Go Back  British Expats > Living & Moving Abroad > Europe > Hungary
Reload this Page >

It Contract or Permanent Employee in Budapest?

It Contract or Permanent Employee in Budapest?

Reply

Old May 10th 2018, 1:17 pm
  #1  
Just Joined
Thread Starter
 
Joined: May 2018
Posts: 4
Waxhill is an unknown quantity at this point
Default It Contract or Permanent Employee in Budapest?

Hi All,
I'm lucky enough to have the offer of an IT job in Budapest and am looking to emigrate once I've served my notice in the UK. I've been given the option of either working as a full time employee or as a contractor through a limited company.
The CEO I'll be working for suggests that it would be better for me to operate as a UK Ltd company, purely to be more tax-efficient, though having gone through HMRC's paperwork on residency I would be classed a Hungarian resident.
Can anyone offer any insight on whether this would be the best route to take? Setting up as a Hungarian company would obviously be an option too.

I've seen a thread - "IT Contract in Budapest / Tax liability" - which is very useful, especially the comment about pension provision.
Sorry I can't post the full link yet because of the forum restrictions.

I should add that the amount being paid to me would be the same either way. Thanks!

Also, any thoughts on whether it would be necessary to obtain health insurance?
I should mention that my partner is Hungarian, so the language barrier isn't as bad as it could be :-)

Thanks!

Last edited by christmasoompa; May 10th 2018 at 2:11 pm. Reason: Posts merged - there is an 'edit' button you can use if you think of something you want to add.:-)
Waxhill is offline  
Reply With Quote
Old May 11th 2018, 9:39 am
  #2  
BE Forum Addict
 
Joined: Nov 2012
Posts: 1,157
Peter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond repute
Default Re: It Contract or Permanent Employee in Budapest?

What do you mean by 'emigrate' If it is going to be a permanent move, sell up everything in the UK you are going to Hungary for the duration then IMO you should have every thing here as leaving bits in the UK will only cause problems (= expense) in the future. If you see it as a move for a few years then see what happens then you have a choice.

As you said - good words in the ' IT Contract in Budapest / Tax liability ' thread. Anything other than an employed person here you will need an accountant.

Another consideration is how old you are, if you are close(ish) to retirement it would be wise to continue paying into the UK state pension system until you have enough years to get a full pension. How close is close - that is a personal decision.

What ever happens IMO you should get residency here before March next year (Brexit) as after that date (at the moment) there is nothing but uncertainty, but before that date there are noises, for what they are worth, about security of residency without work permits etc.
Peter_in_Hungary is offline  
Reply With Quote
Old May 11th 2018, 9:59 am
  #3  
Forum Regular
 
Joined: Jul 2016
Location: Szeged
Posts: 254
Szeged is an unknown quantity at this point
Default Re: It Contract or Permanent Employee in Budapest?

If I were you I would get an Hungary accoountant to weigh up the pros and cons of you being a worker/employee in Hungary, a self-employed person in Hungary versus a LTD Company (either in the UK or Hungary) as taxes are going to play a big part. A Hungarian will tell you that by the time they have paid everything into the system as a self-employed business/person, it eats up the equivalent of 50% of their gross income. Furthermore, I would investigate startup options for your Hungarian partner, if you were to trust her as your company owner for example (i.e. she sets up a company and you work for her - her company takes on your contracts). Obvoiusly you have not given full details of your situation, hence why the above are just ideas/thoughts/options to think about.
Szeged is offline  
Reply With Quote
Old May 11th 2018, 1:02 pm
  #4  
Just Joined
Thread Starter
 
Joined: May 2018
Posts: 4
Waxhill is an unknown quantity at this point
Default Re: It Contract or Permanent Employee in Budapest?

Hi,
Peter - Thanks for that. I was all set to be an employed person until the CEO suggested it might be better otherwise and, surprisingly given the low rate of corporation tax in Hungary, that contracting as a UK company would be a better option to work as.
It's likely to be September when I move over, so one of the first tasks will be to obtain residency; and hope that Brexit doesn't cause any unsolvable issues, though given that I'll be employed I'd hope that a work permit wouldn't be a problem. Time will tell on that one.

The pension is a good consideration - thank you.
At 53 I won't get the minimum service required for the Hungarian state pension, so presumably this is a lost cause and I'd never get a return from the 10% I'd pay towards it from my salary?
At least working as a contractor I could pay myself the minimum allowed to reduce this loss; and therefore get some form of private pension for my remaining working years?

Szeged - Thanks also for responding.
I spoke very briefly to a Hungarian contractor, set up as a Hungarian company, on my last visit. He said that he lost approx. 53% of his income in taxes, though 27% of that was VAT. That surprised me because I thought that (a) he would invoice + VAT and the VAT element would offset against the larger VAT bill of the company he was working for like in the UK - needs clarifying I think, as that's down to whatever contract exists; and (b) that the threshold for VAT registration is (I think) 8m HUF, which is quite low compared to the UK's 85k GBP, as is the distance sales threshold at 35k Euros

Last edited by Waxhill; May 11th 2018 at 1:26 pm. Reason: Update following reply
Waxhill is offline  
Reply With Quote
Old May 11th 2018, 4:41 pm
  #5  
BE Forum Addict
 
Joined: Nov 2012
Posts: 1,157
Peter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond repute
Default Re: It Contract or Permanent Employee in Budapest?

Originally Posted by Waxhill View Post
Hi,
The pension is a good consideration - thank you.
At 53 I won't get the minimum service required for the Hungarian state pension, so presumably this is a lost cause and I'd never get a return from the 10% I'd pay towards it from my salary?
At least working as a contractor I could pay myself the minimum allowed to reduce this loss; and therefore get some form of private pension for my remaining working years?
That is my understanding of the Hungarian pension rules although it is I also understand that additional contributing payments can be made but the minimum Hungarian pension is currently about 30,000huf., very low. You can (I believe) pay additional voluntary national insurance payments into the UK system to boost the years (either 30 or 35 years) to get a full pension. The current proposal for brexit is that for those resident in Europe before brexit will get annual increases but after brexit certain countries may not get increases.
Peter_in_Hungary is offline  
Reply With Quote
Old May 11th 2018, 7:31 pm
  #6  
Forum Regular
 
Joined: Jul 2016
Location: Szeged
Posts: 254
Szeged is an unknown quantity at this point
Default Re: It Contract or Permanent Employee in Budapest?

You need to bare in mind that
Voluntary contributions don’t always increase your State Pension
- https://www.gov.uk/voluntary-nationa...-contributions.

Also with paying gap years via voluntary ni payments, the government might rip you off! I had something like 8 years of not paying ni years back (from my younger years) whereby many yeasrs later, when I had some money, I applied for a pension forecast so I could see my gap years. It stated I could only pay 5 years worth of gap years....even though I wanted to pay all of the 8 years. I do not know how the system works now, but I would definately look into the current situation of whether or not it is worth paying gap years and/or voluntary ni in general......especially with things changing (brexit, universal credit, things being means tested based on your current ni contributions, etc).
Szeged is offline  
Reply With Quote
Old May 12th 2018, 10:18 am
  #7  
BE Forum Addict
 
Joined: Nov 2012
Posts: 1,157
Peter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond repute
Default Re: It Contract or Permanent Employee in Budapest?

Obviously you have to read the rules of the day and come to your own decisions but I think there is a difference between paying in for gap years which it would appear have a limit of 5 and continuing payment on an up to date schedule for as many years as needed to secure a full pension.

Means testing the OAP has been floated several times in the past and has always been met with a loud objections because the pension is seen as a benefit paid for like a life insurance and any attempt to restrict its application because the government decides you don't need what you have paid for will IMO result in political suicide for that government.
Peter_in_Hungary is offline  
Reply With Quote
Old May 14th 2018, 7:42 am
  #8  
BE Forum Addict
 
Joined: Nov 2012
Posts: 1,157
Peter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond repute
Default Re: It Contract or Permanent Employee in Budapest?

Oh, and there is also the KATA system of paying payroll tax for self employed. Under this system you pay 60,000huf per month, flat rate (even for the months you earn nothing) and this covers you up to 12,000,000huf income p/a. There is no opportunity to claim deductibles under this system.

As with the other possibilities you look at your position and make a choice.
Peter_in_Hungary is offline  
Reply With Quote
Old May 14th 2018, 9:41 am
  #9  
Just Joined
Thread Starter
 
Joined: May 2018
Posts: 4
Waxhill is an unknown quantity at this point
Default Re: It Contract or Permanent Employee in Budapest?

Peter/Szeged,

Thank you for your comments. There are some very useful points on pensions in there which I need to follow up.

I've managed to find a Budapest-based accountant who I can speak to this week about operating as a Hungarian company; and hopefully a UK accountant will soon help to clarify things should I go down the UK company route.
Understanding the various VAT/AFA rules is the next hurdle. I don't think I'd have to worry too much about it as a UK company because of the reverse charging, other than fulfilling all the regulations around the paperwork; which I think is why it was suggested as a route. That really is one for the accountants though....
Waxhill is offline  
Reply With Quote
Old May 14th 2018, 2:33 pm
  #10  
BE Forum Addict
 
Joined: Nov 2012
Posts: 1,157
Peter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond reputePeter_in_Hungary has a reputation beyond repute
Default Re: It Contract or Permanent Employee in Budapest?

IMO if you can keep out of the AFA/VAT game you would be better off as the additional accounting adds a lot of expense and unless you have a lot of AFA/VAT receipts then it is not worth it.
Peter_in_Hungary is offline  
Reply With Quote

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Contact Us Archive Advertising Cookie Policy Privacy Statement Terms of Service