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Hungary’s new Social Security law to take effect on July 1, 2020

Law aims to simplify the tax system, reduce public burdens, and help eliminate tax evaders.

The Hungarian government’s new Social Security legislation has been passed and will take effect July 1, 2020. Norbert Izer, state secretary for tax affairs at the Ministry of Finance, called the measure a “three-in-one” law because it met all three of the government’s tax policy goals: simplify the tax system, reduce public burdens and help eliminate tax evaders.

The government aims to reduce the number of taxes to be paid by one third by 2022, primarily benefiting entrepreneurs, families and pensioners. As of July 1, 2020, there will already be nine types less than in 2018. Taxpayers will also have to pay just a single 18.5 percent social security contribution, instead of four separate ones. 

The new law also filters out free riders – those who have unauthorized access to health care without contributing to the system. These parties take advantage of the system and damage the budget to the detriment of honest payers.

Entrepreneurs will save HUF 7.5 billion a year due to a change in the minimum contribution rules. And one billion forints will remain for families with children, after the family benefit can be claimed against the full 18.5 percent Social Security contribution. Per the healthcare contribution, full health coverage, which stood at HUF 7,500 per month this year, will increase to HUF 7,710  from January 1, 2020.

The secretary did note that if you owe more than three times your monthly contribution, you will not be able to access health care free of charge until the debt is paid off. However, all taxpayers begin with a clean sheet on July 1st, 2020, and only debt accrued thereafter will count towards the three-month total. 

Separately, in a move to help pensioners return to the labor market, all working retirees will only have to pay 15 percent personal income tax on their wages and no other public burden.

Pensioners, persons receiving child-related benefits, children with social security needs and the homeless have no obligation to pay any contribution.

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