As of 1 July 2022, Hungary's already existing financial transaction tax has been extended to payment service provision, credit and loan provision, currency exchange and mediated currency exchange services provided on a cross-border basis in Hungary. Provision of cross-border services means financial services provided in a country other than the country where the seat, place of business, head office, or branch of the service provider is located. Basically, this means that non-Hungarian service providers providing such services to Hungarian customers will most probably be affected by this extension.
The rate of the financial transaction tax for such cross-border service provision is 0.3 % but capped at HUF 10,000 (EUR 25) of the transaction value per transaction. The tax does not apply, among others, if/in the case of:
- intrabank transfers if the owner of the sender and recipient accounts are the same person;
- transfers between payment accounts and securities accounts if the owner of both accounts are the same person and the account holding entities belong to the same group;
- the transaction serves clearing;
- the transfers serve group financing and the there is only one account holding bank (e.g. cash pooling); and
- the account holding bank performs the transfer for another payment service provider, financial enterprise, investment firm, investment fund or investment fund manager.
The amendment of the tax regulation requires cross-border service providers to register themselves with the Hungarian tax authority by 1 September 2022 in case they are liable to pay financial transaction tax as of 1 July 2022. If they are liable to pay financial transaction tax after 1 July 2022, they are obliged to register with the Hungarian Tax Authority by the 1st day of the month following the day when tax liability has arisen. It causes uncertainty that the law does not specify any further step for cross-border service providers; thus, it is difficult to foresee how the tax will be imposed. Also, it is not entirely clear what the consequences of failing to register will be or how the tax authority will discover such non-compliance. It is also to be examined whether with careful structuring of their service provision, the cross-border service providers can evade this tax.
By Gergely Szaloki, Local Partner, Schoenherr