Hungarian Financial Transaction Tax
The Hungarian Parliament introduced the Hungarian Financial Transaction Tax (FTT) by Act CXVI of 2012 (FTT Act), with effect from 01 January 2013. Several small changes were subsequently made to the regime. The consolidated information below takes account of these changes and reflects the position as at 01 January 2015.
The tax applies to financial service providers, financial institutions and intermediary service providers involved in currency exchange, provided that they have a seat or branch in Hungary. The FTT Act also applies to the Hungarian Postal Accounting Centre.
The scope of the Hungarian FTT is quite different from the FTT proposed by the European Union and the unilateral FTTs introduced in some other Member States. The Hungarian tax is not limited to transactions on the secondary market (i.e. to trading financial instruments such as equities, bonds, structured notes or derivatives), but applies to a large range of money transfers and financial, banking and currency exchange transactions. The Hungarian government had planned to extend the FTT to share and derivatives transactions, but the proposed changes have not been implemented to date.
Most notably, the Hungarian FTT applies to the following money transmissions performed by financial service providers falling within the scope of the FTT Act:
- payments initiated by the recipient
- cash payments into payment accounts
- cash payments from payment accounts
- cash transfers
- documentary credits
- cheque payments
- all foreign currency exchange transactions (including the sale of foreign currency and the sale of Hungarian forints) and
- any other payments which are considered to be monetary transmissions and as a result of which the service provider deducts the figure recorded against the payer’s account by the amount indicated in the payment order.
Exemptions may apply to certain transactions. In particular, money transfers between an account holder’s own accounts held at the same service provider; qualifying payments from payment or securities accounts; group financing transactions performed via the same financial service provider; payments made in error; money transfers to or from the Hungarian State Tax Authority's accounts and payments relating to European Union subsidies may be subject to exemption. Financial transactions executed on accounts owned by the National Treasury are also exempt from FTT.
The tax base is the monetary value of the relevant transaction. The general tax rate is 0.3%, but any FTT payable is capped at HUF 6,000 (approx EUR 21) per transaction. Cash payments from payment accounts and cash payments via documentary credits (e.g. payments by cheque) are taxed at 0.6%, with no cap. A rate of 0.3%, with no cap, is applied to cash payments from payment accounts and cash transactions where the Hungarian Postal Accounting Centre or the National Treasury is obliged to pay the FTT. Payments by the National Treasury in relation to government bonds bear FTT at 0.3 %, but the cap of HUF 6,000 per transaction applies to this type of payment. As regards credit card payments, FTT is not charged on single payments, rather a fixed yearly amount of HUF 800 (approx. EUR 2.66) is paid in relation to each credit card used by an individual account holder. A reduced FTT of HUF 500 (approx. EUR 1.66) applies to Pay-pass cards.
The tax is assessed, reported and paid to the Hungarian State Tax Authority by the financial service provider on a monthly basis, by the 20th of the month following performance of the underlying financial transaction. There is an exception for FTT due on credit card payments, where FTT should be assessed, reported and paid on an annual basis, by 20 January each year. The law defines which service providers are liable to pay the tax. For instance, in the case of a transfer, collection or cash payment from a payment account, it will be the service provider (eg bank) of the payer and, in the case of a cash payment into a payment account, the bank where the account is held which is liable to pay the tax. Transfers initiated from abroad are out of the scope of the Hungarian FTT; whilst those initiated from Hungary and paid to foreign recipients are subject to FTT.