Hungary Proposes to Introduce New Tax on Financial Transactions by Payment Service Providers

(Sunnyvale, CA)- The Hungarian government has proposed to introduce a new tax on financial transactions by payment services providers (PSP) having registered or branch office in Hungary.

The National Bank of Hungary has been exempted from the purview of the above. However, it would be liable to the tax in case it:

* securities are issued by central bank for a period less than two weeks, or
* short term deposits by central bank having a maturity of between 1 day and 2 weeks.
Hungarian New Financial Transaction Tax: Specifications
* 0.1% rate of tax on transactions,
* There is a limit of HUF 6,000 per transaction for the tax amount. However, transactions by the following won’t be subject to the above threshold:
* Hungarian Post Clearing Center,
* The Hungarian Treasury or,
* The National Bank of Hungary,
0.01% rate of tax on Central bank deposits with a maturity of 1 day.
* The amount debited by PSPs from a payer’s account would be considered as the tax base. The following would usually form part of the tax base:

* the specified sum in a cash transfer order;
* The price of central bank securities for a term not in excess of two-weeks;
* The amount deposited in case of a central bank deposit having maturity within one to two weeks.
* Amount of cash payment (to be transferred to a payee) initiated through the Hungarian Post Clearing Center.

The transactions to be taxed include:

* Transfer of funds,
* Direct debits (collection),
* Cash transfers,
* Letters of Credit,
* Transfer of Cash payments by the Hungarian Post Clearing Center,
* If there is a reduction in the payer's account balance through payment orders,
* central deposits with maturity between 1 day and 2 weeks,
* Securities issued by central bank for a period less than two weeks, and
* Cheques withdrawn for cash.

Hungarian New Financial Transaction Tax: Implications

* The Hungarian government has decided to tax most of its industries including banking, telecommunications, energy and insurance.
* However, it seems that cash pooling can be used for an exemption. Group members in the cash pool would be required to use a common PSP to claim the same.
* For businesses in Hungary, a cautious examination (from tax-perspective) can be of good help for cash pooling arrangements (to decide if any part of cash pool arrangement would be taxed).
* If cautiously planned, benefits of exemption can be availed by some cross border services.

For more information on this topic email media@nair-co.com

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This release was published on openPR.