The Parliament has passed a new package of tax increases of the Minister of National Economy Mihaly Varga on June 27. The rate of transaction fees will further increase, health contribution will be levied on interest income, telecommunications tax of enterprises will increase and mining royalties will also be higher. Now I will detail the changes to the transaction fee and bank tax.
As of August it will cost more to use your bank account
Since January we can experience, to our cost, the effects of the introduction of the financial transaction tax, because banks have passed on to their clients the new tax. Transaction and cash withdrawal fees have increased on the Conditions Lists. As of August 1, 2013 additional burdens will be imposed both on businesses and residential clients.
What does this mean quantified?
Transaction fee payable on remittances rises from 0,2% to 0,3% retaining the upper limit of HUF 6,000. In case of cash withdrawals the rate of interest has increased from 0.3% to 0.6% with an upper limit being abolished.
Example of a transaction fee:
In case of the remittance of HUF 1,000,000, HUF 3,000 fee shall be paid instead of the previous HUF 2,000, but it is good news that above HUF 2,000,000 costs arising from transaction tax cannot increase HUF 6,000.
Previously, after cash withdrawal of HUF 1,000,000 HUF, 6,000 had to be paid.
As of August 1, HUF 6,000 shall be paid after the same amount of money and the rate of payable tax will increase in proportion to the amount withdrawn. In practice, cash withdrawal fees will significantly increase either in case of withdrawal from a branch or by a bank card.
Banks are expected to pass the transaction tax increase on to their clients; many have already published their new Conditions List about the increased remittance and cash withdrawal fees. For now, the use of bank cards remains free, although banks are expected to compensate the increased fees with an increase in the annual card fees.
Savings at risk
As of August 1, 2013 after interest income 6% health care contribution is to be paid beside the 16% tax on savings, so the total tax burden payable after all our savings will increase to 22%.
What is considered to be interest income?
Fixed deposits in credit institutions, publicly traded debt securities, interest on investment certificates, and certain payments in excess of the premiums paid. (The interest income referred to above is defined in detail in the Personal Income Tax Act 65 §.)
Where to invest our savings then?
Forint-denominated bonds issued by EEA Members will still be exempt from the obligation of health contribution payment.
Health contribution will not have to be paid after investment certificates either, if at least 80% of the investment fund are forint-denominated bonds.
In case of long-term investment contracts, those who open such a contract before August 1 will be exempt from paying health care contribution. In case of contracts concluded after the modifications have entered into force, 6% health care contribution is to be paid, if the contract is terminated within 3 years following the opening of the account.
Example of interest tax:
a fixed deposit of HUF 5,000,000 tied up for 1 year with an annual interest of 3,5%
Gross interest income: HUF 175,000
Interest tax deduction: 38 500 Ft (HUF 28,000 personal income tax + HUF 10,500 health care contribution)
Net interest credited to a current account: HUF 136,500