Tax Alert

On 4 June 2022, Government Decree 197/2022. (VI. 4.) on extra profit surtaxes was published in the Hungarian Gazette. One of the changes clearly targets cross-border payment service providers. Please find our summary below on the respective point.

• As of 1 July 2022, the Financial Transaction Tax Act shall be extended to apply to service providers providing cross-border payment service provision, credit and loan provision, currency exchange and mediated currency exchange services in Hungary. 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 in which 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 impacted by this change.
• Cross-border service providers are obliged to register with the State Tax Authority by 1 September 2022 if they became liable to financial transaction tax (FTT) on 1 July 2022. If their liability begins subsequent to 1 July 2022, they are obliged to register with the State Tax Authority by the 1st day of the month following the day when 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 (approx. €25) per transaction.
• Based on the general rules, FTT 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, cashing cheques.  Moreover, despite not being payment services, inter alia, exchange of foreign currency and debt repayment are also subject to FTT even if they are not performed by payment service providers.
• There are certain exemptions that do not trigger tax liabilities: 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; with respect to investment services, transfers between the payment account and the client account provided that certain conditions are met; 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 (approx. €25) per transaction. This cap is not applicable 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 duty payable is reduced to HUF 500 per year. The tax should be assessed and paid each month. 
• If you require any assistance in relation to tax registration or tax compliance (including assessing in-scope transactions), we would be happy to help.