Hungarian finance ministry proposes bill to scrap tax on interest of retail securities

The finance ministry has submitted a bill to the parliament, which proposes scrapping the 15% tax on the interest income earned on government securities purchased by households, the government announced. The draft legislation aims at doubling the holding of government securities by households and will be applicable on papers issued after Jun 1, 2019. The ministry expects that the move will save to households some HUF13-17bn annually. State debt manager (AKK) targets to increase the stock of securities for retail investors by HUF800bn this year.

The bill also seeks to reduce the burden for banks, by lowering the financial transaction tax. Thus, banks will have to pay HUF800 per person per year as of 2020 (HUF400 for 2019) for those who make at least one money transfer exceeding HUF20,000 while keeping the tax exemption for the lower amounts. Currently, transfers lower than HUF20,000 are tax-free since Jan 1 while transfers exceeding this amount should be taxed by 0.3% but the amount is capped at HUF6,000. The ministry expects the positive impact for banks to be in the amount of HUF10-13bn but estimates based on figures provided by the Hungarian Bank Association that show banks paying financial transaction tax on retail transfers of HUF12-13bn annually imply that the effect would be much smaller at some HUF4-5bn annually, state news agency MTI reported.

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