Government decree issued on social contribution tax

The Government of Hungary issued a government decree on the implementation of Act LII of 2018 on the Social Contribution Tax during the state of emergency. Pursuant to government decree no. 205/2023. (V.31.), as of 1 July 2023 a significant portion of household investments and savings will be subject to social contribution tax. It means that in addition to the 15% personal income tax (“tax on interest”) applied so far, a further (currently) 13% will be charged on these incomes as social contribution tax.

The Government Decree will apply to the portion taxable in Hungary of the following types of income:

• Interest credited on bank deposits after 1 July 2023; for term deposits, the interest of savings deposited after 30 June 2023;
• Interest, yield, income from the redemption and the sale on non-EEA/OECD stock exchange of publicly issued and traded securities and collective investment certificates if these assets are purchased after the entry into force of the government decree;
• Assets or securities acquired as interest income on winnings or drawn on a prize-linked deposit account in the period following entry into force of the government decree;
• Settlement paid by the insurer under an insurance policy concluded after the entry into force of the government decree in excess of the total insurance premium paid if tax exemption is not applicable under the Personal Income Tax Act.

According to the current interpretation of the government decree, individual holders of long-term investment account and pension savings account will remain to be able to benefit from the favourable tax consequences based on holding periods, and if they are entitled to the amount of their savings free of personal income tax, they will not be liable to pay social contribution tax, either.

Please note that the cap on social contribution tax liability is not applicable on incomes falling within the scope of the government decree. Please also note that pursuant to the government decree taxpayers will not be able to declare to disbursers that they may be outside the personal scope of the Social Contribution Tax Act (e.g. non-resident individuals under the Social Security Act). In this case, the amount of the deducted social contribution tax may be reclaimed in one’s annual personal income tax return.

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