Tax payments for income from cryptocurrencies in Hungary
The taxation of cryptocurrencies in Hungary has changed in 2021 - the country has announced reducing the levy on profits from the currency by a half. This measure was taken to encourage investors to declare earnings from trading the currency. The taxation process for crypto-businesses in Hungary will become simpler in 2021.
The state aims to bring cryptocurrency out of the shadows and reduce the risk of tax evasion. There are predictions that the lowest rate with simple fee rules will bring additional funds to the state budget.
Peculiarities of cryptocurrency regulation
The EU has developed standard rules for a cryptocurrency license in Hungary in 2021 and other countries, but the principles of taxation differ from state to state.
Previously, the country did not equate assets with securities, and there was no regulated market environment or state body to oversee the taxation of crypto-assets. Income from exchange or sale was treated as other income and had to be declared.
Cryptocurrency was subject to an income tax of 15% and a social contribution fee, which was 15.5%. In 2022 it is planned to reduce the tax burden by half.
Under the new legislation, a cryptocurrency asset becomes a digital representation of value or rights. Those are transferred or stored electronically using a distributed registry or other similar technology.
Taxes are required to be paid when cryptoassets are withdrawn and transferred to a financial institution's account as regular currency. For as long as the digital currency is held or is not exchanged for another currency, no taxes are required to be paid on it.
The tax burden is reduced because income from crypto would not be subject to a special fee. Law-abiding taxpayers can voluntarily declare profits from crypto-assets transactions. According to the government, preferential tax treatment allows attracting foreign investments and bring cryptocurrency income out of the shadows.