If parliament approves the country’s 2022 tax bill currently under debate, Hungary could be among the first European countries to have clear and unequivocal cryptocurrency regulations, possibly attracting further investments to the country, news portal Origo reports.
“Although there are no exact data, the value of assets held in cryptocurrencies in Hungary can be estimated at HUF 300 billion (€84 million). Anyone who wanted to access these assets so far has been easily lost due to the lack of clear regulations. Selling cryptocurrency legally is a very complex and difficult process (taxation, money laundering), and neither the regulatory nor the services environment has been fully prepared for it so far,” Kornél Kalocsai, President of the Blockchain Hungary Association told Origo.
After several consultations, the Ministry of Finance adopted the association’s regulatory proposal and included it in the tax package. The new regulation will take effect starting next year, which will have a significant impact on the lives of many cryptocurrency owners.
Countries such as Malta, Estonia and Lithuania introduced their own blockchain and crypto-friendly regulations years ago, resulting in significant capital flows into their economies, new businesses being set up and people settling in these countries; many international crypto companies chose to reside in these countries as well.
At present, Hungarian law does not regulate crypto instruments. Although the taxation of cryptocurrencies can fall under the logic of the current personal income tax (PIT) law in theory, in practice, there are many actual cases where cryptocurrency owners cannot figure out when and how much tax to pay, nor in what categories. There are only general principles under which a very high tax rate of 26.5 percent is levied on crypto income.
This will change from January 1, 2022. Based on the changes announced as part of the spring tax package, a separate section of the PIT Act will deal with cryptocurrency instruments. Starting next year, a 15 percent personal income tax will be payable on profits from mining and trading cryptocurrencies, but the income will be exempt from social security contributions, and all costs incurred will be deductible. Also, those who have not paid any taxes on income from cryptocurrencies in the last five years will receive amnesty and can make their payments retroactively without penalty.
Regulation of this area is not a completely new issue. The so-called Crypto Asset Regulation is currently being developed in the European Union, which would regulate the market for crypto instruments at the Community level, but its appearance in Hungary may take years.
The advent of the country’s new tax package could mean that Hungary will become an attractive target for international blockchain companies.
Title image: Blockchain currencies. (Origo/Sándor Csudai)