3 February 2023
Employment Tax
Impact: High
Summary
To support the mobility of Hungary’s workforce, the government has doubled the limit of the commuting cost reimbursement which can be treated preferentially.
As a result of the change, the tax-free limit for reimbursements in relation to commuting by car will increase from HUF 15/km to HUF 30/km. According to the regulation, the minimum reimbursement in relation to commuting by car increased from HUF 9/km to HUF18/km. The increase to the higher amount of minimum reimbursement is effective from February, however the increase to the higher tax-free limit is effective from January 2023.
The Detail
The Government Decree, ruling the commuting reimbursement benefit, came into effect in 2010. However, while the price of fuel has increased significantly since then, the related minimum and maximum amounts of cost reimbursement did not change between 2010 and 2022.
Under the Government Decree, ‘commute to work’ means travel to work on a daily basis where their place of residence is in a separate municipality. In certain cases, commuting may also include travel to work within the same municipality. Travelling from a permanent home to a place of work in another municipality (and back once a week) also qualifies as ‘commuting to work’. For the application of the preferential rules, employees must declare their temporary and permanent address and the place where they are commuting from.
Where the employee commutes by public transport, the employer is obliged to reimburse 86 percent of the daily or monthly travel ticket. However the employer can decide to reimburse the whole amount, and if they do, the whole amount will be tax free.
However, employers can also reimburse costs at a higher tax-free rate. This tax-free limit has increased from HUF 15/km to HUF 30/km. In this case it is not a precondition that the employee travels with his/her own car, and consequently more employees can commute together sharing actual costs.
The increase to the minimum reimbursement is effective from February, however the increase to the higher tax-free limit is effective from January 2023. For employees commuting by car who are bearing increased costs due to higher fuel prices, the change can result in significant tax-free reimbursements.
It is important that employers consider the rules in the case of a home office, i.e. what commuting costs can be reimbursed in the case of an employee working in a home office. Where the employee works exclusively from home, commuting costs will not be applicable. However, if the employee works both from home and in the office (i.e. a hybrid working arrangement) some commuting costs can be provided. It is particularly important to consider what is included in the employment contract as place of work when determining commuting costs in these cases.
There is no change in the cost reimbursement that can be provided in the case of private car use for business purposes, as in this case the reimbursement is made on the basis of actual fuel cost incurred or on fuel price and consumption standards determined by the tax authority. As an addition to the fuel cost, HUF 15/km can be provided tax free for covering repair and maintenance costs.
It is also important to note that in 2022 there were changes in the regulation which provided that fuel reimbursement may also be provided in the case of hybrid and electric vehicles. In the case of hybrid vehicles, 70% of the standards can be applied, while in case of electric vehicles 3 litres / kilometres can be reimbursed tax free without supporting invoices.
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