Bitcoin and cryptocurrency trading in Hungary
Hungary has plenty of crypto owners relative to its population size, and there is a keenness for crypto spending and investing. The government is planning tax reductions to increase compliance with tax policy.
Law and crypto trading in HungaryLegal - existing crypto legislation
Cryptocurrency, for a long time seen as risky by the Hungarian government, has now become much more acceptable. Measures to streamline the tax system, including tax cuts on crypto trading, are expected to increase tax revenues overall. You could say it’s become a very attractive place to deal in crypto.Legal - forthcoming crypto legislation
Possible tax reduction measures on crypto purchasing and gains are still in the proposal stage and if approved by the Hungarian parliament will take effect in 2022 – so watch this space.
Taxing cryptocurrencies in Hungary
Tax is a subject never far away from bitcoin and other digital currencies. Put simply, any crypto that you purchase as an investment is treated as income, and the gains and losses you realize on it are either income taxable or deductible. All cryptocurrency transactions are taxed under the Hungarian capital gains tax code, which contains a 15% capital gains tax and 19.5% health contribution (EHO) that has no absolute roof. This means that you will always have to pay independent of your original EHO contribution in Hungary from other sources.
At present, you’ll pay 30.5% tax on profits made from cryptocurrency transactions, but the government may reduce this tax rate to minimize possible tax evasion and promote more crypto trading and investment.
Tax when moving residency
If you are a long-term resident of Hungary you are probably deemed a permanent resident for tax purposes. If you are not a permanent resident, and your holdings are outside of Hungary you’ll fall under the required tax laws of your adopted country.
Tax on mining
Hungary is currently undergoing a review of its tax policy on crypto. The tax on mining may change after this long-term review, with the prospect of a 50% reduction. At present, mining for coins is taxable and costs incurred during the process are tax deductible.
Crypto financial services in Hungary
Most retirement and pension funds worldwide deem cryptocurrencies to be too volatile to become part of long-term retirement schemes. There is little certainty on this at present.
Crypto and digital currencies are openly debated and widely understood right from the top down. Like most countries, there is no bank or financial organization that would consider cryptocurrencies as regular currency, but Hungary is looking into the advantages of blockchain technology overall.
Hungary’s banking and insurance sector recognises how FinTech businesses can attract a significant number of customers, and have started developing innovative solutions as well as forming various types of partnerships with companies in this field.
Using crypto in Hungary
Hungary is possibly overlooked as a crypto leader, and spending all that crypto is a lot easier than you might think. Bitcoin ATMs are springing up all over the country and you can exchange your bitcoin for fiat or spend them directly in a wide number of places including hotels, jewellers, bars and cafes – you can even get some taxis to take you for a ride.
If you’re feeling generous you can gift your crypto but you’ll still have to pay tax on any gains you have made prior to gifting them, whether you’re giving them to a friend, relative or an officially recognized body with charitable status.
Crypto regulation in Hungary
Cryptocurrencies in Hungary are not heavily regulated as yet, and there is no regulated market environment or designated authority to control the taxation of income from them. As always, it pays to do some research into exchanges and find out how much support and protection they offer. In all cases you need to have a clear record of your dealings. Overseas exchanges may provide a wider choice of services and currencies to choose from. Home-based securities may be able to provide more customer support – but you need to check.
As with many government bodies, Hungary needs to know about all your crypto dealing for tax purposes. The authorities can request information from crypto exchanges and get it. You’ll also have to disclose ID and details when opening an account with any exchange. Make sure you keep records of your dealing as either a casual or professional dealer.