Back to school allowance- let's set the record straight

With the beginning of the new school year quickly approaching, several online news portals and tabloid magazines refer to the back-to-school allowance as if it was a form of financial aid available to all parents from their employers through the cafeteria system on a universal basis.

Furthermore, a lot of false information also appeared in online media that do not follow the changes in the relevant legislation, thereby misinforming the readers. The aim of this newsletter is to set the record straight and to provide professional and accurate information for those interested in this form of support.

Significant amendments have been made to the relevant provisions of law concerning non-wage benefits, as well as certain defined and tax-exempt benefits, effective from 1 January 2018 (Acts XLI of 2018 and LXXXII of 2018). It is important to be aware that, as a result of these changes, the possibility to provide what was known as the “back-to-school allowance,” as a form of support earlier available at favourable taxation has been eliminated! Furthermore, the transitory provision (Section 89 (6) of the Personal Income Tax Act), on the basis of which the back-to-school allowance could be provided to employees as one of the “certain defined” benefits (as listed in the law), has also since lost its effect.

What do these changes mean in practice, and what should employers pay attention to in case they still wish to provide some form of assistance to their employees in connection with the beginning of the school year?

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