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Hungary’s new legislation, the 2025 Law XVI, introduces automatic tax relief on infant care allowance, child care allowance, and adoption care allowance. According to Article 1, paragraphs (2)-(3), and Article 3 of the law, the authorities responsible for disbursing these benefits are required to apply the tax relief automatically by adjusting payments accordingly.
Overview of the 2025 Law XVI and Its Key Provisions
The law mandates that tax relief is equal to the full amount of the benefit paid, meaning beneficiaries receive the allowance without any tax deduction on these payments. Notably, if an individual receives multiple types of these benefits simultaneously, the tax relief applies to each separately.
Mechanism and Scope of the Tax Relief
The responsible disbursing agency must calculate and implement this relief without requiring additional applications from beneficiaries. This simplifies administrative processes and ensures that recipients fully benefit from the allowances.
Effective Date and Transitional Provisions
Per Article 3 of the law, this tax relief applies to benefits paid from July 2025 onwards, specifically those payments disbursed after June 30, 2025. Given that benefits are typically paid by the 10th of the month following the benefit period, the relief will first be visible in July 2025 payments, regardless of the reference period for the benefit.
Implications for Beneficiaries and Employers
This reform underscores Hungary’s commitment to supporting families by easing the tax burden on critical family care benefits. For multinational companies operating in Hungary, it is essential to update payroll and benefits administration systems to ensure compliance and accurate reporting.
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