As of 1 July 2022 the Hungarian government has imposed special taxes in several areas, which are laid down in Government Decree 197/2022 (4.VI) on Extra Profit Taxes (the “Government Decree”). The new resolution aims to generate additional resources for the state budget through special taxes on selected industries - including the banking sector - by, inter alia, applying a higher maximum amount of the Financial Transaction Tax (FTT) and introducing the Securities Transaction Tax (STT).
According to the Government Decree investment companies and credit institutions resident in Hungary (including Hungarian branches of foreign institutions) providing investment services are obliged to pay transaction tax on the purchase of financial instruments with an ISIN code issued by KELER Central Depository Ltd.
The liability refers to purchases for both client and own accounts, with the corresponding liability of the submission of a tax return. The tax base of the STT is the value (purchase price) of the respective financial instruments¬, the tax rate is 0.3% capped at HUF 10,000 per transaction. The tax liability shall arise on the day of settlement of the purchase of the financial instrument.
Tax return and payment of the STT are due by the investment company and the credit institution until the 20th day of the month following the execution of the transaction. The first payment obligation is due by 20 September 2022.
The Hungarian Banking Association requested further clarification from the Ministry of Economic Development and received a confirmation from the Minister that custodian services are not subject to STT as the acquisition of the financial instrument is executed by another service provider (i.e. a broker).
Additionally, as of 1 July 2022, the existing Financial Transaction Tax Act (FTT) shall be extended to payment service provision, credit and loan provision, currency exchange and mediated currency exchange services provided by cross-border service providers in Hungary. Provision of cross-border services shall mean 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 are not in the country in which the service provider has its seat, place of business, head office, or branch.
Cross-border service providers are obliged to register with the State Tax Authority by 1 September 2022 in case they become liable to pay FTT as of 1 July 2022. If they will be liable to pay FTT after 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. In relation to the introduction of the STT and the extension of the FTT, UniCredit Hungary GSS recommends clients to consult its legal advisor on the implications of the new Government Decree
Impact on investors: As of July 1, 2022 investment service providers are obliged to pay transaction tax on the purchase of financial instruments (STT) while, in line with the extended Financial Transaction Tax (FTT), cross -border services will also be subject to FTT.
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