Hungary to Create a Regulatory Space for Cryptocurrencies
Hungary is seeking to establish a regulatory environment for cryptocurrencies but does not recognize them as a “legal tender” – yet.
Hungarian legislation is not exactly favorable for cryptocurrency investors. According to Portfolio’s statement, the Finance Ministry reported that the country does not consider digital assets as a legal tender.
Even so, Hungary is currently looking to complete a regulatory framework and classify cryptocurrencies according to the laws.
“Hungary is currently looking into regulating crypto instruments, and the central bank, the tax authority, the finance ministry and other authorities have set up a joint workgroup to evaluate legal, economic, law enforcement, money laundering and other aspects of cryptocurrencies with an eye to introducing more detailed regulation.”
Bitcoin is subject to taxation
According to the Hungarian Personal Income Tax Law, Bitcoin and altcoins are considered as “other income“, meaning that the income from crypto-related operations is subject to taxation as follows: 15% Personal Income Tax and 22% Health Contribution. Interestingly, if behind the operations is a business and not a private individual, the costs drop considerably.
Recently, Deloitte Private reported that the high tax rate influences individuals to invest higher amounts in business schemes to avoid the strict legislation:
“Many people try to escape the infamous Hungarian taxes and additional administrative obligations (i.e. tax advance assessment, or preparation of tax returns and continuous keeping of tax records) through the increasing number of investment schemes. However, the level of reliability and sophistication of these is quite low in most cases, which often entails further taxation and legal risks.”
Still, you can avoid paying taxes for cryptocurrency operations only if you use it as a guarantee for a loan. This activity is not recognized as a taxable event in the European country.
“According to current law in Hungary, as a consequence of selling or exchanging cryptocurrencies is considered a taxable event,” Csaba Csabai, CEO of INLOCK commented. “However using these digital assets as collateral for a loan to finance a temporary liquidity problem is not. The platform we are building is working towards this concept enabling cryptocurrency holders to access the purchasing power of their holdings without being punished by the extremely high tax rates.”