Attention financial and investment service providers!

 Foreign service providers are required to register in Hungary for taxation purposes

From 1 August 2023, the applicable changes related to the financial transaction tax rules - introduced by government decree during the emergency regime (from 1 July 2022) - will be raised to statutory level expectedly.

Pursuant to the regulation, the range of service providers who fall under the scope of the financial transaction tax and obliged to pay the financial transaction tax has been expanded.

The original legislation regulates only those service providers, financial institutions, credit institutions and financial intermediaries who has a residency or a branch in Hungary.

The government decree (Government Decree 197/2022 (4.VI.)) - which has been introduced during the emergency regime - extended the scope of the rules to foreign entities which are performing the above-listed activities in Hungary as cross-border services. The legislation should be applicable in case of investment service providers too, which have a residency or branch in Hungary or which have a residency in abroad (i.e. not in Hungary), but provides cross-border services.

The rules which have been introduced during the emergency regime become final, thus many foreign service providers are required to register in Hungary in order to fulfill their declaration and tax payment obligations.

The Act on financial transaction tax (Act CXVI of 2012) should be applicable to payment service providers, financial institutions which are providing credit and loan, but not qualified as payment service providers, credit institutions authorized to pursue currency exchange activities and special services intermediaries of currency exchange services which have a registered office or branch in Hungary.

According to the emergency government decree the financial transaction tax should be applicable to the aforementioned service providers with the expansion of the range of the obligors, thus all people/organizations with foreign seat or branch who provide payment services, lending and borrowing, currency exchange, currency exchange intermediation to customers with a Hungarian residency.

Furthermore, as of 1 August 2022, investment companies which are authorized to provide investment services with a registered office or branch in Hungary and people providing investment services with a registered office or branch in abroad will be obliged to assess, declare and pay financial transaction tax if the customer who directly uses the service has Hungarian residency.

The investment service activity includes the purchase of

• transferable stocks,
• money market instruments,
• stocks issued by a collective investment scheme

issued by KELER Központi Értéktár Zrt. for customer’s or for own use too.

To sum up, the following provided services generates financial transaction tax obligation:

• provision of payment services,
• provision of credit and money lending,
• currency exchange and currency exchange intermediation activities,
• provision of investment services.

What obligations does this impose on foreign financial service providers?

• Foreign service providers covered by the Act should register in Hungary by the first day of the month following the month in which their business activity has been started. Since the regulation already covered cross-border service providers from 1 July 2022 under the government decree, in case of certain service providers retrospective registration is required.
• The companies which are subject to the legislation should pay a financial transaction tax. The rate of financial transaction tax is 0.3 % of the financial transaction tax base, but the tax amount cannot exceed HUF 6,000 per payment transaction and HUF 10,000 per purchase in case of investment services.
• The financial transaction tax should be assessed and paid monthly by the 20th day of the month from the performance date, and should be declared on the official declaration form (i.e. nr.’93 form).

In the case of initiated payments the payment service provider should assess, declare and pay the tax by the 20th day of the first month of the calendar year.

We would be pleased to assist you in the following financial transaction tax related cases:

• Is your company liable to pay financial transaction tax?
• We would prepare and submit the required registration form (retroactively if necessary).
• We would prepare the financial transaction tax analytics and the related tax return on monthly basis.
• For non-EU companies which do not have a residency in the EU, we would provide a financial representation services in order to fulfill the taxable transactions in Hungary.

5 July, 2023

We will inform our Clients about the applicable amendments after the final vote in Parliament.

If you have any further questions regarding the financial transaction tax, please do not hesitate to contact our tax experts.