Hungary: Financial transaction tax extended to cross-border payment services

Service providers providing cross-border payment services, credit and loan-related services, currency exchanges, mediated currency exchange services

Cross-border payment services

Decree 197/2022. (VI. 4.) (4 June 2022) includes a change that imposes the financial transaction tax on certain cross-border payment service providers.

Effective 1 July 2022, the financial transaction tax is extended to apply to service providers providing cross-border payment services, credit and loan-related services, currency exchanges, and mediated currency exchange services in Hungary.

For these purposes, the term “cross-border services” is defined as the supply of financial services or auxiliary financial services in a country other than the country where the seat, place of business, head office or branch of the service provider is located, and the place of business or permanent residence of the customer using the services is not in the country where the service provider has its seat, place of business, head office or branch.  Essentially, this means that non-Hungarian entities or branches providing these payment services to Hungarian customers will be affected by this change.

Overview

  • Cross-border service providers must register with the tax authority by 1 September 2022 if they became liable to financial transaction tax as of 1 July 2022. If their liability is triggered after 1 July 2022, the cross-border service providers must register with the tax authority by the first day of the month following the day when the tax liability has arisen.
  • The rate of the financial transaction tax—with the existing exemptions—remains 0.3% of the tax base, but the cap is HUF 10,000 (approximately €25) per transaction.
  • Based on the general rules, the financial transactions tax applies to the following payment services: bank transfers, direct debits, cash payments from payment accounts (including cash withdrawals using a credit or debit card), cash transfers, debit and credit card payments, and cheque cashing services.  Moreover, despite not being payment services, exchanges of foreign currency and debt repayments are also subject to the financial transactions tax even if they are not performed by payment service providers.
  • There are certain exemptions that do not trigger the tax liability—e.g., bank transfers up to HUF 20,000 initiated by private individuals; technical transfers between accounts held at the same bank provided that the owner is the same person; with respect to investment services, transfers between the payment account and the client account provided that certain conditions are met; and transactions between financial service providers (including, among others, financial institutions, investment companies, etc.).
  • The tax base is the amount of the transaction (debit amount, amount paid, amount of currency sold, etc.). The general tax rate is 0.3% of the amount of transaction but capped at HUF 10,000 (approximately €25) per transaction. This cap does not apply to cash withdrawals, for which the tax rate is 0.6% without any cap. For credit or debit card transactions initiated by the cardholder through the payee (e.g., at point of purchase or via the internet), a flat-rate tax of HUF 800 per year is payable. However, if such payment includes transactions executed with the use of a contactless payment feature, the tax payable is reduced to HUF 500 per year. The tax is to be assessed and paid each month. 

Read a July 2022 report prepared by the KPMG member firm in Hungary

 

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