Managing director as representative

From 1 July, it is a priority to deal with the settlement of the social security relationship and the data on the social security relationship of employees in the Hungarian Tax Authority

As of 1 July 2020, Act CXXII of 2019 (hereinafter new Social Security Act) enters into force. For this reason, we would like to draw attention to the fact that it is worth paying more attention to the settlement of the social security relationship from both employee and employer side.

It is worth knowing that the National Health Insurance Fund of Hungary indicates the different conditions with five different lamp colors, based on the instruction from the Hungarian Tax Authority, and the social security number can be valid or invalid.

Lamp colors could be the followings:

  • Green means that the legal relationship is settled, the social security number is valid.
  • Red means that the legal relationship is unsettled, the social security number is valid.
  • Blue means that the person could obtain the medical health care in the European Economic Area (EEA) with a European Health Insurance Card issued by a foreign insurer, the social security number is invalid.
  • In the case of a brown, the entitlement is unresolved, the social security number is invalid, the person could use the health services in Hungary only for a specified fee.
  • Yellow means limited entitlement, the social security number is a valid, voluntary agreement, a person entitled to full care, excluding transplant benefits, medical treatment abroad, and only emergency dental care is available among the free dental benefits.

Why is all this important? So far, the practice has been that person received the medical care for free of charge in case of the green and red lamps (valid social security number) in the system, however, at red we received a notification about the disorder of the legal relationship. In case of brown and blue lamps (invalid social security number), a person has to pay for the benefits.

At the same time, an important change will take effect on 1 July 2020, namely that the Hungarian Tax Authority will check those who register for the mandatory healthcare contribution and after three consecutive months of late payment, will alert the National Health Insurance Fund of Hungary if the entitlement is still unresolved. Then the lamp will be changed to brown, i.e. invalidating the social security number, so that the persons concerned will not be entitled to free health care. This means that from 1 July 2020, it will no longer be possible to settle the legal relationship by paying the arrears of health insurance service contributions (previously this was a viable option), i.e. the patient, if provided, will have to pay for the service. The paid amount will not be refunded even after the subsequent payment of contributions. However, emergency care still cannot be denied.

The National Health Insurance Fund of Hungary transfers the data of persons receiving unauthorised legal care to the Hungarian Tax Authority. Based on the data, the fulfilment of the reporting and contribution payment obligation is monitored by the Tax Authority. If no contribution data is found, the authority will contact the customer to verify their entitlement to the healthcare. In the absence of a basic legal relationship entitling to health care, a health care service contribution must be paid. If the request is unsuccessful, the health service contribution is prescribed by the tax authority of its own motion.

In addition, based on our experience, although the Hungarian Tax Authority has already paid special attention to the legal relationship of employees, after July 1, it will check more intensive whether the data of employees received during the monthly returns (08) have been properly declared on the T1041 registration form. In the event of a discrepancy, the employer is contacted and a conciliation procedure is initiated. Even with proper notification, the starting date or so-called FEOR number for a given employment relationship may be incorrectly recorded with the authority, or the statement of an outgoing worker may not be recorded. Therefore, it is worth checking from time to time that the data displayed in the Hungarian Tax Authority system is the same as the data in the internal database maintained by the given employer. In the event of a discrepancy, the first step is to contact the Health Insurance Department of the territorially competent Government Agency and agree on further action.

Finally, we would like to draw your attention to the fact that in the case of employees who have worked or studied abroad and have therefore been excluded from the scope of Hungarian social security, it is especially worthwhile to initiate re-validation of their number after moving home. In order to do so, the termination of the foreign insurance relationship and the repatriation to Hungary must be notified to territorially competent Government Agency on the standardised form, and at the same time re-validation of the social security number must be initiated. In the absence of this, despite that the employer notifies the given employee and then pays the necessary employer and employee contributions to the Hungarian Tax Authority, the social security number was not validated automatically. Of course, if this notification is not made in time, the social security number could be validated retrospectively with an employer’s certificate and the notification form.

For more information, contact:

Ferencz Gyöngyi, Partner
VGD Hungary

Kuntner Andrea, Partner

VGD  Hungary

Thurn Erik, Partner

VGD Hungary

Date: July 2020