Next week marks the start of the summer holidays, which also marks the start of student employment for tens of thousands of students. Most students will pay no income tax on the income they earn from working, partly for financial reasons and partly to gain work experience, thanks to the under-25s' tax credit. However, it is important to pay attention to the type of employment relationship, as the different tax obligations associated with different forms of employment have a significant impact on the evolution of net income. The main options are explored in the following analysis by Moore Hungary.
From Reduction in income tax applies to self-employment and non-self-employment income from the employer. A a discount of up to HUF 499 952 per month, which means a tax saving of HUF 74 993 for students in the months of eligibility. For lower incomes, the student pays no tax, while for higher incomes, the payer deducts personal income tax from the higher part of the income.
Optimally, the student's gross and net income are the same. This is is available for employment through a school cooperative. Until the age of 25 the student pays neither personal income tax nor contributions. Moreover, the employer is not liable to social contribution tax. In addition, the student may be given a benefit, such as a SZÉP card, in which case the company receiving the school cooperative service is the employer.
At the company student in employment does not pay VAT when the conditions for the reduction are met, but his/her income constitutes a contribution base, from which the employer deducts 18,5% in social security contributions.
If the student on the basis of an agency contract works, the contribution is calculated according to the rules applicable to self-employment income. This means that an expense can be charged against self-employment income, which can be itemised, based on invoices, or 10% without vouchers. A surcharge is only payable if the fee paid to the student is 30% of the minimum wage on the first day of the month in question, or 30th part of it per calendar day, i.e. HUF 2 320 per day.
Both as an employee and as an agent at the same time the employer also incurs 13% social contribution tax obligation.
Instead of or in addition to traditional legal relations the student may also work in a simplified employment relationship for agricultural and/or tourism seasonal work or occasional work - includes the film industry extra. Casual employment is limited in time, with a maximum of 5 consecutive calendar days in total, a maximum of 15 calendar days in total in any one calendar month and a maximum of 90 calendar days in total in any one calendar year.
It is important that for simplified employment, the student's net income, as he pays neither VAT nor contributions, since the employer pays the tax. From 1 January 2023, the tax will be payable per employee for each calendar day of employment, which:
- for seasonal agricultural work 0.5% of the minimum wage on the first day of the month, i.e. 1 200 forints,
- for seasonal tourist work 0.5% of the mini-wage valid on the first day of the month, i.e. 1 200 forints,
- for casual work 1% of the minimum wage on the first day of the month, i.e. 2 300 forints,
- film industry extra 3% of the minimum wage, i.e. HUF 7 000.
On the basis of an employment relationship established on the basis of simplified employment, as a basic salary or performance-related salary, in accordance with the conditions laid down, you may. at least 85 per cent of the statutory minimum wage, 87% for the guaranteed minimum wage.
According to the relevant government decree, the net daily income of a film industry extra will not exceed HUF 27 800 net per day in 2023. Up to this amount do not have to assess income, so you do not have to file a return on this either.
Students over 18 can also be self-employed. From application of flat-rate taxation is favourable, as the income of less than half of the annual minimum wage (232.000*12÷2= 1.392.000 HUF) is exempt from tax, which at a 40 percent cost ratio means an income of 2,32 million HUF for the student free of tax and contributions.
Employment of a foreign student
The benefit for young people under 25 years of age can be claimed from the wages or fees of a non-resident student if the same or has not received and does not receive a similar benefit for the same period in another state, and the value of the assets acquired in the tax year total income of - including income that is not taxable in Hungary - at least 75 per cent in Hungary is taxed. For non-resident taxpayers, the taxable base allowance is a separate additional declaration is required.
Where the non-Hungarian student studying at a foreign secondary or higher education institution and studying in a domestic institution in Hungary work placements income, regardless of age and amount exempt from tax.
Moore Hungary
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