Cafeteria changes in 2010
Cafeteria changes in 2010
Tax-exempt benefit opportunity
Employers may provide computer and internet use option to employees tax-free in 2010 also; the tax rules of the internet vouchers rightly popular with employers will remain unchanged next year.
Benefit elements taxed at preferential rates
The majority of the types of fringe benefits were classified into group, which is taxed at a preferential rate – lower than the tax rate on wages.
From next year, payers will have 25% tax liability on the provision of the following cafeteria elements:
• holiday vouchers, holidays at a resort of the employer (or the employer’s related party);
• income provided in the form of hot meals (typically provided in the form of hot meal vouchers);
• assumed cost of school-system training;
• school-start allowance (typically provided in the form of school-start vouchers);
• reimbursement of local public transport pass;
• payment to voluntary pension fund;
• payment to voluntary health fund.
A favourable change from this year’s rules is that the value limit of the support for hot meals increases from HUF 12,000 to HUF 18,000 from 2010. However, there will be fewer opportunities for using holiday vouchers; they may only be used for holiday and cultural services.
In respect of other elements, the value limits of taxation at the preferential rate will remain unchanged in 2010 also; i.e. certain benefit types will remain subject to the preferential rate to only a limited extent.
If the amount of any incentive subject to a value limit exceeds the relevant threshold, the amount above the threshold will also be subject to 97.89% tax.
Benefit types taxed as benefits in kind
Cold meal vouchers were not included in the group of preferential benefit types and neither was the provision of using electronic data carriers allowing the purchase of food and drinks from vending machines. The legislators did not include cultural institution services (typically provided in the form of culture vouchers), products and services provided by the employer (small-value gifts) and vouchers for these, i.e. gift vouchers either.
These items qualify as taxable benefits in kind up to certain limits and the tax burden on these increased significantly. The payer will have 97.89% tax liability if he intends to use the above-mentioned fringe benefit incentives in 2010 also.
If the amount of any incentive subject to a value limit exceeds the relevant threshold, the amount above the threshold will also be subject to 97.89% tax.
Example
Although the group of incentives, which may be provided to employees tax free will be much smaller in 2010; we may conclude that it is still worthwhile to use the benefit types taxed at the preferential tax rate as incentives.
Let us assume that an employee has an annual budget of HUF 100,000 for the provision of fringe benefit incentives to employees. Below we would like to show you how much of this amount remains at the employee as net amount depending on the type of benefit provided by the employer.
1. Incentives provided from the preferential-tax-rate cafeteria elements:
Gross amount HUF 100,000
Employer’s burden HUF 100,000
Tax burden (25%) HUF 25,000
Net amount HUF 75,000
If the employer (payer) provides all of the HUF 100,000 available to the employees in 2010 in the form of preferential-tax-rate cafeteria elements; from the HUF 100,000 cost paid by the employer, the employees will only receive HUF 75,000.
2. Payment as salary:
Gross amount (monthly) HUF 77,821
Employer’s burdens
Pension contribution (24%) HUF 18,677
Health contribution (2%) HUF 1,557
Labour market contribution (1%) HUF 778
Training Fund contribution (1.5%) HUF 1,167
Total employer’s burdens HUF 100,000
Employee’s burdens
Health contribution (6%) HUF 4,669
Labour market contribution (1.5%) HUF 1,167
Personal income tax on the amount under HUF 5 million (17%) and above HUF 5 million (HUF 850,000 + 32%) HUF 16,802 HUF 31,627
Net salary HUF 55,183 HUF 40,358
If the employer (payer) wants to include the HUF 100,000 available for incentives in the salary of the employees instead of the benefit types subject to preferential tax rates, he will be able to increase the employee’s gross salary by HUF 77.821 in 2010. This salary increase will only amount to HUF 55.183 on the employee’s side and if the employee’s annual gross wage exceeds HUF 3,937,000, only HUF 40,358 remains of this amount.
The difference between the two forms of providing the same amount is significant as, depending on the amount of the employee’s base salary, the employee looses HUF 19,817 or HUF 34,642.
The above calculation illustrates that in 2010 also the employer will be able in to provide the HUF 100,000 budget to its employees under the most favourable conditions using benefit elements taxed at preferential rates or, of course, in the form of internet-access.
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