Financial transaction tax on cross-border services
Background
The regulation on the extra-profit surtax expands the scope of transactions subject to the financial transaction tax (hereinafter: FTT). Investment firms, as well as credit institutions will become taxable after the purchase of a financial instrument with an ISIN code issued by KELER Central Depository Private Company Limited Liability by Shares for the benefit of a client account or own account. The scope of the rules are also expanding, persons performing these services, payment services, credit and loan granting, currency exchange activity and currency exchange intermediation services in Hungary as cross-border services will also be required to pay FTT. If these persons become taxable persons by 1 July 2022, they must request their registration as taxpayers with the Hungarian Tax and Customs Authority by 1 September 2022. If the foreign person becomes a taxpayer after 1 July 2022, the application for registration will have to be submitted by the 1st day of the month following the month in which the foreign person became a taxpayer. In general the tax rate is 0.3% of the value of the transaction but maximum HUF 10,000 per transaction. Taxpayers are required to submit monthly tax returns until the 20th day after the end of a month.
Actions required by the cross-border service providers
As a first step it is essential to determine if the cross-border services provided in Hungary fall under the scope of the FTT. Foreign entities providing cross-border services that are subject to FTT in Hungary should prepare themselves for the following actions:
- Registration with the Hungarian Tax and Customs Authority for FTT purposes;
- Designing appropriate compliance processes;
- Preparing and submitting tax return;
- Processing the payment of FTT;
- Communication with the relevant Authorities.
How do we approach the new rule?
As the actions, depending on the scale and volume of the activities, can be burdensome and require solid understanding of the local tax, legal and IT environment, it might be worth outsourcing the different tasks. PwC Hungary is ready to assist you with the following matters.
- Impact analysis
- Tax registration
- Compliance services
- Process automation – SMART tax solutions
- Consultation with the authorities
Impact analysis
In order to determine if the cross-border services performed in Hungary are subject to FTT, we are ready to analyse domestic and EU legal background. In such analysis we also describe the relevant rules of the Hungarian FTT and highlight the areas (if any) that require consultation with the different authorities in Hungary.
Tax registration
PwC Hungary is able to help with navigating through the whole tax registration process, including the preparation and submission of the relevant forms. Of course, our colleagues are able to reach out to the Hungarian Tax and Customs Authorities if any question arises during the process.
Compliance services
If the required input data is provided to us, PwC Hungary is ready to support the cross-border service providers with preparing and submitting the FTT returns, as well as preparing the necessary underlying analytics.
Process automation – SMART tax solutions
In order to minimise the administrative burden in relation to preparing and completing the FTT return form and statement, PwC’s tax and IT experts are currently developing the “FTT Tool” solution. The application will be able to provide end-to-end support from processing the transaction data to prepare the tax return in the required format, however the tool can also be used for separate tasks (e.g. only for preparation of the tax return).
This application can run on the Business user’s laptops as a desktop software or can be hosted on the Company’s servers as well. As far as the data input is concerned, two ways will be available:
- A file can be uploaded on a user interface by the Business users;
- Data can be sent through an API connection.
Consultation with the authorities
In order to be able to design and execute an appropriate FTT compliance process, it might require consulting with the relevant authorities regarding uncertainties in the rules or the available IT environment. Our expert colleagues have extensive experience in discussing such matters with different authorities, therefore we are able to provide support for preparing technical meetings or assist in the process of preparing and submitting written ruling requests.
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