Background information

The prime minister announced in June 2021 that the government plans to refund personal income tax paid on the year of 2021 to taxpayers with children. Government decree 560/2021 (30 September 2021) states that employees and the solo self-employed will be eligible for the tax rebate payable in 2022.The subsidy applies for tax payable after deductions for children.

Content of measure

The refund is capped at 12 times the tax calculated on the gross monthly average national wage as published by the central statistical office KSH for December 2020, estimated at around HUF 800,000 (€2,222).

Both parents and expectant parents are eligible for the rebate each, which is due in February 2022. Self-employed people paying the simplified flat tax (KATA) with children are eligible for a tax rebate of 25% of their annual KATA tax paid for 2021. The KATA tax is HUF 50,000 a month or by choice HUF 75,000 a month for full-time self-employed and HUF 25,000 a month for part-time self-employed (working 36 hours or more a week in employment).

Thus the cap for the rebate here is HUF 225,000 or €625. Self-employed parents get the rebate within 30 days of filing their tax returns (19 June 2022 if they file on the deadline of 20 May).

Use of measure

About 1.9 million taxpayers are estimated to get the tax rebate. The measure is calculated to cost HUF 600 billion (€1.67 billion). The average number of employees in Hungary was 3.116842 million in December 2020 (data from the central statistical office KSH). In December 2020 the gross median wage was HUF 336,177 (€933.8) a month (about HUF 222,000 net without child tax credit) with an employee stock of 3.04 million. Because the child tax credit system awards incrementally more tax credit for more children, but the current parent tax rebate awards the same regardless of the number of children, the most to benefit is parents with one child and high employee income for both parents. Low-income earners with three or more children do not benefit as they already pay no or very low taxes due to the child tax credit system.

Target groups

Workers	Businesses	Citizens
Parents in employment	Does not apply to businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	No involvement	No involvement
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: N/A

Involvement

Social partners were not involved in any way in the development of this measure.

Views and reactions

The trade union confederation MASZSZ views the measure as a way to lift consumption, as it gives the largest amount of support to families with two high-income earners and one child, and generally supports higher-income families more. The measure can also be seen as a one-off correction to the tax system which as a rule favours families with more children more. It does not support the unemployed or stay-at-home parents who are not eligible for the rebate.

Sources

• 10 June 2021: Calculations for the tax rebate for parents - how much? (www.portfolio.hu)
• 30 September 2021: Govt decree 560/2021.
• 01 October 2021: State gives out gifts before elections (www.portfolio.hu)