BASIC RULES OF CONTRIBUTIONS AND HEALTH
CONTRIBUTION,
AS WELL AS SOCIAL CONTRIBUTION TAX, PAYABLE BY
BUSINESS PARTNERSHIPS, BUSINESS PARTNERS, BUSINESS
ASSOCIATIONS AND EXECUTIVE OFFICERS
2014
I. CONTRIBUTION
1. Business Partnership and Business Partner
The Act on Social Security Benefits refers to a business partnership 1 as a
collective definition.
1.1 Business Partnership:
• any unlimited partnership,
• any limited partnership,
• any private limited liability company,
• any joint company2
• any profession association, including European economic interest
groupings,
• the business partnership listed above, when functioning as precompanies.
For the purposes of the Companies Act, the above companies are business
associations.
1.2 Business Partnerships that Are Not Business Associations3:
• any patent agency company or patent agents’ office,
1
Act LXXX of 1997 on the Eligibility for Social Security Benefits and Private Pensions and the Funding for
These Services (hereinafter Hungarian abbreviation: SSB Act.).
2
Pursuant to Article 333 (7) of Act IV of 2006 on Business Associations (hereinafter: Companies Act) after 1
July 2006 new joint enterprises may no longer be established. The joint enterprises registered in the register of
companies or in the process of registration on the day of this Act entering into force may continue to operate
according to the provisions of the Companies Act in force on 30 June 2006.
3
Article (4) c) of SSB Act
1
•
•
•
•
•
•
any private driving school,
any association of private educators,
any law firm,
notaries’ office,
any court bailiffs’ office
any sole proprietorship4
1.2.1. Patent Agency Company or Patent Agents’ Office
In a patent agency company and a patent agents’ office the patent agent may
operate as a member or as an employee. As an employee, they are insured in
view of their contract of employment or personal service contract.
1.2.2. Law Firm, Notaries’ Office, Court Bailiffs’ Office, Private Driving
School, Association of Private Educators
The social security status of the members of such business partnerships are
governed by the rules pertaining only to business partnerships from the start to
the termination of their membership (there can be no other insurance
relationship).
1.2.3. Sole Proprietorship
The rules pertaining to a sole proprietorship5 are contained in a separate act, but
in an issue not governed by that separate act, the provisions of the Companies
Act on the common rules of business associations and the provisions of the Civil
Code6 must be applied accordingly.
A sole proprietorship is managed by its member as an executive officer, or based
on his membership in the sole proprietorship.
If that executive officer is the member, then such activity may also be pursued
as a business partner.
4
Article 4 c) point 13 of the SSB Act
Act CXV of 2009.
6
Act IV of 1959 on the Civil Code (hereinafter: the Civil Code)
5
2
1.3 Business Partner7:
•
members of a limited partnership,
•
any unlimited partnership,
•
any private limited liability company,
•
a joint company
•
a professional association,
•
and any European economic interest grouping if they take an active
part in the company’s activities (including when functioning as precompanies), by means other than employment or service contract
(membership).
1.4 Other Business Partners:
• any member of a patent agency company, a patent agents’ office, if they
take an active part in the company’s operations,
• any law firm,
• notaries’ office,
• court bailiffs’ office
• private driving school,
• any association of private educators,
• sole proprietorship8, and
• any natural person who is a member of a limited partnership, unlimited
partnership or private limited-liability company, who manages the
company by means other than a contract of employment, except if treated
as a business partner according to Point 1.3.9
2. Insurance Liability10
7
Article (4) d) of SSB Act
Article (4) d) point 4. of the SSB Act
9
Article (4) d) 5. of the SSB Act
8
10
The insured status of individuals registered as small taxpayers is governed by Act CXLII of 2012 on the
Fixed-rate Tax of Small Enterprises (hereinafter: FRSE Act); associations paying tax in the small taxpayers
system and small taxpayers as such do not fall within the scope of the SSB Act.
3
The most important factor in establishing the amount of contribution payable for
each member of a business partnership is the legal relationship, based on which
those persons pursue work in the business partnership.
It is important to note that when a limited partnership, an unlimited partnership,
a limited liability company, a joint company, and a grouping operates as a precompany, the rules pertaining to the members shall be the same as during the
operation following incorporation.
The problems concerning the establishment of the insurance obligations of
business partners occur most frequently in relation to the members of the
business associations, and therefore we shall focus on them below.
A member of a business partnership (business association) may pursue work in a
company based on three legal relationships:
contract of
employment,
 personal service
contract,
 membership.
However, another distinction must be made as to whether or not the member is
an executive officer of the business association, or not.
2.1 Insurance Liability of Executive Officers
2.1.1. Executive Officers11:
• the management of unlimited partnerships and limited partnerships shall
be handled by the member or members in the capacity of executive
officers,
• the management of private limited-liability companies shall be conducted
by one or more managing directors,
• the management of a grouping shall be conducted - according to the
provisions laid down in the Memorandum of Association - by the director
as an executive officer or by the management board functioning as a
body.
11
Article 21 of the Companies Act
4
As an executive officer pursues his activities
•
in accordance with the provisions of the Civil Code, pertaining to
personal service contracts, or
•
under a contract of
employment.
Unless the memorandum of association provides otherwise, a member of a
single-member business association, or a member authorised to manage an
unlimited or a limited partnership on his own cannot hold the position of an
executive officer.
2.1.2. Assessment of the Insurance Liability and Social Security Legal
Status of Executive Officers
Natural person members of a limited partnership, unlimited partnership and a
limited-liability company are considered business partners, if they manage the
company based on a legal relationship other than a contract of employment. The
exception to that rule, if, in view of his personal participation, the executive
officer is deemed a business partner.
Insured persons are also chief executives of business associations other than
business partners (who are not members of the association) if their income from
these activities comprising part of the contribution base for the month reaches
thirty per cent of the prevailing minimum wage, or one-thirtieth of the said
minimum wage for each calendar day.12
Consequently, for the purposes of social security, an executive officer status
triggers either an employment status, or a business partner status, or the status of
an elected officer.
Assessment of the legal status of executive officers for the purposes of social
security:
• The insurance status of a general partner of a limited partnership, who
performs the tasks of an executive officer based on a contract of
employment will not change, and they will continue to be insured based
on their contract of employment. However, if the general member
performs the tasks of an executive officer pursuant to a personal service
contract and is not actively involved in the activities of the company, they
12
Article 5 (2) of SSB Act.
5
will be deemed business partners on the basis of the executive officer
status13 which is specified in the respective personal service contract.
• If the general partner of a limited partnership performs the managerial
tasks pursuant to a personal service contract and is also actually and
actively involved in the company, they will become business partners in
view of their active involvement and the provisions of Article 5(2) of the
SSB Act must be applied to the managerial service performed pursuant to
the personal service contract. In other words, the executive officer will be
insured, if the income originating from that activity and comprising the
constitution base for the current month reaches thirty percent of the
minimum wage, or 1/30 thereof by calendar day.
Examples of the treatment of executive officers in terms of the social security
system:
• The general member of a limited partnership works only as an executive
officer. In that case he will be insured in view of the contract of
employment.
• A member of a limited liability company acts as an executive officer for a
monthly contracting fee of HUF 40,000 and pursues no other activity. The
executive officer will be insured as business partner, based on the
personal service contract and must pay contribution as a business partner.
• An executive member of a limited liability company providing tax
advisory services performs the tasks of the executive officer under as
contract of employment and, simultaneously is also engaged in advisory
activities, not based on a contract of employment or a personal service
contract. In such a case the member has several contracts subject to
insurance, i.e. will be insured based on a contract of employment as an
executive officer and as a business partner in view of his active
involvement.
• One member of a limited liability company providing bookkeeping
services fulfils the tasks of the executive officer pursuant to as personal
service contract, for a monthly fee of HUF 20,000 and, simultaneously is
also engaged in the accounting services, not based on a contract of
employment / personal service contract. Such a member also has several
contracts subject to insurance under the social security system. In view of
the active involvement, he will be insured as a business partner, but, in
13
Only for the purposes of the SSB Act.
6
•
•
•
•
•
•
view of the executive officer’s status he will not be deemed a business
partner, in which case Article 5(2) of the SSB Act must be applied.
The general member of a limited partnership, who performs the tasks of
the executive officer only pursuant to a personal service contract retires
and will draw pension on his own rights. According to the currently
effective regulations that person will be considered a business partner
pursuing auxiliary activities.
A member of a limited liability company works as an executive officer
based on a personal service contract and is also actively involved in the
company (not under contract of employment or a personal service
contract), while is also employed for 36 hours a week by another
company. Such a person also has several contracts subject to insurance in
the social security system. In view of the personal participation, the
member is deemed a business partner, regarding the executive officer’s
status Article 5(2) of the SSB Act must be applied, while in the other
company the rules pertaining the employment must be applied.
A member of a limited liability company is engaged in a daily course of
higher education studies and performs the tasks of the executive officer
based on a personal service contract. In view of the contract, the
executive officer’s social security status will change and he will become a
business partner.
The executive officer of a limited liability company performs the tasks of
the executive officer pursuant to a service contract and is also a private
entrepreneur. His social security status will change in that case too and
the executive officer will become a business partner.
The executive officer of a limited liability company performs the tasks of
the executive officer pursuant to a personal service contract and has other
personal service contracts with other companies. In that case the social
security status will also change and, with regard to such activities, the
executive officer will be deemed a business partner. His status in the other
company will not change, where the rules pertaining to a personal service
contract must still be applied.
A member of the limited liability company is personally involved in the
company not on a contract of employment or a personal service contract
and also performs the tasks of the executive officer based on a personal
service contract, plus is a private entrepreneur. In this case there are also
several contracts subject to insurance: in view of the personal
participation, the member must be deemed a business partner, in view of
his executive officer’s status the provisions of Article 5(2) of the SSB Act
7
must be applied, and the rules pertaining the to a private entrepreneur
must also be followed. As the private entrepreneur is simultaneously also
a business partner, according to the general rule, he will be deemed to
work full time as a private entrepreneur and must pay contributions
according to the lower limit of contribution payments in that status, while
as a business partner, his contribution base will be the amount paid
(granted) in view of his actual personal contribution.14
• A member of a limited liability company performs the tasks of the
executive officer under a personal service contract without any
remuneration and is also involved in another limited liability company as
a business partner. The executive officer will be insured as a business
partner, based on the personal service contract. As in such a case the
natural person is concurrently a business partner in 2 business
partnerships, he may choose one business partnership where he must pay
contributions at least up to the lower limit of contribution payment, and
can pay contribution in the other company based on the actual amount
received in view of his actual personal participation.15
14
The private entrepreneur shall notify the business partnership by way of a statement made out before 31
January of the current year concerning his intention to discharge his obligation to pay contributions at least on
the lower limit for contribution payment obligations in his capacity as a business partner for the entire tax year.
15
The business partner may designate the business partnership, which must pay contribution at least up to the
lower limit for contribution payment by 31 January of the current year.
8
Social security status of executive officers of business partnerships
Underlying contracts of
executive officers pursuant to
the Companies Act*
contract of employment
The officer acts not only as an executive officer, but
is also actively involved in the activities of the
company
Legal status of an executive officer for the
(Three options of personal participation: contract of purposes of the SSB Act
employment, personal service contract, or
business partner’s status)
no
contract of employment
contract of employment
yes
(in this case the legal relationship is irrelevant)
contract of employment
personal service contract
no
business partner
personal service contract
personal service contract
personal service contract
* Act IV of 2006 on Business Associations
yes
(contract of employment)
yes
(personal service contract)
yes
(as a business partner)
business partner
business partner
insured as an executive officer
according to the rules pertaining to elected
officers (Article 5(2)
of the SSB Act)
2.2. Performance of Activities other than the Tasks of an Executive Officer
Non-executive officer members (e.g., limited member) and any member who
performs work for the company in addition to being an executive officer, may
perform the following activities:
• contract of employment if they work accordingly,
• personal service contract, if they work according to such a contract, which
was concluded pursuant to the provisions of the Civil Code,
• as a member (business partner) if they do not perform their activities
under a contract of employment or a personal service contract.
2.3. Business Partners are under Obligation to Join an Insurance Scheme16
Business partners are under obligation to join an insurance scheme:
• with respect to members of business associations, professional
associations, public-benefit organizations, patent agency companies,
patent agents’ offices, as of the day of commencement of personal
participation until terminated, and with respect to the owners of sole
proprietorships, from the day of foundation of the sole proprietorship until
terminated,
• in other cases as of the first day of partnership or executive officer in a
business partnership or executive office until it is terminated.
The date of commencement of personal participation specified in the
memorandum of association is the date, on which the member actually
commenced personal participation. If that date cannot be established, then the
date specified in the memorandum of association must be applied.
The insurance obligation of a member of a sole proprietorship prevails from the
date when he becomes a member until the date when he stops being a member
of the sole proprietorship. Based on the power of the law, a member of the sole
proprietorship is a business partner, i.e. in their case there is no need to check
16
Article 10(2) of the SSB Act
10
whether they actually and actively participate in the activities of the company or
not.
If in terms of the executive officer’s status the member is deemed a business
partner, his insurance obligation starts on the day when his executive officer’s
status is established at the business partnership and lasts until that status is
terminated. However, the insurance relationship and any change taking place
therein must be reported by using the 17 ’T1041 notification and change
reporting form. When selecting the type of employment code in the monthly tax
and contribution declarations, 18 the employer must indicate the code of
(potentially modified) legal relationship established in compliance with the SSB
Act.
If a business association establishes an employment or personal service contract
with a member, the insurance obligation must be established according to the
rules pertaining to individuals with an employment legal relationship or with
any other legal relationship involving work.
For the purposes of the social security system, a business partner may be:
• a full-time partner, an individual
• with several statuses, including those pursuing a full-time course of study
in a secondary school or an institution of higher education, engaged also
in a contract of employment for 36 hours a week,
• business partners engaged in auxiliary activities.
3. Contribution Types
3.1. Individual Contributions Payable by the Insured19
The insured pays
17
18
Pursuant to Article 16(4) of the Act XCII of 2003 on the Rules of Taxation (hereinafter: Taxation Act)
Pursuant to Article 31 (2) of the Taxation Act.
19
Article 19(2)-(3) of the SSB
Act.
11
• 10 percent pension contribution, as well as
• 8.5 percent health insurance and labour market contributions, which
comprise 4 per cent of health insurance contributions provided in kind, 3
percent of health insurance contributions provided in money, and 1.5 per
cent in labour market contributions.
3.2. Age Allowance Guarantee Premium20
Employers shall be liable to pay age allowance guarantee premiums calculated
based on the income forming the contribution base. Any income that is not
included in the pension contribution, health contribution and labour market
contribution base is an exception. The rate of the Age Allowance Guarantee
Premium is 13 percent.
If the activity pursued in a position, eligible for age allowance guarantee
premium, does not prevail for whole period (e.g., a complete calendar month or
calendar year) for which the income is paid or provided, then a proportionate
part of the income relating to the period (calendar days) must be taken into
account, as the base of the age allowance guarantee premium, during which the
insured gains eligibility for the age allowance.
Business partnerships do not need to pay age allowance guarantee premium,
which are exempted, based on their special request from it, pursuant to the
provisions of a separate legal regulation. 21
3.3. Health Services Contribution22
The amount of health services contributions payable by private entrepreneurs
engaged in auxiliary activities is HUF 6,810 forints a month (HUF 227 a day).
4. Contribution Payment Obligation
20
Article 20/A of the SSB Act
Act CXXVI of 2007 on the Amendment of Certain Tax Laws.
22
Article 19(4) of the SSB
Act
21
12
4.1. Contribution Payment Obligation of Full-Time Business Partners23
Insured business partners are required to pay pension contributions and health
insurance and labour market contributions based on the income comprising part
of the contribution base received from the business partnership for personal
participation. The base for monthly pension contributions is at least the
prevailing minimum wage, and for monthly health insurance and labour market
contributions at least the prevailing minimum wage one and a half times
(hereinafter lower limit of contribution payment).
Minimum wage:
• the personal base wage, effective on the first day of the current month, for
a full-time employee; its mandatory lowest monthly amount in 2014 is
HUF 101,500.
• For the purposes of the regulations on the contribution payments of
insured private entrepreneurs and business partners the guaranteed
monthly wage minimum for full-time work, prevailing on the first day of
the current month (HUF 118,000 in 2014) where the main activity of the
private entrepreneur or the main activity of the business partner requires
at least secondary general qualifications or secondary vocational
qualifications.
The rule on the calculation of the monthly average minimum contribution base
has been terminated, i.e. the contribution liability no longer needs to be
established as a “cumulative” monthly average, but as a monthly amount. E.g., if
in January 2014 no income is generated in view of personal participation, the
contributions must be paid at least on the lower limit of contribution payments.
In February HUF 300,000 is paid out to a business partner, and he must pay
contributions on that sum.
For any executive officer who performs his activities as an executive officer
based on a personal service contract and becomes a business partner
accordingly, the remuneration paid for his managerial activities must be deemed
the remuneration of his personal participation.
E.g., an executive officer, who provides his services for a monthly contracting
fee of HUF 190,000, will have to pay contributions as a business partner on
HUF 190,000.
23
Article 27(2) of the SSB Act
13
The lower limit of the contribution base must be reduced as appropriate by any
period during which the business partner:24
• was drawing sick-pay, benefits for accident-related injuries, pregnancymaternity benefits,
• child-care benefits, child-care allowance, child raising benefit, attendance
allowance, except if he continues to engage in business activities while
receiving child-care allowance or attendance allowance,
• for any period when detained,
• served in the military as a voluntary reservist,
• if he is an attorney, patent agent or notary public, has officially suspended
his activities.
If the circumstances specified above do not apply for the entire calendar month,
the lower limit for contribution payment obligations shall be calculated based on
one-thirtieth of the minimum wage specified above. This provision shall also
apply if the business partner’s insurance relationship is initiated or terminated
during the month.
It is an important rule that if no income was paid to the business partner(s)
during the month and the amount of contributions claimed during the year - up
to the current month - is less than the amount of contribution calculated based
on the lower limit for contribution payment obligations, the business partnership
shall advance the contribution payable on the lower limit for contribution
payment obligations instead of the business partner, and shall pay it within the
deadline prescribed by law.25
The following business partners shall not be required to pay labour market
contributions of the rate of 1.5%:
• those pursuing a full-time course of study in a secondary school or an
institution of higher education, and if also engaged under contract of
employment in addition to the entrepreneurial activities,
24
25
Article 28 of SSB Act
Article 52(4) of the SSB Act.
14
• those who are entitled to draw pensions on their own right or if having
reached the applicable retirement age under the applicable legal
regulation.26
Not including workers on leave of absence without pay.27
4.2 More Than One Contract of Employment Subject to Insurance Under
the Social Security System28
If a business partner
• is concurrently engaged in employment - by one or more employers under contract for at least thirty-six hours of work weekly, or
• is pursuing a full-time course of study in a secondary school or an
institution of higher education,
then the 10 percent pension contribution and 7 percent health insurance
contribution is payable on the basis of the actually obtained income constituting
the contribution base.
Where an insured person is a business partner or executive officer of several
business associations participating in person in their operations, the amount of
contribution on the lower limit for contribution payment obligations shall be
taken into consideration once, according to the insured person’s selection made
once a year. The business partner shall notify the business partnership
concerning his aforesaid selection by 31 January of the year.
If a business partner is also a private entrepreneur, then he must pay contribution
on the basis of the actual income paid to him. The private entrepreneur shall
notify the business partnership by way of a statement made out before 31
January of the current year concerning his intention to discharge his obligation
to pay contributions at least on the lower limit for contribution payment
obligations in his capacity as a business partner for the entire tax year. Based on
this option, contributions shall be paid on the contribution base in connection
with his private entrepreneurial activities and/or with other any partnerships.29
Attention!
26
Article 25/A of the SSB Act
27
Article 25/A b) of the
SSB Act
28
Article 31(4) of the SSB Act
29
Article 31(5-6) of SSB Act
15
If a person registered as a small taxpayer pursuant to the FRSE Act is
concurrently insured as a business partner or a private entrepreneur, the rules
indicated above do not need to be applied.
That means that when a small taxpayer natural person, who is insured for the
purposes of the SSB Act as a business partner is deemed a full-time partner,
unless he is also employed for 36 hours a week, or pursues full-time studies at a
secondary or higher education institution. Consequently, he must pay
contribution pursuant to the provisions of point 4.1. In such a case, however, he
shall not be deemed a full-time small taxpayer.
4.3. Business Partner Engaged in Auxiliary Activities30
A business partner engaged in business operations who is entitled to draw
pensions on his own right or a person receiving widow’s pension and is above
the appropriate retirement age is a business partner engaged in auxiliary
activities who is not insured.
Pensioner entitled to draw pensions on his own right31: any natural person
1. who is drawing pension benefits defined in Article 14(3) a) and c) in the
application of the Social Security Pension Benefits Act or international
agreement on his own right, retirement or invalidity aid (old-age pension)
provided under the government decree on benefits provided by the
Hungarian Creative Art Foundation, pension benefits provided by a church
or religious organization registered in Hungary, or receiving old-age
allowance or increased old-age benefits,
2. who is drawing retirement pension on his own right in accordance with the
Community regulation on the coordination of social security systems and
the implementing regulation, or with the laws of an EEA Member State,
3. any suspension of payment of the benefits and pensions referred to in
Points 1-2 has no effect on the legal status of business partners mentioned
in this point.
4.3.1. Contribution Payment Obligations of Business Partners Pursuing
Auxiliary Activities32
30
31
Article 4 e) of SSB Act
Article 4 f) of SSB Act
16
Business partnerships shall pay health services contributions on behalf of their
business partners engaged in auxiliary activities at the rate of HUF 6,810, and
the business partner shall pay pension contributions at the rate of 10 percent.
The pension contribution shall be paid on the income paid (provided for) to the
business partner for personal participation.
Business associations shall not pay health services contribution for business
partners engaged in auxiliary activities for any of the following periods:
• for any period of incapacity,
• or when receiving child-care allowance,
• for any period when detained,
• in respect of attorneys, notaries public and patent agents - for the duration
of official suspension of their activities, or
• while engaged in employment or in concurrent employments under
contract for at least thirty-six hours of work weekly.
Health services contributions in respect of concurrent insurance relationships
shall be paid in respect of one of those relationships only.
Any private entrepreneur who is also engaged in a business partnership shall pay
health services contributions in the capacity as a private entrepreneur. Any
private entrepreneur who is engaged and working in several business
partnerships simultaneously shall provide a statement before 31 January to all
business partnerships as to which business partnership pays his health services
contributions for the tax year. (If he is a member of more than one business
partnership, he must designate one association to pay the contribution for him).
Any business partner who is engaged and working in several business
partnerships simultaneously shall provide a statement before 31 January to all
business partnerships as to which business partnership pays his health services
contributions for the tax year.33
Attention!
The rules indicated above cannot be applied to any person who is registered as a
small taxpayer under the FRSE Act.
32
33
Article 36 of SSB Act
Article 38 of SSB Act
17
If a member pursues any work under a contract of employment or a personal
service contract, he must pay contribution according to the rules pertaining to
individuals having those legal relationships.
5. Notification and Registration Obligation
5.1. Notification Obligation
Business partnerships shall notify the competent state tax authority of the first
instance - by way of electronic means or using the standard form prescribed for
this purpose - and indicating their tax identification number, name, corporate
name, registered office, place of business, home address, including the
predecessor’s name and tax number, of the forename and surname, tax
identification code and date of birth of insured persons employed by them, as
well as the date of commencement and termination and the code of the insurance
relationship, the length of any period of suspension of insurance, the weekly
work time and the FEOR code. If the insured person does not have a tax
identification code, the insured person’s forename and surname at birth, place of
birth, mother’s forename and surname at birth and nationality shall be reported
as well.
The notification shall be sent:
a)
concerning the commencement of the insurance relationship, on the first
day of the insurance relationship before the date of taking up employment or if
the insurance is evaluated subsequently, on the day following the day of the
establishment of insurance obligation;
b)
within eight days following the date of termination of a relationship, the
commencement and termination of suspension, and the opening and closing date
for benefits provided after the termination of the insurance relationship,.
If the employer is terminated by succession, by the successor employer or payer
in respect of the affected insured persons (contract of employment, other legal
relationship involving work, elected official, etc.). The notification shall indicate
the name, corporate name and tax number of the predecessor, the fact and date
of succession, as well as the name, corporate name and tax number of the
successor, and the date of establishment of the successor. The deadline of
notification is stated in paragraphs a) and b).
18
Employers shall issue a certificate concerning the notification to the insured
person affected within three working days, indicating the information contained
in the notification and the date when it was filed.34
5.2. Obligation of Keeping Records
Employers shall keep records of the data of insured persons personally
participating in their activities, of which the private individual concerned shall
be given a certificate, to provide facilities to access the information required by
law from the beginning of employment (activity). Any employer failing to keep
such records shall be subject to a penalty in accordance with the Taxation Act,
separately for each person not registered.
Employers shall maintain a register of insured persons - private entrepreneurs on
their insurance-related data - in accordance with specific other legislation that is
to contain the insured persons’ name and personal data, social security
identification code, employer’s data, information relating to the insured period
and service time, the base and amount of contributions deducted from insured
persons.
The employer shall issue a statement of verification - attached to the income
certificate - containing the data of the register before 31 January of the year
following the year to which it pertains to the insured person regarding the length
of the insured period in that year, the amount of contributions deducted for the
year or for any other period, and the amount of health insurance and labour
market contributions the employer has paid and the base as well as the family
allowance claimed against those contributions. If the contract of employment
subject to insurance under the social security system is terminated during the
year the statement shall be issued with immediate priority.
The employer shall - at the time of paying the monthly wages - inform the
insured person in writing concerning the amount of health insurance and labour
market contributions, as well as pension contributions deducted from the insured
person’s wages, and the amount of contribution refunded (transferred) due to
overpayment, and on the amount of membership fees, and business partnerships
34
Article 44(5) of the SSB Act
19
shall inform the business partner who is engaged in auxiliary activities
concerning the health services contributions.35
This rule needs to be applied also to any social security paying agent providing
any taxable social security service.
6. Contribution Declaration and Payment Deadline
The established contribution for the current month must be declared and paid by
the 12th day of the subsequent month.36
Irrespective of the applicable frequency of declaration, a business partnership
submits monthly declarations, by the 12th day of the subsequent month,
electronically, on the 1408 form, reporting all taxes and contributions relating to
payments and emoluments made to natural persons and tax and/or social
security liabilities, other than tax on interest income, as well as the data
specified in Article 31(2) of the Taxation Act.
II. SOCIAL CONTRIBUTION TAX37
A business partnership, as the payer, is obliged to pay social contribution tax.
1.1. Legal Relationship Resulting in the Tax Liability:38
The following activities will trigger a tax liability:
a legal relationship between an unlimited partnership, a limited
partnership, a limited liability company, a joint company, a grouping, a
European economic interest grouping, a patent agency company, a patent
agents’ office and their natural person members, regulating the obligation of the
35
Article 50(6) of the SSB Act
Annex 2 of the Taxation Act
37
Establish in Act CLVI of 2011 on the Amendment of Certain Tax Laws on Taxation and Related Other Acts
(hereinafter: SCT Act).
38
Article 455(2) c)-d) of the SCT Act.
36
20
member relating to the personal participation in the activities of the legal person
and other organisation (also including the
legal relationship of an executive officer under a contract other than a contract
of employment);
the legal relationship between the natural person members of a law firm, a
notaries’ office, a court bailiffs’ office and a sole proprietorship.
Pensioners drawing pension on their own rights or receiving widower pension
who are over the applicable age of retirement and subject to any legal
relationship indicated above do not have any tax liability. Consequently,
business associations do not need to pay social contribution tax for any business
partner pursuing auxiliary activities for the purposes of the SSB Act, e.g.
pensioner.
1.2.
Business partnership tax base:39
The income from the revenue of a natural person from a legal relationship with
the business association generating a tax liability originating from any activity
other than self-employment and provided and paid to the natural person subject
to tax liability under the PIT Act,40 taken into account in the calculation of the
tax advance base according to the provisions of the PIT Act, increased by the
membership contribution deducted (paid) to the organisation representing the
interests of the employees.
Personal participation of a member of a business partnership and activities of an
executive officer of a business association are not deemed self-employment.
Income from activities other than self-employment includes any revenue earned
by the member in relation to such activities including e.g., honorary fees,
remuneration for personal participation, based on which the association must
pay social contribution tax. Example: an executive officer, who is a business
partner, earns HUF 250,000 income monthly, which constitutes the tax advance
base, in which case the same amount will be the tax base.
1.3.
Special rules pertaining to business partnerships:41
39
Article 455(1) a) of the SCT Act
40
Act CXVII of 1995 on Personal Income Tax (hereinafter: PIT Act).
Articles 457-458 of the SCT Act.
41
21
In view of any legal relationship between an unlimited partnership, a limited
partnership, a limited liability company, a joint company, a grouping, a
European economic interest grouping, a patent agents’ office, a patent agency
company, a law firm, a notaries’ office, a court bailiffs’ office, a sole
proprietorship and their members, triggering a tax liability, the monthly tax base
is at least 112.5 percent of the minimum wage. The tax base is at least 1/30 of
112.5 percent of the minimum wage for each day of the legal relationship
triggering the tax liability, if the legal relationship does not prevail on each day
of the month.
For the purposes of the social contribution tax the minimum wage is the same as
the minimum wage defined in the SSB Act.
The special rules must be applied when e.g., a business partner does not receive
any income in view of his personal participation or the amount of the income is
lower than 112.5 percent of the minimum wage, in which case the tax is payable
at least on 112.5 percent of the minimum wage.
1.4. A Business is Exempted from the Payment of Tax on
A business partner is exempted from the payment of tax on those days when
• drawing sick-pay, sickness benefit for accident-related injuries,
pregnancy-maternity benefits, or child care benefit;
• when drawing child-care allowance, child raising benefit, attendance
allowance, except if he continues to engage in personal participation
while receiving child-care allowance or attendance allowance,
• while serving in the military as a voluntary reservist;
• for any period when detained,
• when a law firm, a patent agents’ office, a patent agency company, or a
notaries’ office establishes the tax payable on the basis of a legal
relationship with its members the day of the month, when the member’s
activity as an attorney or his membership in the chamber of patent
agents or notaries is suspended.
The special rule does not need to be applied, i.e. the association does not need to
pay the tax on at least 112.5 percent of the minimum wage for days while the
business partner is employed, under a contract of employment for at least 36
hours a week, or pursues full-time studies in a secondary or higher level
education institution. If there are several contracts that are subject to insurance
22
simultaneously, the working hours prescribed in each contract must be added up
while calculating employment for at least 36 hours a week.
In that case the association must pay the tax on the actual tax base.
Similarly, the special rule does not need to be applied for days when the
business partner has the same relationship in another company, providing that
the other payer includes that day in the tax base calculated according to the legal
relationship with the member. In practice that means that only one business
association needs to pay the tax on at least 112.5 percent of the minimum wage,
while the other business association has to pay tax on the actual tax base
(according to the member’s statement).
Business entrepreneurs who are private entrepreneurs as well, can decide to pay
the tax on at least 112.5 percent of the minimum wage as a private entrepreneur
or have it paid by the business association where he is a member and use only
the actual income as the tax base in the other legal relationship. However, the
natural person must inform the business association by 31 January of the current
year in a declaration made for the tax year on his decision that the tax payable
on the minimum tax base should be paid by the business association.42
It is a prerequisite of the application of the above rule that the natural person
should issue a declaration to the company on the legal relationship involving
employment for at least 36 hours a week, or on the pursuing of studies, or on
any legal relationship with any other payer that falls within the scope of the
special rules pertaining to the establishment of the tax base. The natural person
must provide a new declaration to the payer on any change immediately. The
declaration must contain the personal identification data and personal
identification number of the natural person or the title and number of the
personal identification document and his residential address. The payer may
claim the reimbursement of any tax deficit for the failure of supply of the new
declaration and its legal consequences from the natural person who failed to
provide it. If the tax deficit occurring as a result of the failure of submission of a
new declaration cannot be collected from the payer, the State Tax Authority may
oblige the natural person failing to provide the declaration, in a resolution, to
pay the tax deficit and its legal consequences.
1.5. The Social Contribution Tax Rate and Allowances
42
The rules indicated above cannot be applied to any person who is registered as a small taxpayer pursuant to
the FRSE Act.
23
The calculated tax is 27 percent of the tax base. The payable tax equals the
calculated tax less the tax allowances available for the person liable for the
payment of tax pursuant to the provisions of the law.43
1.6. Payment and Declaration of the Tax, Records
The business partnership assesses the social contribution tax pursuant to Article
31(2) of the Taxation Act on a monthly basis, and declares and pays it by the
12th day of the subsequent month. The amount of the tax is not indicated in the
certificate issued to the natural person. If the taxable person claims any
allowance or aid in view of the employment of the natural person, the
declaration obligation specified in Article 31(2) of the Taxation Act must be
fulfilled by ensuring that the title and basis of the allowance or aid, ensuring that
the title basis and amount of the allowance or support can be clearly established
from the data of the declaration.
Taxable persons, obliged to assess, declare and pay the tax must keep records,
based on which the tax base and amount, and any exemption and allowance
included in the calculation of the tax, as well as the date of the tax payment can
be verified. Payers falling within the scope of the Act on Accounting fulfil that
recording obligation by keeping sufficiently detailed records (books) in
compliance with the Act on Accounting, while other payers fulfil the same
obligation with separate records kept pursuant to the provisions of the PIT Act,
or the provisions of the Act on Simplified Entrepreneurial Tax.
43
For more information on the allowances that are available under the social contribution tax read our Booklet
No. 49.
24
III. HEALTH CONTRIBUTION44
Obligatory 14 percent health contribution payment
A business partner shall pay 14 per cent healthcare contribution on the income
defined below:
- income withdrawn from the business account [Article 68 of the PIT Act]
- dividend [Article 66 of the PIT Act]
- capital gains income [Article 67 of the PIT Act]
until the aggregate amount of 4% health insurance contributions in kind and 3%
health insurance contributions in money, health insurance contributions paid
under Act CXX of 2005 on Simplified Contribution to Public Revenues, and
health services contributions paid by the business partnership for a business
partner engaged in auxiliary activities and the 14% healthcare contribution paid
on the incomes specified in the HC Act reaches four hundred and fifty thousand
forints for the year in question (hereinafter referred to as “contribution payment
ceiling”).
A business association assesses and deducts the fixed percentage health
contribution, payable by the business partner and pays and declares it to NAV,
pursuant to Article 31(2) of the Taxation Act, by the 12th day of the month
following the payment (granting) of the income.
IV.
Account Numbers
The account numbers related to the taxation activities of NAV, used in the
international payments for the obligations and claims of taxable persons towards
the budget (IBAN account numbers), effective from 1 January 2014 are
available on our internet website: www.nav.gov.hu .
Should you have any question after reading this Booklet, please contact the
NAV customer service, where our colleagues will be happy to help you.
44
Act LXVI of 1998 on Healthcare Contributions (hereinafter: HC Act). For more information on the health
contribution obligation read our Booklet No. 11.
25
National Tax and Customs Administration
26