27% social security contribution tax (24% pension + 3% health) 1,5% labour-market contribution

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1 Prepared by UNION Biztosító. I SUMMARY Social Security Eligibility All legally employed persons, members of cooperatives, students, people receiving jobseekers allowance and all contributing citizens, including the self-employed. Retirement Age Contributions For men and women Age 62 born before January 1, 1952 Age days born in 1952 Age 63 born in 1953 Age days born in 1954 Age 64 born in 1955 Age days born in 1956 Age 65 born in 1957 or after Employer contributions: 27% social security contribution tax (24% pension + 3% health) 1,5% labour-market contribution Employee contributions: 18,5% of employee s salary 10% pension contribution: upper limit of employees pension contribution cancelled from 1st of January % health contribution: 4% contribution for health services in kind + 3% contribution for cash benefits 1.5% labour- market contribution Citizens who are not insured have to pay HUF 6,930 (HUF 231/day) health contribution per month. Retirement Benefits Compulsory governmental pension fund: The basis is the average monthly salary of the employee earned during the whole active period from 1988, multiplied with a valorisation rate, depending on inflation (published annually). The final amount of pension depends on the number of years of service. Minimum retirement pension benefit is HUF 28,500 per month. Disability Benefits Known as Rehabilitation Benefits. The system of disability allowance has totally changed in The earlier disability benefit under the age limit has changed for rehabilitation and disability benefits and over the age limit it has changed for retirement pension benefit. Rehabilitation benefit is paid for a maximum of 3 years for those whose employability can be restored and who are disabled 60% or less (B1 or C1), and younger than 57. The amount of rehabilitation benefit depends on the degree of disability and varies between 35%-45% of the average salary. The minimum is 30% Employee Benefits Reference Manual Swiss Life Network

2 and the maximum is 50% of the official minimum salary (HUF 105,000 per month in 2015). Disability benefit is paid to those whose rehabilitation is not recommended (B2, C2 and D) or are older than 57 independent of the disability categories. The amount of disability benefit varies between 40-70% of the average salary, the minimum being 40% and the maximum 150% of the official minimum salary (HUF 105,000 in 2015). Those older than existing old pension age will get the retirement pension benefit. Death Benefits Spouse s Pension: Paid to surviving spouse, divorced spouse or common-law spouse. The temporary spouse s pension amounts to 60% of any pension that was due, or would have been due to the deceased. If the surviving spouse has at least 2 children the temporary benefit is paid as long as they study. The permanent spouse s pension also amounts to 60% if the person entitled to it does not possess a pension in their own right. In all other cases, the permanent spouse s pension is 30% of the pension rights of the deceased person. Orphan s Pension: 30% of the deceased s pension is paid for each orphan younger than age 16 (age 25 if in full-time education, no limit if disabled); a full orphan or an orphan with a disabled surviving parent receives 60% of the highest pension of either parent. Parent s Pension: Paid to parent or grandparent, who was disabled or over the age of 65 at the time of the child s or grandchild s death, and the child or grandchild took care for his or her parent and grandparent in last year. The sum of parent s pension is equal with spouse s pension. If more people are entitled for parent s pension, it is split among them. Accidental survivor s pension: Paid to the survivors, if the insured died in accident at working. The sum of accidental survivor s pension is equal with 60% of average salary and increased by percentages according to the number of service year. Medical Benefits Free medical care is provided to all who are insured (family members, provided at least one person is paying social security contributions) or for whom the contribution is paid by the government. Free medical services are prevention and early detection of diseases medical treatments: general practitioner, dentist, outpatient and inpatient hospital treatment other treatments: birth, medical rehabilitation, medical transport and emergency. Employee Benefits Reference Manual Swiss Life Network

3 Private Benefit Plans Private Benefit Plans consist of voluntary schemes, provided by Voluntary Mutual Pension Funds (VMPF). Eligibility A VMBF is established by at least 15 individuals founding a general assembly that comprises only the members of the fund. Retirement Age Same as for the state pension Members of a voluntary pension fund can decide after a 10-year waiting period to continue to pay member contributions to the fund to take the savings from their account (either partly or totally). Contributions Contributions to compulsory private pension funds (CPPF) are suspended and transferred to the state pension fund. For CPPF members, the 27% contributions paid by employer are transferred to the state pension system and the 10% contributions paid by employee are transferred to compulsory private pension fund. New rules for CPP funds from 2015: the fund should be closed if the rate of members paying contributions in less than 70% in 2 months for within 6 months average. Contributions to voluntary pension funds can be paid by the employer and / or employee. VMP Funds are cost and tax effective way of employees compensation. Employers typically pay contributions between 2-6% of salary to funds, and employees are required to pay about the half of employer s contribution (1-3%) Non-contributory for employees if scheme is Group Life only. Companies can choose among many Group Accident and Life insurance proposals offered by most insurance companies. Insurance premiums to group life and accidental plans are usually paid fully by the employer. Retirement Benefits Disability Benefits Death Benefits Medical Benefits Usually lump sum is paid at normal retirement age and can be paid as an annuity according to the decision of the beneficiary (employee). Whether caused by accident or illness, benefit amounts to 40% of salary and is paid till age 65. Only in the event of total disability according to the definition of social security categories 1 and 2. Lump sums are often provided, usually as a multiple of salary. Normally no pensions only lump sums, usually as a multiple of salary. Many companies grant free medical consultations/examinations within the company or in clinics. The new tax and cost effective options for companies are service-based health insurance packages, and the medical examinations at medical specialists and hospital care offered by them. Employee Benefits Reference Manual Swiss Life Network

4 Taxation Employer Contributions Employee Contributions Benefits Social security contributions are regarded as business expenses for the employer. Voluntary contributions paid by the employer to voluntary pension funds are tax-free up to 50% of the official minimum salary (per insured person, i.e. HUF 52,500 per month, maximum HUF 200,000 per year) and up to 30% of the minimum salary for health funds (HUF 31,500 per month, maximum HUF 450,000 per year). Changes in taxation from 2013: Generally the insurance premiums for the employee paid by employer as the allowance - are taxed. The risk life insurance premiums without maturity payment and without surrender value paid by employer are tax -free up to 30% of the official minimum salary (the premium per insured person in case of group insurance) The risk life insurance premiums with premium return to the employee (especially non-claim bonus) over 30% of insurance premium paid by employer are taxed (51.1% = 19% personal income tax % health contribution). The regular premiums of whole life insurances with surrender value are tax-free (from 1st January 2018 the tax-free status of whole life insurance will be cancelled and 51,17% tax should be paid as another benefit) the single and extra premiums are taxed. The surrender value of whole life insurance are taxed (personal income tax + health contribution): 39.5% (=12.5% personal income tax + 27% health contribution) within 10 years, 26.5% (=12.5% personal income tax +14% health contribution) after 10 years The unit-linked and saving life (group or individual) insurance premiums are taxed (51.17%), and in case of surrender the interest on saving is taxed (16%) Accident and health insurance premiums paid by the employers are tax-free without limitation There is 16% flat rate in personal income tax. (The government promises the further decrease to 9% in this 4-years term). The risk life, accident and health insurance premiums are tax-free without limitation. Voluntary scheme: 20% of contributions are deductible up to a maximum of HUF 150,000 per annum for pension and health contributions and up to a maximum of HUF 280,000 per annum paid for pension insurance, pension saving account and for funds together. All social security cash benefits are taxed as income with the exception. Retirement pension and rehabilitation or disability pension are tax-free. The taxation of interest on saving is changed in (in correlation with Long-term Investment Account system): Tax rate of interest on savings: 16%+ 6% (health contribution) Single premium payment 50% tax advantage in 3-5 years 100% tax advantage over 5 years Regular premium payment 50% tax advantage in 6-10 years 100% tax advantage over 10 years Employee Benefits Reference Manual Swiss Life Network

5 II INTRODUCTION Country Statistics Population/ growth rate 9,877 thousand (in 2014) / -0.3% (2014/2013) Age structure 0-14 years: years: years: years: 65 years and over: 14.8% 11.9% 41.6% 14.2% 17.5% (2013 est.) GDP GDP growth rate Agriculture Industry Services HUF 29,078 billion / EUR billion (2013) 3,5% (2014) 3.3% 27.6% 69.1% (2012 est.) Unemployment rate 7.7% (2014) Inflation rate -0,9%% (2014) Annual gross salary * In HUF ( 000) Para-professionals Professionals Management General: 2,641 Junior: 5,385 Lower middle: 12,043 Skilled: 3,772 Senior: 7,690 Upper middle: 18,597 Legal minimum wage Exchange rate on February 27, Currency: Hungarian Forint HUF 105,000/month (2015) 1 HUF = USD 1 HUF = EUR *Source: Mercer s International Geographic Salary Differentials, Edition 2015 Legislation and Insurance Market Update in Brief For private pension insurance after 1st January 2014, 20% of paid premium is deductible up to a maximum of HUF 130,000. From 1st January 2015 commission can be paid for life insurance up to 116% in 1st year and 100% in following years. New Law about insurers and insurance activity from 2016: Life insurance with insured periods longer than 6 months can be cancelled within 30 days without any explanation. Life insurance shorter than 6 months cannot be cancelled. Insurers have to accept client complaints made personally during working days from 8: , via phone on one of the working days 8:00-20:00 too, and online permanently. Insurers have to answer within 30 days. Before writing life insurance policies, the insurer is obliged to assess the client's needs. This obligation of assessment is transferred to brokers. The liability of multiple agents (who can sell products of different insurers) changed: they have to contract a liability insurance with a limit of EUR 1,251,000 per claim. If an investment fund offered by an insurer is yield guaranteed, then it automatically includes capital guarantee. The insurers are entitled to free investment, and they can invest in any investment assets. But the insurer cannot purchase its own securities or securities issued by a related company. Employee Benefits Reference Manual Swiss Life Network

6 III SOCIAL SECURITY Background Information By the 1990s, it had become clear that the whole pension system needed radical reform. The pay-as-you-go system imposed a huge burden on the budget due to unfavourable demographic development. This led to the introduction of the funded system and indirectly to the foundation of private pension funds. The law of 1996 regulates the operation of insurance companies and insurance activity. The main features are as follows: loosening of a priori and tightening of a posterior control, separation of life and non-life branches, lowering the capital requirements for insurance companies, obligatory profit sharing for savings products, and control over investments of the technical reserves and part of the solvency margin. Old age pensions are made up of three pillars: Benefits from the pay-as-you-go state system of social security Benefits based on funds from voluntary private pension funds (MPFs or Mandatory Supplementary Pension Schemes) Private coverage (VMBFs or Voluntary Private Pension Schemes) and private life insurance Employees can join a voluntary private pension fund On October 2010, the Hungarian Prime Minister Viktor Orbán suspended the payments into the compulsory secondpillar (occupational) pension funds (CPPF) as from November 1, This was in response to stringent deficit targets imposed by the IMF and the European Union. Instead, payments were redirected to the government-run first pillar (a traditional defined benefit, pay-as-you-go system). Members who decided to remain in the private funds do not receive any government pension. Eligibility All legally employed persons and all contributing citizens, including the self-employed, are eligible to receive social security benefits. Contributions There is no ceiling (upper limit) for employee pension contribution since There is no ceiling for employee contributions to health insurance, and there is also no ceiling for employer contributions (neither pension nor health care). % of salary Employee Employer Pension 10% 24% Health Care & Labour 7% Health Care and 1.5% Labour 3% Health Care and 1,5% Labour Early Retirement - - Total 18.5% 28,5% Citizens who are not insured have to pay HUF 6,930 (HUF 231/day) health contribution per month. Retirement Benefits Retirement Age For old-age retirement there are 3 kinds of possibilities: 1. normal / full old-age pension 2. part of the old-age pension 3. women reduced old-age pension Employee Benefits Reference Manual Swiss Life Network

7 The government has cancelled other pension benefits such as the disability pension, early retirement, and reduced early retirement. Normal retirement: both for men and women Age 62 M/F born before January 1, 1952 Age days born in 1952 Age 63 born in 1953 Age days born in 1954 Age 64 born in 1955 Age days born in 1956 Age 65 born in 1957 or after Early retirement is not possible anymore. Qualifying Conditions At least 20 years of employment are necessary to receive a full old age pension. The amount of pension depends on the length of service and earnings from Retirement Benefits Old age retirement pension is calculated in three steps: The average monthly gross salary is calculated for each year. Each year the average is multiplied by a valorisation multiplier, reflecting the inflation at that time. The valorisation multiplier in 2014 Year Multiplier Year Multiplier Year Multiplier Year Multiplier , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,365 Employee Benefits Reference Manual Swiss Life Network

8 Percentage of salary based on years of service Years of service % of monthly salary Years of service % of monthly salary Years of service % of monthly salary % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % % For each additional year plus 2.0%. A decreasing percentage of the pension basis monthly salary is calculated into the monthly pension: Amount (HUF) Calculation basis % 0 372, % 372, ,000 90% 421,000 and above 80% The minimum old age pension is HUF 28,500 per month. The pension basis monthly salary is taken as the basis, and a percentage of the basis is paid according to the years of service. The basis of calculation is the gross salary minus the personal income tax. Pensions are free from personal income tax. After 2013 the calculation of the old age pension will be changed and mutual pension funds will begin to finance part of the pension for its members. The governmental social security will provide full pensions for those who are not members of mutual funds and partial pensions for those who are members of different funds. Disability Benefits Called Rehabilitation Benefits since 2012 Qualifying Conditions The system of disability allowance totally changed in The earlier disability benefit under the age limit has changed for rehabilitation and disability benefits and over the age limit it has changed for retirement pension benefit. Rehabilitation benefit is paid to those whose employability can be restored and who are disabled 60% or less (B1 or C1) and younger than 57. The rehabilitation allowance is paid for the period of the rehabilitation, but for a maximum of 3 years. The monthly rehabilitation benefit depends on the degree of disability. If the employee can be rehabilitated, then the rehabilitation benefit is 35% of the average salary the minimum is 30% and the maximum is 50% of the official minimum salary. If permanent rehabilitation is necessary then the rehabilitation benefit is 45% of the average salary the minimum is 40% of the official minimum salary and the maximum is 50% of the official minimum salary. The rehabilitation benefit must be increased according to the regulation of pension increase. Employee Benefits Reference Manual Swiss Life Network

9 Disability benefit is paid to those whose rehabilitation is not recommended (B2, C2 and D) or who are older than 57 (independent of their disability category). The amount of disability benefit depends on the degree of disability. The following applies: Disability of 50% to 60%: disability benefit is 40% of the average salary the minimum is 30% and the maximum 45% of the official minimum salary Social security disability category III: disability benefit is 60% of the average salary the minimum is 45%,the maximum 150% of the official minimum salary Social security disability category II: disability benefit is 65% of the average salary the minimum is 50%, the maximum 150% of the official minimum salary Social security disability category I: disability benefit is 70% of the average salary the minimum is 55%, the maximum 150% of the official minimum salary. The disability benefit must be increased according to the regulation for the increase of pensions. Death Benefits Qualifying Conditions Widow s/widower s pension is payable to the surviving spouse, divorced spouse or common-law spouse. Widow s/widower s pension can be temporary or permanent. Benefits The temporary spouse s pension amounts to 60% of any pension that was due, or would have been due to the deceased. If the surviving spouse has at least 2 children the temporary benefit is paid for as long as they study. The permanent spouse s pension also amounts to 60% if the person entitled to it does not possess a pension in their own right. In all other cases, the permanent spouse s pension is 30% of the pension rights of the deceased person. Orphan s Pension: 30% of the deceased s pension is paid for each orphan below age 16 (age 25 if in full-time education, no limit if disabled); an orphan or semi-orphan with a disabled surviving parent receives 60% of the highest pension of either parent. Parent s Pension: Paid to parent or grandparent, who was disabled or over the age of 65 at the time of the child s or grandchild s death, and the child or grandchild took care for his or her parent and grandparent in last year. The sum of parent s pension is equal with spouse s pension. If more people are entitled for parent s pension, it is split among them. Accidental survivor s pension: Paid to the survivors, if the insured died in accident at working. The sum of accidental survivor s pension is equal with 60% of average salary and increased by percentages according to the number of service year. Sickness Benefits Qualifying Conditions See Disability Benefits (Rehabilitation Benefits). Sick Leave Benefits A sickness benefit of 50% of earnings is paid out to an eligible and hospitalised recipient. Sickness benefit (for a recipient who is not hospitalised) is 60% of earnings of monthly average on last 180 days from 1st January 2015 up to 200% of the official minimum salary (HUF 7100 per days) if continuous employment lasted at least 2 years before Employee Benefits Reference Manual Swiss Life Network

10 sickness occurred. The sickness benefit is payable for a maximum of 1 year, or for the duration of continuous employment preceding the illness, if less. Sickness benefit is also paid for the following: pregnancy where the insured is not entitled to maternity allowance for mothers breast-feeding a hospitalised child older than age 1 for caring for a sick child younger than age 12. The duration of benefits varies according to the sick child s age and the parents marital status. Medical/Health Benefits Qualifying Conditions Entitlement to free medical care depends on the payment of contributions. Free medical care is provided to all family members, provided at least one person is paying social security charges. Benefits The level of traditional health care in Hungary is average by European standards. The following benefits are provided free of charge by the public health system in reverse of the obligatory social security contribution: general and specialist care, hospitalisation, sanatorium (only partly) and spa treatment, maternity care, partial costs of medication, equipment as well as travel expenses. There is no limit on the duration of benefits paid. All benefits are extended to the dependants of the insured. Still, due to the urgent need for a higher level of services, many private clinics and treatment centres have opened since Work Injury Benefits Qualifying Conditions If loss of working capacity of at least 67% occurs as a consequence of an occupational injury, a pension benefit becomes due. There is no minimum qualifying period. Benefits Benefits are paid for occupational diseases, governed by legally binding rules set by the National Health Insurance Fund. Accidents that occur while commuting to and from work are covered. There are no special provisions for work-related death and sickness benefits. In case of work-related disability the benefit amounts to 70%, 65% or 60% of average salary according to the degree of disability and is increased by 1% for each year of service. Category 1: entirely disabled and dependant on others Category 2: entirely disabled, but not dependant on others Category 3: partially disabled loss of working capacity of 67% but not fully disabled. Unemployment Benefits Qualifying Conditions Unemployment coverage extends to all wage-earners and salaried employees. In order to qualify for full unemployment benefit the insured must have been employed 365 days during the last 4 years before loss of employment. Employee Benefits Reference Manual Swiss Life Network

11 Benefits Unemployment benefit (jobseekers allowance) is paid up to 3 months, in the 1st month the benefit is 90% of average salary, in the 2nd month 80% and in the 3rd month 70%. The minimum is 60% of the official minimum salary, and the maximum is 100% of the official minimum salary (HUF 105,000 in 2015). Other Benefits Maternity Leave Benefit The mother is entitled to maternity leave benefit if she was insured and had earnings for at least 365 days within 2 years before delivery. The amount is 60% of her daily average earnings, and the period is 168 days. Lump Sum Maternity Aid If the mother is entitled to free pregnancy care and participates in the programmes regularly, a lump sum maternity grant of HUF 64,125 is due and HUF 85,500 for twins. Child Care Allowance (GYED) If the child is under 2 and the parent staying at home has paid contributions to the national insurance, a child care allowance of 70% of the parent s salary is due. This amount cannot exceed 70% of twice the official minimum salary- Child Care Aid (GYES) A parent is entitled to sick care aid for a child if the child is between the age of 2 and 3, or if there is a permanently sick child between the age of 3 and 12. The monthly amount is HUF 28,500. The period during which child care aid is paid is considered as a service period. Entitlement ceases after the 3rd birthday of the child (12th birthday of a permanently sick child). The recipient must pay 6% of the amount as a contribution to national insurance. The employer does not pay additional social security contributions. Family Allowance A parent is entitled to family allowance if a child is brought up in the household and under school age or if the child is permanently sick. Schooling Allowance A parent is entitled to schooling allowance if a child is raised in that household, is in school age or older, in a public education institution and under 20 years of age. An orphan is entitled to schooling allowance if they are under 20 and a student at a public educational establishment. Monthly amounts of family allowance: Employee Benefits Reference Manual Swiss Life Network

12 Per Child Family with one child HUF 12,200 Single parent with one child HUF 13,700 Family with two children HUF 13,300 Single parent with two children HUF 14,800 Family with three or more children HUF 16,000/child Single parent with three or more children HUF 17,000/child Permanently sick child HUF 23,300 Single parent with permanently sick child HUF 25,900 Taxation Social security contributions are regarded as business expenses for the employer and are tax-deductible for the employee. All Social security benefits are taxed as income with the exception of old age and disability pensions. Other Information Reciprocal Social Security Agreements Austria, Bulgaria, Canada, Croatia, Germany, India, Japan, Korea (Republic), Moldova (Republic), the Netherlands, Romania and Switzerland. Employee Benefits Reference Manual Swiss Life Network

13 IV PRIVATE BENEFIT PLANS Background Information The law on Voluntary Mutual Benefits Funds (VMBF) allows the establishment of funds for the provision of benefits in addition to social security. A VMBF can be a supplementary pension fund, a mutual aid fund providing benefits on unemployment, disability or death, or a health fund. By the beginning of 2007, after a wave of mergers and acquisitions, there were 190 VMBFs operating on the market. While the provision of voluntary pension benefits is already quite wide-spread in the market, voluntary health funds are becoming more popular at present and the increasing popularity of voluntary aid funds is expected in the near future. The law of 1996 regulates the operation of insurance companies and insurance activity. The main features are as follows: loosening of a priori and tightening of a posterior control, separation of life and non-life branches, lowering the capital requirements for insurance companies, obligatory profit sharing for savings products, and control over investments of the technical reserves and part of the solvency margin. Typical Group Life and Accident Plan A typical group life and accident product contains pure risk coverages, renewable yearly. Such a plan would consist of the benefits presented in this section. All benefits are paid in the form of a lump sum, but may be converted into an annuity. The sum insured can either be a fixed amount or a multiple of annual salary. 1 to 2 times annual salary is often chosen. Accident insurance provides worldwide coverage. Eligibility A VMBF is established by at least 15 individuals founding a general assembly that comprises only the members of the fund. An employer can participate either as an employer member or as a supporter. An employer member pays the membership dues or contributions of all members as determined in an agreement between the employer and the fund. As a supporter, the employer can make regular or one-off donations to the fund and specify how they are to be used. Individual accounts must be set up for each member and additional voluntary contributions are permitted. Contributions Voluntary Mutual Pension Funds are well-recognised by the employers as a cost and tax effective way of compensation. Employers with 10 to 50 employees typically pay regular contributions (expressed in percentage of salary) to an open, multi-employer fund usually backed by financial institutions (banks or insurance companies). Typically, the employer contribution to VMPF varies from 2% to 6%. Generally employees are required to pay about half of employer s contribution, varying from 1% to 3%. Contributions to group life and accidental plans are usually paid fully by the employer. Employee Benefits Reference Manual Swiss Life Network

14 Retirement Benefits Retirement Age Normal retirement: as for state pension age Benefits Benefits from a pension VMBF are only payable after a 10-year mandatory membership period, or attainment of normal retirement age. Benefits paid before retirement must be paid as a lump sum, which is then treated as taxable income, or transferred into another pension scheme. Disability Benefits Accidental Disability Permanent disability due to accident is covered. A partial sum insured is paid as a benefit depending on the degree of disability. For total permanent disability, the full sum insured is paid as a benefit. Coverage is available for 24 hours. Accidental Disability in Service This coverage is the same as for accidental disability, however for working hours only. Temporary disability due to an accident during working hours is covered. Temporary disability is defined as 28 days spent at home, or in the hospital due, to accident. A physician s certificate is required. Only a lump sum benefit is available. Disability Lump Sum Benefit Permanent total disability due to sickness or accident is covered. Disability Pension Benefit In case of disability due to accident or sickness, 40% of the annual salary (13x monthly base salary) is payable as an annual pension for as long as the disability continues, or up to age 60. Disability means permanent total disability in disability groups 1 and 2 according to the definition of the Hungarian Social Security Administration. Death Benefits Death due to any cause Death due to any cause is normally insured. The full sum insured is paid as a benefit. Premium waiver for disability is available. Accidental Death The sum insured is paid as a benefit if death occurs due to an accident and within one year after this accident. Coverage is available for 24 hours. Accidental Death in Service Same as accidental death. Coverage extends to working hours only. Employee Benefits Reference Manual Swiss Life Network

15 Medical/Health Benefits In order to satisfy market demands, insurance companies introduced a wide range of sickness insurances. Market demand was caused by the fact that individuals with high income had to suffer a significant loss during the sickness period. Most popular services are: Sickness hospitalisation coverage Sickness operation coverage Sickness recovery coverage Permanent sickness coverage Dread disease coverage The insurance service might be individual or group. According to the present law, if hospitalisation, operation, recovery, permanent disability coverages etc. are due to an accident, all care costs incurred are deductible and tax free. If these costs are due to sickness, the employer must pay social security contributions and the employee is charged for the premium through personal income tax. Other Benefits Daily Hospital Allowance If hospitalisation of at least 5 days occurs due to accident, a daily allowance according to the daily sum insured becomes due. The daily benefit is paid for a maximum of 50 days. Taxation Contributions to non-compulsory employee benefit plans are paid in full by the employer and are considered as business expenses. For the employee, employer contributions to savings policies are considered taxable salary; employer contributions to risk policies are not considered part of taxable income. Long-term savings policies are eligible for preferred tax-treatment. However, the employer must pay social security contributions on the premium when it is considered taxable income for the employee: The risk life insurance premiums without maturity payment and without surrender value paid by employer are tax-free up to 30% of the official minimum salary (the premium per insured person in case of group insurance) The risk life insurance premiums with premium return to the employee (especially non-claim bonus) over 30% of insurance premium paid by employer are taxed (51.1% = 19% personal income tax % health contribution). The regular premiums of whole life insurances with surrender value are tax-free till 2018, but the single and extra premiums are taxed. The surrender value of whole life insurance are taxed (personal income tax + health contribution): 39.5% (=12,5% personal income tax + 27% health contribution) within 10 years, 26.5% (=12.5% personal income tax +14% health contribution) after 10 years The unit-linked and saving life (group or individual) insurance premiums are taxed (51.17%), and in case of surrender the interest on saving is taxed (16%) Accident and health insurance premiums paid by the employers are tax-free without limitation On long-term saving policies the following tax preferences apply for employees: If employer contributions are paid to an insurance company for an individual pension insurance 20% of the annual premium (maximum HUF 1300,000) can be deducted from the personal income tax of the employee. If employer contributions are paid to a pension scheme, 20% of the annual premium (maximum HUF 150,000) can be deducted from tax. If employer contributions are paid to a voluntary pension scheme, 20% of annual premium (maximum HUF 150,000) can be deducted from the tax. Employee Benefits Reference Manual Swiss Life Network

16 Double Taxation Agreements Albania, Armenia, Australia, Austria, Azerbaijan, Bahrain, Belarus, Belgium, Bosnia and Herzegovina, Brazil, Bulgaria, Canada, China, Chinese Taipei, Croatia, Cyprus, the Czech Republic, Denmark, Egypt, Estonia, Finland, Former Yugoslav Republic of Macedonia, France, Georgia, Germany, Greece, Hong Kong, Iceland, India, Indonesia, Ireland, Israel, Italy, Japan, Kazakhstan, Korea (Republic), Kosovo, Kuwait, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova, Mongolia, Montenegro, Morocco, the Netherlands, Norway, Pakistan, the Philippines, Poland, Portugal, Qatar, Romania, Russia, San Marino, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Thailand, Tunisia, Turkey, the Ukraine, the United Arab Emirates, the United Kingdom, the United States of America, Uruguay, Uzbekistan and Vietnam. Employee Benefits Reference Manual Swiss Life Network