3/Apr/2019
SUMMARY OF RELEVANT CHANGES OF THE HUNGARIAN LABOUR CODE ON THE USE OF COMPUTER DEVICES BY THE EMPLOYEES
We are hereby presenting the amendments of the
Hungarian Labour Code, which will (possibly) come into force this spring in 2019
related to the usage of computers and other electronic devices by the employees,
provided by the employer, especially granted for private usage purposes.
This summary is not exhaustive and only contains the
most significant modifications. The analysis goes beyond the scope of this
newsletter and in case of request, we gladly provide you further information on
essential content.
1. THE CURRENT
RULES FOR USE OF COMPUTER EQUIPMENT PROVIDED BY THE EMPLOYER
The Section 2 of Art 197 of the Act I of 2012 on the Hungarian Labour Code
(hereinafter: the “Labour Code”) regulates the use of computer devices by the
employee on private purposes in the following way:
„The employer may
restrict the use of computing equipment or electronic devices in a way, that it
supplies solely to the work of the employee performed on its behalf.”
Based on this fact, the employee is entitled to use the computer devices
for private purposes as well, if the respective labour contract, or other company
regulation/internal policies are not containing any special regulation in this
matter.
2. THE RULES
RELATED TO THE PROPOSAL LAID BY THE MINISTER OF JUSTICE
The possible forthcoming
change of the Labour Code recently filed under nr. T/4479 by the Minister of
Justice to the Hungarian Parliament revers the regulation of the Labour Code, as
the following:
- Under the new regulation, unless otherwise agreed by the parties, the
employee may not use the computer equipment, tools (pc, notebook, smart -, mobile
phone etc.) provided by the employer for work purposes for any private purpose.
(Currently the opposite is the case.)
- Based on this rule, the employer may check compliance with the abovementioned
prohibitions, though during the controlling process the employer is restricted
for the purpose of reviewing employment relationship related data.
- On the other hand, control check performed on private employee data it is strictly
prohibited. However, any data necessary for the verification for compliance shall
be deemed to be employment-related data based on presumption of the law.
- The rules on control check shall apply in all cases when, based on the
agreement of the respective parties, the employee uses own computer device, or tools
for the purposes of fulfilling the respective employment relationship.
Once the proposal is accepted,
(i) There might be a need to modify labour contracts of the employees, to regulate whether the private use of computing devices (computers, mobile phone, etc) of the employer are allowed, and
(ii) The rules of private usage,
plus the control for compliance with the abovementioned provisions possibly set
as internal stated policy.
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This summary intends to raise awareness and does not constitute legal
advice.
If you might have any question or need further information, please do not
hesitate to contact us.
2/Jan/2019
- CORPORATE INCOME TAX
The most significant change in corporate taxation is that the institutional system of Tax Corporation is introduced. Just as it is the case with group VAT.
The most important conditions for corporate taxation are:
- affiliated business relationship based on a voting right of at least 75% of the taxpayers wishing to participate in the group,
- same accounting system,
- same balance sheet date and date,
- same book-keeping currency.
One of the significant advantages of the new regulation is that the tax base of group members with a negative tax base in the respective tax year, can be offset against up to 50% of the tax base of members with positive tax base, which will result significant savings. For the establishment of group taxation, all the respective parties for the first time shall apply between 1st of January, 2019 and 15th of January, 2019; hence quick reaction time is needed, as the communicated deadline is peremptory.
Based on the new interest deduction limitation rules, the net financing costs of 30% or 939.810.000 HUF for the period before interest payment, taxation and depreciation were recognized for interest deduction. Unused interest deduction capacity may in some cases reduce the tax base for the following years.
Exemption from the classification as a controlled foreign company will only apply to active services and in addition to that the automatic exemption of listed stock exchange companies will also be terminated.
Supporting team sports is complemented with the possibility of subsidizing the costs of running a sports recreational property.
- VALUE ADDED TAX (VAT)
The Act offers the possibility to automatically apply for 50% rate for renting a car when the rented car is used for both economic and private use. If a higher proportion of commercial use is justified, a corresponding deduction rate may be applied.
As of January 1st, 2020, the sales tax on new residential property will again rise to 27%. The new regulation makes it clear that the 5% VAT rate can still be applied to the sale of residential property if the building permit or the declaration about the building was made before 2nd of November 2018.
The threshold for tax exemption entitlement rises from the current 8 million forints to 12 million forints. Thus, the subject-matter of the tax exemption of VAT and KATA’s electoral limit is the same.
The law governs taxation related to the transfer of single-use vouchers. Tax-pay obligations arise even after the free assignment of single-use vouchers when the taxpayer was subject to a right of deduction in connection with the purchase of the voucher.
- PERSONAL INCOME TAX, SOCIAL-SECURITY CONTRIBUTION
The most significant change is that the tax incentive scheme, which is reinforced by the social contribution tax on R & D workers is significantly wider.Based on the Act of the new Szocho law, if the enterprise carries out its R & D activity as its core or principal activity or its related activities, 50% of the co-payment on the wage cost accounted for as direct costs of R & D can be enforced as a tax allowance. The wage costs thus taken into account – of course – can no longer be deducted from the corporation tax base. As from 1st January 2019, the personal and group risk insurance concluded by the paying agent (employer) is taxable. In the case of group insurance, the proportion of the insurance premium that is proportional to the private individual is the taxable insurance premium. Where the proportion of individuals cannot be determined by the above proportionality, the insurance premium would be subject to tax as a certain defined benefit and payer tax.
Effective from 2019, the employer’s contribution to the voluntary mutual fund and the employer’s donation would be considered as income from the employment status, after which the employer’s deduction from the gross amount of the employer’s subsidy should be deducted by the employer. There is no tax advance for the voluntary mutual insurance fund that is taxable for other incomes and it is payable by the date of the declaration.
The tax exemptions of the non-repayable employer’s allowance for housing purposes cease to exist, but there is no need to establish an interest-benefit income when the employer provides a worker with housing loans under certain conditions.
- FIXED RATE, TAX OF SMALL TAXPAYER ENTERPRISES AND SMALL COMPANY TAX (KATA, KIVA)
The KIVA requirement of the expected amount for receipts, receivables, and the balance sheet total (small business tax) changed from 500 million HUF to 1 billion HUF as of December 1st, 2018.
In the event that the taxpayer transfers from the scope of the corporation tax to the taxation of subsidiaries (KATA), the amount invoiced on the basis of the supply of goods and services by the company during the period of corporation tax would be a corporation tax, irrespectively of the date of delivery.
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The foregoing summary is intended to raise awareness and does not constitute legal advice.
If you have any questions or need further information, please do not hesitate to contact us.
10/Sep/2018
The Hungarian parliament has adopted the legislation amending taxation regulation, due to which the cafeteria system becomes thoroughly altered. The new law significantly narrows the scope of the non-salary compensations whose tax rate was favourable up till now: from 2019 onwards, the SZÉP-card will remain the only item in this category.
Our newsletter regarding the cafeteria-system deals with the question of whether the employer or the employee is obliged to bear the modified tax burden of these non-salary compensations. The answer partly depends on whether the duty to provide cafeteria items is regulated in the employment contract or is prescribed by an internal rule of the employer. The possible answers are detailed below.
1. The employment contract specifies the duty to provide the non-salary compensation whose public charges are to increase
If the employment contract itself determines that the employees receive e.g. Erzsébet Vouchers as non-salary compensation and the form of compensation remains unchanged, then the wording of the clause about the compensation will decide who has to bear the increased tax charges.
Namely: If according to the employment contract, the employee is entitled to a compensation of gross HUF 8,000 in the form of Erzsébet Vouchers, the employer will simply subtract more charges from the gross amount, so the net amount of the compensation is going to be lower. However, if the employee is entitled to a compensation of net HUF 8,000 in the form of Erzsébet Vouchers, then if the contract remains unchanged, the employee will have to receive HUF 8,000 in Erzsébet Vouchers, but this means that, henceforth, the employer is going to pay significantly more in charges (the same tax rate as for the salary applies for the non-salary compensation).
It is important to note that if the employer wants to provide other kind of non-salary compensation instead of the ones stipulated in the contract (to which from now on the higher charges apply), the employment contract has to be changed, which requires the consent of the employee.
2. The obligation to provide non-salary compensation is set forth in the internal rules of the employer
In this case, the employer is in a more favourable situation, because under some conditions he can change the internal rules unilaterally, so the employer is able to:
- unilaterally introduce a different type of compensation
- shift the higher charges onto the employees
- completely abolish the cafeteria-system.
However, it is important to emphasize that under section 16 (2) of the Hungarian Labour Code an obligation contained in the employer’s internal rules can be altered or terminated with immediate effect to the detriment of the employee only if such fundamental changes occur in the circumstances of the employer, that the fulfilment of the obligation would become impossible or would cause disproportionate harm to the employer. Consequently, if the employer wishes to change the internal rules due to the higher charges of the cafeteria items, he can only do that, if he previously figures how the application of the salary tax rates to the cafeteria items would influence his operation and can prove that this would cause him serious losses.
As a summary we can state that the adaptation of employers to the narrowed scope of cafeteria items requires careful consideration and preparation, during which not only the legal aspects, but also the social and HR-aspects must be taken into account.
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The foregoing summary is intended to raise awareness and does not constitute legal advice.
If you have any questions or need further information, please do not hesitate to contact us.
9/May/2015
I. Preliminary observations
The multilevel regulation of law of obligations
One of the most important innovations affects the method of regulation of the law of obligations. The new Civil Code regulates the law of obligations on 3 levels. The first level involves the general provisions relating to the law of obligations, the second level contains the rules about the contracts in general, and the third level deals with the particular types of contracts
II. Conclusion and amendment of contracts
Obligation to co-operate
The new Civil Code unequivocally declares that the parties have the obligation to co-operate during the negotiation, the conclusion, the term and the termination of the contract, and the parties shall also inform each other about any relevant circumstances in connection with the contract. If the parties enter into the contract, the offender party shall reimburse all damages for the offended party if it breached its cooperation or information obligation.
In the case when the contract fails to be concluded, the neither of the party has liability for damages, except if either of the parties breached his cooperation and information obligation during the negotiation, and thereby causes damages to the other party. This, for instance may occur, if one of the parties has no intention to conclude the contract, and despite he continues the negotiations, and as a result the other party absorbs its capacities, and thereby loses other orders.
Contracting in tendering procedures
The new Civil Code sets forth the rules of contracting after tendering procedures. From among such provisions we highlight the rule pursuant to which the party who published the call for tenders has an obligation to make a contract with the tenderer whose tender, besides meeting the criteria set forth in the call for tender, is the most favorable economically. The party publishing the call for tender may be released from the contracting obligation, if he stipulated in advance the right to refuse to conclude the contract in the call for tenders.
Refusal to conclude the final contract on the basis of a preliminary contract
Compared to the old Civil Code’s unclear provisions, the new Civil Code defines significantly stricter rules on the possibilities of refusing to conclude the final contract by a party who entered into a preliminary contract. According to the new regulations, the party can refuse to conclude the final contract, if
- a circumstance appeared after the conclusion of the preliminary contract, was not foreseeable; and
- the performance of the contract with unchanged conditions would harm an essential legal interest of the party concerned;
- the change was not inducted by the party; and
- the change in circumstances does not belong to ordinary business risks.
Unilateral amendment of the contract
The new Civil Code explicitly stipulates that the contract can be amended unilaterally by either of the parties, if it was stipulated by the parties in the contract, or the party concerned is authorized by law to do so.
Modification of contract by the court for the reason of changes in circumstances
The new Civil Code clarifies the conditions of amendment of contract by the court because of significant changes arisen in circumstances. The conditions are the following:
- the contract between the parties establishes a long-term legal relation;
- the performance of the contract with unchanged conditions would harm the essential legal interests of any of the parties;
- the possibility of change in circumstances was not foreseeable when the contract had been made;
- the change in circumstances was not inducted by the party, who requested the amendment of the contract from the court; and
- the change in circumstances does not belong to ordinary business risks.
III. Performance of the contract
Additional services
The issue of the additional services has been added to the new Civil Code as a new provision. According to that, if the obligor party offers to provide a quantity that exceeds what is stipulated in the contract, the obligee party may refuse the acceptance thereof reject that; or is obliged to provide a consideration raised proportionately to what has been added to the service originally stipulated in the contract.
Notification obligation regarding hindrance to performance
The new Civil code stipulates as a new rule that if either of the parties’ performance is foreseeably hindered, then the party being aware of such hindrance shall notify the other party, unless the other party be aware of that without a notification. The old Civil Code did not contain such provision as a general rule, it only appeared among the provisions pertaining to specific contracts.
Performance of payment obligations
In accordance with the regulations of the European Union, the new Civil Code declares that if the parties did not determine the time of the performance of the payment obligation in the contract, then “the payment obligation must be performed within 30 days of the receipt of the payment demand or the invoice of the other party.”
Late payment penalty interest concerning contracts between business undertakings
Concerning contracts between business undertakings, if any of the parties fell in delay, the obligee may demand late payment penalty interest from the delayed obligor party. Based on the new Civil Code, the late payment penalty interest rate is equal to the central bank’s base rate prevailing on the first day of the calendar half year affected by the delay.
If the payment obligation specified in the contract is determined in other not Hungarian currency „then the base rate determined by the central bank issuing the currency concerned or, in the absence of such, the money market rate – plus 8% shall be applied.„
Here is an example on the calculation of the aforesaid:
The base rate applied by the Central Bank of Hungary was 3, 00% on January 1, 2014, thus, a business undertaking falling in delay on March 16, 2014 shall be obliged to pay a late payment interest in the rate of 11, 00%.
The EUR 40 rule
Based on the newly introduced so-called “EUR 40 rule”, in the case of contracts between business undertakings if one of the parties falls in delay, the obligor shall pay an amount in HUF corresponding to EUR 40 as a lump sum for the costs of the recovery. The nominative rate of exchanges to be applied for the conversion is the mid exchange rate issued by the central bank prevailing on the day when the late payment penalty interest occurred.. The payment of such lump sum does not grant relief from other legal consequences of the delay.
IV. Invalidity
Reasons for nullity and contesting
Some of the reasons for contesting or declaring the nullity of a contract have been amended and some new reasons have been introduced in the new Civil Code. The following table summarizes the most significant new or amended contesting and nullity causes:
Reasons for nullity: fiduciary credit collaterals; conditions impairing consumers rights; consumers’ waivers; unfair general contractual terms in a consumers contract; unfeasible services stipulated.
Reasons for contesting: excessive disproportion between the value of the service and the consideration thereof; unfair general terms and conditions.
Nullity of the fiduciary credit collaterals
It was a prevailing bank practice that the loan agreements contained certain terms that entitled the banks to gain for instance ownership or option right over the debtor’s assets specified in the contract.
This practice becomes terminated by the new Civil Code, since in cases of insuring payment obligations it stipulates the nullity of the fiduciary credit collateral contract terms
- transferring ownership, other rights or vindications; or
- founding right to buy (so called fiduciary credit collaterals)
Contest in the case of excessive disproportion
According to the new Civil Code, the party who could recognize the excessive disproportion between the value and the consideration thereof, or undertook the risk of excessive disproportion when the contract had been concluded cannot exercise his right to contest the contract. The parties may also exclude their right to contest for reasons of excessive disproportion save for consumers’ contracts.
Legal consequences of invalidity
One of the most important innovations affects the legal consequences of invalidity. If the parties remedy the reason of invalidity or the invalidity reason ceases for other reasons, the invalid contract becomes valid if the parties confirm their contractual will. The invalid contract may become valid with retroactive effect from the date of conclusion of the contract. The invalid contract becomes valid for the future, if the parties remedy subsequently the reason of invalidity, and agree that the contract becomes valid with a respect to a future date.
V. Breach of contract
The definition of breach of contract
The conducts of breach of contract exhaustively listed in the old Civil Code are the same in the new Civil Code, but the new Civil Code also stipulates a general definition of breach of contract,, which is the following: ”Failure to fulfil an obligation in accordance with the contract constitutes a breach of contract.”
Contracts providing security coverage
The provisions on contracts providing security coverage had been added as new rules to the new Civil Code. By way of a contract providing security coverage, in case of cancellation or termination of a contract due to the other party’s breach, the obligee may conclude another contract suitable for the realization of the goal intended to be achieved by the original contract, and demand, in accordance with the rules of compensation for damages, that the obligor
- reimburse the difference between the value of consideration determined in the failed contract and in the contract providing security coverage; and
- reimburse the expenses arising due to the conclusion of the contract providing security coverage.
Liability for breach of contract
According to the old Civil Code, the party causing damage by breach of contract was not held liable if he proved that he proceeded in a way that is generally expected in the given situation. In contrast with that, based on the new rules, the party causing damage will not be held liable, if he proves the existence of the following conditions:
- the breach of contract arose due to a circumstance beyond his control unforeseeable at the time of the conclusion of the contract; and
- it could not be expected from him to avoid the circumstance or prevent the damage.
VI. Limitation time
Changing the term of the statutory of limitation time
In the old Civil Code, the parties also had the possibility to change the term of the statutory limitation time, because they could stipulate a term shorter than the statutory 5-year-limitation time. Extending the term of the statutory limitation time was only possible in case of 1-year- limitation time, and the parties could extend it only by 1 additional year.
According to the new regulation the parties may agree in writing on a limitation term either shorter or longer than the statutory time.
Interruption of the limitation time
A significant innovation of the new Civil Code that the written statement demanding the obligor to perform will not interrupt the term of limitation anymore. For that reason, those claims which approximate to of the end of the limitation time should be enforced in judicial procedure in the future if the parties cannot reach an agreement on the settlement.-
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The newsletter contains general information. Therefore, its content may not be regarded as professional advice or comprehensive information for decision-making.
Should you have any further question, we remain at your disposal.
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