The Tax Office in Hungary published an information notice on the taxation aspects of health screening tests covered by a health insurance provided as fringe benefit to the employees.
According to the Act on Income Tax, health screening tests are considered as taxable incomes (either as wage income or specifically defined benefits) and are taxed accordingly, whereas health insurance provided as fringe benefit is exempt from tax. On the other hand, several health insurance products cover screening tests. The Tax Office clarifies in its latest notice that health insurance products which include full health screening tests with taking negligible risks and therefore the employer pays the insurance fee as a quasi-service fee actually aim to reach unlawful tax benefits.
The notice explains that health insurance should generally cover illnesses and accidents that occur randomly and in that case, health screening tests may be the part of the service provided. But if the insurance fee mostly covers the fee of screening tests, the only purpose of insurance is to ‘wrap’ these services and the health insurance contract concedes a sham insurance relationship and the fee of screening test will not be exempt from income tax.