New Tax Law Brings Significant Changes for Guest Workers

The new tax law, effective January 2024, introduces significant changes for guest workers coming to Hungary. Under the amendments, workers from countries outside the European Economic Area (EEA) or non-EEA neighboring states of Hungary will no longer qualify for several key tax benefits. Ukrainian and Serbian citizens, however, are not affected by these changes.

Which Benefits Are Being Removed?

The affected guest workers will lose eligibility for the following benefits:

• Family Tax Benefits
• First Marriage Tax Allowance
• Tax Benefits for Workers Under 25

A major HR company in Hungary has already informed its employees about the changes. According to the notification, workers from Mongolia, the Philippines, Bosnia and Herzegovina, North Macedonia, Montenegro, Brazil, Kyrgyzstan, Kazakhstan, Indonesia, Vietnam, and Venezuela will be particularly affected.

Impact on Net Salaries

The changes will significantly reduce the net income of affected guest workers:

• Workers Under 25: A 15% reduction in net salary
• Workers with Children:
  • A monthly decrease of 10,000 HUF for one child,
  • 40,000 HUF for two children,
  • 99,000 HUF for three children,
  • 132,000 HUF for four or more children.
• First Marriage Allowance: A reduction of 5,000 HUF per month

What’s Behind These Changes?

Károly Radnai, Managing Partner at Andersen Tax Advisory Ltd., stated that the changes aim to prevent previous misuse of tax benefits. “It was common for employers to replace guest workers every 24 months to avoid paying social contribution taxes,” he explained. Radnai added that the logic behind the amendment is sound, as it removes unnecessary tax incentives for those temporarily working in Hungary but not residing here permanently.

Guest Workers and the Labor Market

According to the latest data from Hungary’s Central Statistical Office (KSH), fewer than 100,000 foreign workers were employed in Hungary in the autumn of 2024, marking a decline from last year’s peak. While the government has tightened regulations for labor brokers to protect domestic jobs, experts believe these measures will not significantly reduce the number of Asian guest workers in Hungary.

The long-term effects of the regulation remain to be seen. However, companies believe the changes will not fundamentally alter Hungary’s labor market. Still, these financial burdens may raise concerns about Hungary’s attractiveness to foreign workers in the future.