New taxation on the cafeteria system

The benefits in kind (cafeteria) system has been subject to significant changes as of 2010. Even if most of the changes have an unfavourable impact on the employees (and vice versa: the changes will probably lead to an increase of the state budget), professionals consider that the employers still should implement some sort of cafeteria system instead to pay the amounts allocated for such purpose as part of the base salary.

It is beneficial though that the former yearly limit of the benefits in kind (HUF 400.0000,-) has been abolished and instead each benefit will have its individual limit provided that in all cases the amount exceding the given limits subjects the tax of 98,79%. Also, the circle of the fund allowances (amounts paid by the employer to mutual or pension fund account of the employee) wasn’t limited.

The most unfavourable novelty is the change of the former tax (and social security) exempt status of several benefits to a taxable benefit in kind category. As most probably the employers will not takeover such taxes the employees may select the elements of the package from three categories having different tax rates.

The allowance to employees using the Internet at home, life assurance respectively the housing allowance keep their tax (and social security) exempt status and there is no upper limit  thereof (first category).

The elements in the second category may be given up to a certain limit and subject to a ‘preferential‘ tax of 25%. The employer may dispense the lunch (hot meal) voucher up to HUF 18.000,-/month, the school allowance up to the 30% of the amount of the yearly statutory minimal salary, local travel pass as per the tariffs of the local public transportation company, the holiday voucher up to the yearly amount of the statutory minimal salary, the voluntary pension fund allowance up to 50% statutory minimal salary/month respectively the voluntary health fund up to 30% statutory minimal salary/month. The reimbursement of the tuition fees of any training is limited to amount of the statutory minimal salary multiplied with 2,5 and is taxable with 25% only (i) if it has been ordered by the employer and the training offers professional knowledge related to the business activity of the employer (ii) the curricula of the training is related to the given position. Please note that if the value of the certain benefit exceeds the threshold above the difference is subject to a tax of 97,89%.

The elements of the third category (cold meal voucher, culture voucher and gift voucher) do not have an upper limit (but the cafeteria package regulation will provide for such limits) and may be disbursed subject to a normal tax of 54% nevertheless, adding all payroll burdens (levied either on the employer or the employee) it increases to 98,79%.

Benefit Limit Tax
Internet unlimited 0%
Housing allowance HUF 5 million 0%
Life insurance unlimited 0%
Cold meal (lunch) voucher HUF 18.000,-/month 25%
Holiday voucher 73.500,- /month 25%
Transporation pass Unlimited 25%
School allowance 22.050,-/year 25%
Voluntary health fund premium 22.050,-/year 25%
Voluntary pension fund premium 36.750,- /month 25%
Training 183.750,- 25%
Cold meal voucher, gift voucher, culture voucher Unlimited 98,79%

Linda Horváth

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