The employer can provide support to the employee in several ways. The employer can provide a payroll and also has the opportunity to grant a concessional loan to the employee. What do you need to know about an employer loan?
Borrow from the employer
The loan granted by the employer is governed by the rules of the Civil Code relating to the loan agreement. Thus, an employer loan is basically not a labor law but a contract governed by civil law.
In the case of an employer loan, the employer undertakes to pay a specified amount of money to the employee, who is obliged to repay the loan. The loan amount shall be repaid by the employee at the time specified in the loan agreement, which may be made in installments or in lump sum under the contract.
The conceptual element of the loan agreement is that the borrower must pay interest on the loan amount. However, the employer may grant the loan free of interest. If the parties do not agree on the interest rate, the loan shall be repaid at a rate corresponding to the central bank base rate.The employer can lend for a variety of purposes. Employers are usually able to borrow loans for house purchase, renovation, construction, schooling or other social purposes. Compared to loans provided by financial institutions, it is not necessary to go through a complicated borrowing process for an employer loan and the interest rates on these loans are usually more favorable or interest free.
Detachment from wage advance
The loan given by the employer is sometimes mistaken for the wage advance.
In the case of a wage advance, the employer pays the employee an unpaid wage. The advance is therefore not a loan, so no interest is payable unless otherwise agreed.
In contrast, the loan is not paid to the employee for the future wage, but provides the employee with an over-wage amount.
Another important difference is that, in the case of a salary, the employer can deduct the amount of the advance from the wage without the consent of the employee. In the case of a loan, it is not normally possible to deduct wages, unless the employee has given his consent, in which case the employer may deduct the non-deductible wage.
Exemption of employer loan
Employer loans are often interest-free or at preferential rates compared to market interest rates. Under tax law, personal income tax is payable on income from interest relief. However, in the case of an employer loan, the Act provides for a tax exemption for the employee under certain conditions in respect of the interest rebate.
The upper limit of the preferential employer loan payable without income tax is HUF 10 million, including the amounts disbursed in the 4 years preceding the year of disbursement as housing loans.
The prerequisite for the tax exemption is that the preferential loan is provided by the employer through a credit institution for the construction, construction, purchase, expansion, upgrading and accessibility of its own home. It is also possible to repay or repay a loan from another credit institution or former employer for the same purpose to provide a preferential employer loan.