Abolition of SZÉP Card sub-accounts,
tax base relief for mothers under 30 and
tax relief for parents of long-term sick children from 2023

At the end of December, the Hungarian government issued decrees amending certain employee benefits and tax reliefs, which can bring significant changes to the lives of workers and families from 2023. In this newsletter, we detail these changes.

Changes affecting SZÉP Card benefits

As it is known, the government extended the interoperability between the three sub-accounts of the SZÉP Card (catering, accommodation, leisure) until 31 December 2022, so from 1 February 2022, the funds transferred to any sub-account could be freely used for any of the services listed in the relevant regulation.

Government Decree 593/2022 (XII. 28.) broadened the above regulation by abolishing the sub-accounts of the SZÉP Card from 1 January 2023, so that SZÉP Card benefits can be provided to employees without indicating sub-accounts. Accordingly, the tax liability should be calculated as follows from 1 January 2023:

• up to the so-called „recreational amount” of HUF 450,000 per year, the benefit is taxed as a fringe benefit under which the employer is liable to pay 15% personal income tax and 13% social contribution tax on the gross value of the benefit;
• the amount exceeding the annual HUF 450,000 threshold becomes taxable as a certain defined benefit which means a 15% personal income tax and 13% social contribution tax being assessed on the gross value of the excess amount multiplied by 1.18.

Amounts previously transferred to sub-accounts and not yet used can be used for any eligible services regardless of the sub-account.

Government Decree 594/2022 (XII. 28.) re-regulated the services that can be used with SZÉP cards, but there are no substantive changes to report here, as the change mainly serves to separate the different categories of services, taking into account the abolition of sub-accounts. At the same time, the government has increased the maximum fee that can be charged to the employee when replacing a lost SZÉP Card from HUF 1,500 to HUF 1,800.

Introduction of a tax credit for young mothers under 30 years of age

Under Government Decree 596/2022 (XII. 28.), from January 2023, women under the age of 30 can reduce their consolidated tax base under the Personal Income Tax Act by the benefit of mothers under the age of 30, provided that their entitlement to the family allowance opens on the day before they turn 30, but after 31 December 2022.

The tax credit for mothers under 30 can be claimed after the tax credit for mothers with four or more children and after the tax credit for young people under 25, but before the personal tax relief, the first-married couples' tax relief and the family tax relief.

The tax credit is granted to young mothers on income qualifying as wages, other income earned from employment (with one exception) and certain self-employment income types listed in the Government Decree. It is available from the month of entitlement to the family allowance after the age of 25 at the earliest, up to the month of entitlement after the age of 30 at the latest.

The maximum amount of the tax credit per tax year is the product of the young mother's months of entitlement in the tax year calculated as above and the average gross earnings published by the Hungarian Central Statistical Office for the month of July preceding the year of entitlement to the benefit.

If the young mother's tax base is reduced to zero after taking into account the young mother's tax credit, the remaining credit can still be claimed as a family tax relief against social security contributions.

Family tax relief for parents of permanently sick or seriously disabled children

According to Government Decree 597/2022 (28.XII.), the family tax relief under the Personal Income Tax Act is available for each beneficiary dependent who qualifies as a permanently ill or severely disabled person under the Family Support Act, in the amount increased by HUF 66,670 per month of entitlement and per beneficiary dependent.

In the personal tax income tax return or the tax advance statement, the eligible individual should indicate if the dependent beneficiary qualifies as a dependent beneficiary for the increased family tax relief and in which months of the tax year he or she qualified as such.

The higher family tax relief can be claimed for income earned from 1 January 2023 and included in the consolidated tax base according to the provisions of the Personal Income Tax Act.

10 January, 2023

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Should you have any questions regarding this newsletter, the tax experts of VGD Hungary will be pleased to assist you.

This newsletter provides general information and does not constitute tax advice.