would remain valid. Starting in 2010, the rate of contributions paid by employers should, however, decrease to 27% uniformly, without income limits.
Corporate income tax. Pursuant to the tax package, the surtax related to the income of enterprises would be abolished as of 1 January 2010, but the corporate income tax would be increased from 16% to 19%. As the tax base would be broadened it is highly probable that tax allowances will be abolished. According to the intentions, allowances related to investments would not be modified and therefore the opportunity of creating development reserve, the investment allowance for SME’s, and the accelerated depreciation rates would remain in effect.