In this post of our series, we will take a closer look at the legal framework and tax guidelines for cryptocurrencies in Hungary.
The Legal Status of Cryptocurrency in Hungary
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.
The Taxation of Cryptocurrency in Hungary
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%. This 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 entities in the crypto-business.
Furthermore, the current legal situation in Hungary treats crypto-to-crypto the exact same way. Any profit made from selling or exchanging virtual currency is considered "a taxable event". All these regulations suggest that the current legal framework is rather unwelcoming towards crypto-based businesses. It is no surprise that some actively search for loopholes in order to lower the taxation. Deloitte recently issued a report discussing how the unfavorable tax rates lure more and more people into using questionable investment schemes. These schemes often involve high risks and generally show low reliability, which can result in even higher taxation and legal consequences.
As the legal framework in Hungary involves taxes that depend on a lot of different factors, we highly recommend consulting a certified legal professional in the country for further advice and information.
The Taxation of Mining
Mining is considered to be "money obtained through the use of a software" and is subject to the payroll tax law, which is taxed at the 15% personal income tax and an additional 22% health contribution tax.
Recent Developments
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.
Free Crypto Tax & Portfolio Software
In recent years, it has been observed that the trade in cryptocurrencies such as Bitcoin, Litecoin and Ethereum has steadily increased. However, many cryptocurrency owners do not consider that the profits or losses from trading cryptos are taxable. Therefore Blockpit offers software that meets the requirements for traders of Bitcoin, Ether and Co. Besides the webapp Blockpit also offers a mobile app that is free for iOS and Android. With the API import, transactions can be imported from different exchanges without much effort. Taxes on cryptocurrencies do not need to be complicated – use Blockpit
Disclaimer: The information provided in this blog post is for general information purposes only. The information was completed to the best of our knowledge and does not claim either correctness or accuracy. For detailed information on crypto regulations we recommend contacting a certified legal advisor in the specific country. As this blog post refers to international crypto laws, the content will only be available in English. If any questions occur, feel free to contact us in our social media channels.
Sources
https://www2.deloitte.com/content/dam/Deloitte/ce/Documents/tax-legal-highlights/april-2018/ce-tax-legal-highlights-hungary-april-2018.pdf
https://ecovis.hu/bitcoin-taxation-crypto-currency
https://bitcoinist.com/hungary-not-consider-cryptocurrency-legal-tender/
