Crypto Regulations in Hungary
Currently, no laws specifically regulate the use of cryptocurrency in Hungary, nor is any cryptocurrency recognized as legal tender. Further, cryptocurrencies are not considered security in Hungary. In a statement released by the country’s Finance Ministry, they restated that there is currently no regulatory framework for cryptocurrency in Hungary. Still, efforts are being made to create a regulatory system and define the country’s position on cryptocurrency. This effort comes after a Hungarian cryptocurrency called Korona was launched in Budapest but was headquartered and incorporated in Switzerland because Switzerland offered a more stable and efficient cryptocurrency environment.
Source: Freeman Law
There is no specific legal definition of cryptocurrencies yet, but it is currently in development. This means that all profit made through investment activities, also by the use of Bitcoin and Co., is classified in the category of “other income”. Furthermore, Hungary does not yet consider cryptocurrency an official form of legal tender because it is not issued by a central authority and does not have a confirmed exchange rate by the Hungarian National Bank.
Source: Medium
New crypto regulations in Hungary could set an example for other policymakers As long as we keep the assets in a cryptographic device, no tax liability arises only when the profits are “taken out of the black box”, ie they are transferred to the account-holding bank by converting them into normal currency or forint. Although today’s announcement is only a draft, it is already a big step that the government has moved toward regulation and independent legal recognition of cryptocurrencies. Authorities will soon have access to cryptocurrency data, with Coinbase already providing ample data to the U.S. tax authorities.
Source: Gurcanpartners
Hungary introduced one of the lowest tax rates on cryptocurrency income in 2021. A single tax rate of 15% applies to income from any cryptocurrency source received by individuals resident in Hungary.
Source: Prikhodko
As already mentioned, any activities involving profit through virtual currencies are filed under “other income” and are also taxed as such. Individuals and legal persons face different rates, which are dependent on a variety of factors. Because of this, the following examination only covers a general overview of the current taxation of cryptocurrencies in Hungary. The personal income tax is at a rate of 15%. Additionally, individuals also face a health contribution tax of 22%. Legal entities whose activities consist of activities involving virtual currencies currently face the standard corporate income tax rate of 9%. Depending on where exactly your business is located a 2% local business tax might be applicable. Aside from that, Hungary is also infamous for having administrative requirements that involve a lot of paperwork, e.g. continuous assessment and keeping track of tax records. This could be a big obstacle for any legal entity in the crypto business.
Source: Medium
A new amendment to the Hungarian Anti-Money Laundering Act seeks to extend its scope to custodian wallet providers and virtual currency exchange platforms, in order to reduce the risks associated to cryptocurrencies. The proposal is currently before the Hungarian Parliament and aims at fulfilling Hungary’s obligations deriving from the 5th Anti-Money Laundering Directive (“Directive”). Due to the modifications, virtual-currency exchange platforms and custodian wallet providers will be required to comply with the provisions of the Directive (e.g. to identify the beneficial owner and to verify a client’s identity). The Member States must adopt the necessary regulations to comply with the provisions of the Directive as of 10 January 2020.
Source: KCG Partners
The government of Hungary is currently working on a legal framework that fits the needs of virtual currencies. They also introduced a workgroup to deal with matters such as AML. For more detailed information on tax and regulatory conditions in other countries, please read our blog series Countries & their Crypto Laws.
Source: Medium
Five arrests in Hungary for money laundering across three continents. Estimated to be active since September 2020, the criminal network is suspected of laundering millions of euros of criminal proceeds. More than EUR 44 million has been received on accounts linked to the criminal group, while the criminal origin of a further EUR 5 million has already been identified.
Source: Europol
FinTech in Hungary. Regulatory sandbox In 2018, the MNB established a regulatory sandbox to further foster innovation and the development of an appropriate regulatory environment. The regulatory sandbox aims to help innovators perfect new technologies, concepts, and ideas under regulatory supervision, which (at a later stage and for a specific period of time) can be tested with real customers. Only regulated entities can currently benefit from the sandbox, although the MNB aims to make the sandbox available to unlicensed entities. See Question 24 for further detail.
Source: UK.practicallaw.Thomson Reuters
