Brexit – New tax bill concerning UK individuals working in Hungary

As probably everybody knows by now, the UK is supposed to leave the European Union on 29 March 2019. Although the situation is changing almost every day, seemingly Hungary wants to have a solution for UK citizens if the UK leaves the EU without a deal.

A potential no-deal Brexit would raise a number of challenging questions regarding the social security liabilities of UK citizens working in Hungary. A draft law attempting to handle the Hungarian social security and immigration situation of UK citizens was published on the website of the Hungarian Parliament last week. The bill, among others, lays down transitional rules on the enjoyment of various social security benefits obtained by individuals before the Brexit, as well as it also deals with the social security status of UK individuals after the Brexit.

Most importantly, assignments started before the Brexit would keep enjoying the ‘old’ rules as if UK remained in the EU until the end of the given assignment. Although the language of the bill is not entirely clear, according to the verbal interpretation of the Ministry of Finance, the bill proposes that A1 certificates obtained from the HMRC in the UK would be accepted also for post Brexit period.

Furthermore, it is also proposed that UK individuals starting assignments after the Brexit date could be exempt from Hungarian social security tax based on the rules applicable to third country residents, even if an individual has worked in Hungary in the last three years. This derogation would last until 31 December 2020, in a hope that Hungary would conclude a new bilateral totalization agreement with UK by then.