Recent changes in vocational training contribution rules from 1 January 2021

As we wrote in one of our previous newsletters, from 2021 the scope of the incomes liable to vocational training contribution has been broadened. This underlying interpretation of the law was confirmed by the Hungarian tax administration, but a subsequent government decree clarified the applicable rules. Government Decree 22/2021 (I.28.) On the Vocational Training Contribution Relief Applicable for the Emergency Period introduced rules different from the general rule for the duration of the emergency.

While under the current law (Act LXXX of 2019 on Vocational Training) the base of the vocational training contribution equals the base of the social contribution tax levied on those liable to it, under the introduced vocational training contribution relief the following types of income should be exempt from vocational training contribution, retroactively from 1 January 2021 on:

• Fringe benefits,
• Certain specified benefits,
• Income from interest rebates,
• Income withdrawn from the business,
• Income from securities lending,
• Dividend income, business dividend fund,
• Income from capital gains,
• Income of a non-resident individual engaged in performing arts earned from this activity.

As can be seen from the above, the relief does not cover Other Income under Section 28 of the Personal Income Act, so from 2021 this type of income should be subject to the vocational training contribution liability.

Yet, the types of income in the scope of the relief are exempted from the contribution from 1 January 2021 until the expiration of the relief. This also means that no contribution should be assessed and paid on fringe benefits (e.g. SZÉP Card benefits) and certain specified benefits (e.g. meals and other services purchased during a business trip, private use of the telephone, representation costs for business partners, business gifts, low-value gifts, the amounts paid to the voluntary mutual insurance fund for the usage of targeted services).

It is not yet clear how long the vocational training contribution relief will remain in force in its current form. The Government has already submitted to the Parliament a tax bill extending the validity of Government Decree 22/2021 (I.28.). According to the bill, the vocational training contribution relief should remain in force for 90 days from the promulgation of the law. We will inform our Clients in our newsletters about further developments in this regard.