Social security obligation of a foreign executive in Hungary

Foreign citizens who hold executive positions are considered as entrepreneurs, and if they are not retirees, they are generally subject to social security contributions in accordance with the general rules.

However, regarding entitlement to social security benefits and the coverage of these benefits, as per Section 3(b) of Act CXXII of 2019 on social security benefits and their coverage, the provisions of the law must be applied to individuals covered by international agreements in accordance with the rules of the respective agreements.

It’s important to take into consideration countries with which Hungary has valid agreements in this regard.

In general, according to these agreements, if a person works or conducts self-employed activities in the territory of one of the Contracting Parties, the laws of that Contracting Party apply to their employment or self-employment, unless the Agreement provides otherwise. Therefore, if work is exclusively performed outside of Hungary, there is no obligation for social security contributions in Hungary.

However, if work is performed in Hungary, then the obligation for social security contributions exists. In such cases, obtaining a Hungarian social security identification number (Tajszám) is necessary, and this typically requires proof of residence.

Nevertheless, in cases where the individual also has a 36-hour work contract in a foreign country, there might be an exemption from the obligation to pay contributions in the context of their status as a corporate entrepreneur. The obligation for social security contributions (as well as reporting) may be “avoidable” even in this case.

Under the agreements, “the competent authorities of the Contracting Parties or the institutions designated by them may, at the joint request of the employer and the employee or the self-employed person or by mutual agreement, establish further exemptions from the general provisions concerning applicable legislation, on condition that the person concerned remains subject to the legislation of one of the Contracting Parties or becomes subject to it. When establishing the exemption, the nature and circumstances of the employment or self-employment shall be taken into account.”

Based on this, individuals can approach the social security institution of their home country (Social Security Office) for the issuance of such exemptions. This applies when work is conducted in Hungary (or is planned to be conducted in Hungary).

In summary, it’s important to emphasize that generalization cannot be made in this matter. Each case should be thoroughly examined in the context of the agreement between the two countries and the individual’s executive status in Hungary. The experts at Company Express Kft are available to provide precise answers to questions related to this topic.

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