Cryptocurrency Isn’t Recognized as a Legal Tender in Hungary- Yet

3 min read

Hungary is currently setting up a regulatory environment for cryptocurrencies but does not recognize them as “legal tender” – yet.

Hungary is working on a new legislation for the crypto sector. Now, the legislative framework imposes several barriers such as high taxes, making it a difficult destination to access and install in for crypto investors.

As reported by national media Portfolio, the Hungarian Finance Ministry has stated that Bitcoin (BTC) and altcoins are not considered as legal tender.

“Hungary is currently looking into regulating crypto instruments, and the central bank, the tax authority, the finance ministry and other authorities have set up a joint workgroup to evaluate legal, economic, law enforcement, money laundering and other aspects of cryptocurrencies with an eye to introducing more detailed regulation.”

Unfavorable environment for crypto investors

Hungarian law related to tax is notoriously unfavorable for cryptocurrency investors. The Personal Income Tax Law recognizes Bitcoin and altcoins as “other income”, meaning that the income earned from crypto activities is taxed at a rate of 15% for Personal Income Tax and 22% for Health Contribution.

Even so, if the operations are carried out by a business rather than a “private individual”, the tax is diminished.

Recently, Deloitte Private reported that the high level of taxes is influencing owners to invest and get more and more involved in business schemes to avoid the complexity of the legislation:

“Many people try to escape the infamous Hungarian taxes and additional administrative obligations (i.e. tax advance assessment, or preparation of tax returns and continuous keeping of tax records) through the increasing number of investment schemes. However, the level of reliability and sophistication of these is quite low in most cases, which often entails further taxation and legal risks.”

Currently, Hungarian law charges for crypto operations, including selling and exchanging. On the other hand, if you use digital assets as collateral for a loan, you will avoid taxation. So, act intelligently.

“According to current law in Hungary, as a consequence of selling or exchanging cryptocurrencies is considered a taxable event,” Csaba Csabai, CEO of INLOCK commented. “However using these digital assets as collateral for a loan to finance a temporary liquidity problem is not. The platform we are building is working towards this concept enabling cryptocurrency holders to access the purchasing power of their holdings without being punished by the extremely high tax rates.”

Author: Adriana Midrigan

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