As the new year holds small changes, in cafeteria system, it is time to look at it in a different way for Employers. They can review their system in a relaxed environment, whether they would like to change something in their system/control process. Should they modify their frame amount? Or the available elements? Or should they modify the free choice? Should even exist any Cafeteria system? In this article, we would like to highlight those points where some changes should be considered and we would like to help to make this decision easier.
this decision easier.
For the most important change we would like to mention that the personal income tax rate decrease to 15%, which also does not leave the Cafeteria system without changes. So that means there will be some saving in Employee or in Employers budget depending on Cafeteria type.
It is worth noting for the companies operating in the capital city that the price of the local travel pass (BKK) remains unchanged for the coming year therefore each employer can provide monthly travel pass for HUF 10.500 and annual travel pass for HUF 114.600 as cafeteria element.
Unfortunately we have no information about the amount of the minimum wage, yet it has not been clarified or officially communicated to the Public.
How do we calculate the amount of the privileged and the higher tax?
The method and basis of calculation did not change compared to the year 2015. 1.19 times the value of the benefit is to be taken into account that is a correction factor to equalize it to the wage type payments. Based on this amount 15% of personal income tax (SZJA) and 14% of health contribution (EHO) are to be paid.
(0.15+0.14)*1.19 = 34,51%
In the case of the higher tax it is also 1.19 times the value of the benefit that is taken into account however besides the SZJA of 15% it is an EHO of 27% that the employer has to pay.
(0.15+0.27)*1.19 = 49.98%
Annual frame amount and recreational frame amount
Annual frame and recreation frame should sound familiar for most of the Employers due to 2015 regulations. So that is why we’d like to summarize briefly what are these notions mean and highlight how they work in practice across some samples.
49.98% tax debits the referential elements above 200.00 Ft annual amount instead of 34.51% (except SZÉP card)
Recreation frame amount appeared in 2015, and for its debit until 450 000 Ft, SZÉP card benefits are still referential taxed.
With the below example we would like to show how you can exceed the 450 000 Ft recreation frame amount with only BKV season ticket, Erzsébet voucher and SZÉP card benefits.
The issued benefits are below:
- BKV season ticket: 8*10 500 Ft
- Erzsébet voucher: 8*8 000 Ft
- SZÉP Card benefit: 320 000 Ft
We can see that in BKV season ticket and Erzsébet voucher the 200 000 Ft frame amount have not been exceeded. However, if we add all the annual benefits the frame amount will exceed the limit.
The death of the net cafeteria frame amount
The regulations in the recent years continued to load bigger and bigger tax burden on the employers concerning the off-salary benefits. If you think about it, a few years earlier the catering of the employees could be supported tax-free or there was such a year when the cafeteria benefit could be granted with merely 19% of employer’s burdens. Compared to these the 34.51% and 49.98% of the next year burden the employers’ budgets a lot more. For those who decided so far not to change the earlier practice, now it is high time to rethink the regulation for the next year.
There are multiple solution in the hands of the employers that can hold the level of the cafeteria expenditure (or even decrease it) even in such a way that the employees do not suffer disadvantages. Let’s look at a few examples.
„Half gross" system
The “half gross” system might be solution for those employers who applied the net system so far, the frame amount of the employees does not exceed the annual net amount of HUF 450.000 and the employees could choose freely from the available elements. In this case the employer and the employee take the tax burden in a shared (but not equal) way. In practice it means that if the employees choose in a way exceeding the annual frame amount (HUF 200.000) – and it is not the SZÉP card or a tax-exempt element – then the difference between the privileged and normal tax is deducted from the frame amount available for the employees. On the one hand this enables the employees to continue choosing based on their own preference system taking the extra costs involved. On the other hand it is a solution for the employer because the higher tax does not constitute additional expenses for the employer.
It might also be a solution if the employer regulates in the existing cafeteria regulation that exceeding the annual frame amount (HUF 200.000) the employee can only choose SZÉP card or tax-exempt elements. Compared to the previous version, the employees’ free choice is limited here however the net frame amount available for them is not changed and the employer’s expenses are not changed either. It is a different issue how badly the employees are affected by the fact that they cannot decide on their available frame amount on their own.
Widening the tax-exempt elements
If the employer did not apply or only partially applied tax-exempt elements then including these into the cafeteria plan might result in further decrease in expenses. The more chance the employer has for these, the more of the available frame amount the employees can use for tax-exempt elements. A great tool for this could be the tax-exempt housing support that can be provided to the employees for a maximum of 5 million forints within a 5 year period. It is important to note that the regulation of this element is not very simple therefore it requires a well-considered decision; furthermore the terms and conditions for providing this element are advised to be set forth in regulation. Although the tax-exempt housing support requires a lot of administration on part of the employer, there are such service providers who take this burden off the employer.
Certain specified benefits
Starting from 2015 the certain specified benefits come back to focus. These elements are considered elements with normal taxation that are subject to a tax burden of 49,98%. Although they do not seem to be an attractive alternative at first but it is worth considering their application due to their usefulness if the employer provides a high available frame amount. Certain vouchers (gift voucher) are accepted so widely that they can almost be used as payment tools equivalent to cash for purchasing clothing, toys, traveling, fuel, and chemical products. It is an important condition for these elements that regulation remains to be necessary for providing them and these elements actually need to be available for all the employees.
Gross Cafeteria frame
Initiating a gross Cafeteria frame also should be considered. For as a main advantage tax changes do not impact Employers budget. Although there will be some decrease in taxes in 2016,it should be considered if we look at the previous years’ experiences.
Deadline for tax payment
The modification of the SZJA Act partially affected the deadline for the related tax payment as well. In 2016 there are no changes in this field. Therefore the tax for the benefits provided exceeding the annual frame amount, the recreational frame amount and the monthly maximum values are to be established as the burden of the particular month when they are provided. It is important that in case of entry into employment or termination of employment during the calendar year, the annual and the recreational frame amounts are calculated proportionately based on the time spent in employment.
It is clear from above that there are no significant changes in regulations, but that is why it is a perfect occasion to consider and review the frames of the next years regulations, to maintain a system It is clear from the above that multiple significant modifications happened in the regulation that affect a significant portion of employers. It is important to consider the frame amount of the regulations of next year so that the employer can operate a plan that corresponds to the expectations of the employees on the one hand and enables a cost-efficient operation for the employer on the other.