Tax information

INFORMATION ON HUNGARIAN TAX RULES

On taxes on the capital gains of clients subject to Act CXVII of 1995 on Personal Income Tax (hereinafter: Personal Income Tax Act).

1. A) Interest income (Section 65 of the Personal Income Tax Act)

Interest income shall mean the interest and yield paid (or credited) for publically offered and traded debt securities specified as such in the act on the capital market, or collective investment securities, and, of the income due the private person when calling, redeeming, or transferring the above securities, the part determined under the provisions governing exchange rate gains (with the exception of the sale of collective investment securities on the market of an OECD or EU Member State).

Tax rate: 15%

Tax return: if the tax liability is incurred by the payer (investment service provider), it shall assess the amount and deduct the tax, and the private person does not have to include it in the tax return (with the exception of the cases specified by law).

1. B) Dividend income (Section 66 of the Personal Income Tax Act)

All revenues of private individuals received as dividends or dividend advance shall be considered income

Tax rate: 15%

Tax return: Taxes on dividend income shall be assessed by the payer (including investment service providers registered in Hungary if it pays (or credits) dividends (or interim dividends) from abroad for securities kept on the private person’s securities (deposit) account managed by the payer) at the time of providing payment, and shall report and pay the tax as specified in the act on the rules of taxation

In absence of a payer, the tax shall be assessed by the individual in a return prepared without the involvement of the tax authority and shall be payable by the deadline for filing the return. The interim dividend and the tax thereon shall be included in the tax return for the year in which payment is provided as informative data; approved and paid dividends and deducted and paid taxes shall be reported in the tax return for the year of the financial report that determined the dividend, taking into account the paid tax as having been deducted from the interim dividend.

1. C) Capital gains income (Section 67 of the Personal Income Tax Act)

Income from capital gains realised shall mean the proceeds received upon the transfer of securities (not including lending arrangements), less the purchase price of the securities and any incidental costs associated with the acquisition of the securities. Any portion of the said profit that is to be treated as part of some other type of income in accordance with this Act shall not be considered as a capital gain.

Tax rate: 15%

Tax return: The payer shall assess the amount of income realised from the revenues, the tax and tax advance corresponding to the legal title of the income relying on the data and information at its disposal on the day of payment or that can be obtained, or as verified by the private individual relating to acquisition costs and the incremental costs, and shall declare and pay it in accordance with the act on the rules of taxation. If the income does not originate from a payer, the private individual shall establish the tax in accordance with the relevant provisions of the Personal Income Tax Act in his tax return prepared without assistance from the tax authority and pay it before the deadline prescribed for filing.

Section 3 of the Healthcare Contribution Act

Domestic private persons are liable to pay a healthcare contribution (EHO) for income derived from exchange rate gains outside the controlled capital market.

Tax rate: 14%

Tax return: The payer shall deduct the healthcare contribution. The payer is not entitled to deduct the healthcare contribution from payments due private persons for exchange rate gains only if, prior to the payment, the private person provides a statement that the total of the obligations specified by law has reached the limit of HUF 450,000 in the target year.

1. D) Income from controlled capital market transactions (Section 67/A of the Personal Income Tax Act)

Controlled capital market transaction shall mean any transaction concluded with an investment service provider or with the cooperation of an investment service provider for an financial instrument (not qualifying as a swap transaction) or commodity under the act on investment firms and commodity dealers, and on the rules governing their activities, as well as spot transactions concluded within the framework of financial services under the act on credit institutions and financial enterprises, or within the framework of services under the act on investment firms and commodity dealers, and on the rules governing their activities involving foreign exchange or currency, where such deals are concluded by financial settlement and if they satisfy the provisions of the said acts pertaining to transactions, with the exception of transactions where performance takes place with the application of the price specified by the party contracting the investment service provider and/or the parties representing them (the private person and/or any person with shared interests, including indirect shared interests), if such price is not at arm’s length and

1. a) if executed within the framework of activities supervised by the body regulating the financial brokerage system (hereinafter: Authority),
2. b) that is concluded with an investment service provider operating in the money markets of any EEA Member State, or any other State with which the Republic of Hungary has an agreement on double taxation, and

• ba) if executed within the framework of activities supervised by the competent authorities of that State, and
• bb) if the given State is not an EEA Member State, there are facilities in place to ensure the exchange of information between the competent authorities mentioned above and the Authority, and
• bc) for which the private individual has a certificate made out by the investment service provider to his name, containing all data and information for each and every transaction concluded during the tax year for the assessment of his tax liability.

Income from controlled capital market transactions shall mean the profit realised on controlled capital market transaction(s) the private individual has made during the tax year – including the capital market transactions covered by the provisions of this Section at the private individual’s choice – (not including interest income, or if income from long-term investments has to be established based on the transaction), and received in money from all such transactions (total profit realised on transactions) that is in excess of the total losses the investment service provider has charged to the private individual in connection with a given transaction or transactions, and paid during the tax year (total loss realised on transactions). Losses on controlled capital market transactions shall include the sum of total loss realised on transactions that is in excess of the total profit realised on transactions.

Tax rate: 15%

Tax return: the private person shall assess the tax in the annual tax return based on the tax certificate assessed and provided by the investment service provider by 15 February of the year following the tax year.

1. E) Income from long-term investments (Section 67/B of the Personal Income Tax Act)

On a long-term investment account (TBSZ), an unlimited number of (purchase, sale, etc.) orders can be placed for controlled capital market transactions based on a long-term investment contract and for financial instruments (e.g. government bonds, investment certificates) where the investment yield would otherwise qualify as interest income.

Long-term investment account (TBSZ): an investment account granted exemption from under the obligation to pay personal income tax if the account is held under the end of its term.

Conditions:

• one account can be opened per investment service provider and per tax year,
• the minimum investment account is HUF 25,000,
• the term of the deposit shall be five years.

Income from long-term investment shall mean the profit the private individual has realised through placing a sum under the conditions and subject to tax liability described in the relevant provisions of the Personal Income Tax Act, under a long-term investment contract concluded with an investment service provider or a credit institution, comprising a part of that amount that is in excess of the sum tied up according to the aforementioned regulations, to which the private individual is entitled upon the maturity or interruption of the time deposit, not including the part qualifying as exchange rate gins [Section 67/A (9)] but including the fair market value of the financial instruments comprising part of the investment prevailing at maturity or the interruption of the time deposit.

Tax return: the private person shall assess the personal income tax in the annual tax return based on the tax certificate assessed and provided by the investment service provider by 31 January of the year following the tax year. No tax return has to be filed if the tax is 0%.

Tax compensation: IMPORTANT! Losses realised on a long-term investment account cannot be set off by gains on other securities and cannot be carried forward for the following year, i.e. no tax compensation can be applied to the account.

IMPORTANT WARNING!

When compiling tax information, EQUILOR lays a great deal of emphasis on ensuring it is up to date. However, EQUILOR is not liable for continuously monitoring changes in legislation and applying those to its documents. The information is not exhaustive. Equilor Investment Ltd. maintains the right to change or amend the contents of the information. Familiarity with this information does not exempt the taxpayer from under the obligation of always informing himself/herself of the provisions of effective tax laws and of seeking the assistance of a tax consultant if necessary.

The above information is indicative only and cannot be considered to be tax consultancy, an official interpretation of relevant legislation, investment advice, motivation to invest, or a call for proposals.

Equilor Investment Ltd. does not assume liability for any interpretations of relevant legislation that differs from the above or for the legal consequences of legislative amendments. The taxpayer client bears sole responsibility for interpreting and applying tax laws. As several unknown factors may have an impact on the exact amount of the amount of tax actually payable, individual examinations and evaluations are required in each and every case.

In international transactions, please take into account the tax laws applicable at the place the transaction is concluded, which may result in tax liabilities that differ from the above.

Before opening a long-term investment account or a retirement savings account, please read the applicable consumer protection information and also consider the account fees when making your decision to open an account.

Consumer protection information for clients opening long-term investment accounts

Consumer protection information for clients opening retirement savings accounts

Before taking a position in any financial instrument, please make absolutely sure that you have understood the functioning and risks of the market, and that the instrument is fully suited to your own investment purposes and expectations. Please carefully review Equilor Investment Ltd.’s general terms and conditions, relevant framework agreement, notices, and information on financial instruments. EQUILOR Investment Ltd. does not assume liability for the contents of the information.

NYESZ-R ACCOUNT

The sooner you start saving up for your retirement, the sooner you can break free of the state pension system and create a secure standard of living for your relaxed years in retirement.

As an Equilor Investment Ltd. client, you have the opportunity to open a retirement savings account (NYESZ), which not only provides a tax advantage but is also eligible for state support.

What are the advantages of a retirement savings account?

• You can set aside any amount you want for your retirement at any time, with any frequency. Payments do not have to be regular.
• You can make the investment decisions for your own account! (For more information see: Notice on the financial instruments that can be credited to retirement savings accounts, available NYESZ-R transactions)
• You can change the account’s securities portfolio at any time.
• Receive up to HUF 130 thousand in tax credits every year.
• If investments on the retirement savings account are used as retirement provisioning, they are granted exemption from taxes on interest and foreign exchange gains.
• The first order is free up to the amount of the payment.
• Our NYESZ account has the lowest account management fees permitted by law

NYESZ account holders can choose the risk and term of the instruments to invest in. For example, they can purchase shares, government bonds, investment certificates, or any other investment vehicles offered by the account service provider. However, it is important to reconcile the risk levels of the individual financial instruments and the investment targets resulting from the nature of the NYESZ.

In general, you will be able to access the savings on your NYESZ account when you become eligible for pension benefits. Another condition is that accounts opened before 1 January 2013 have to be used to collect savings for at least 3 years to be eligible for the tax advantage; for accounts opened later, this same period is 10 years.

Regardless of the above, people close to or even past the retirement age may also open a NYESZ account, though they too are required to keep their savings for at least 10 or 3 years, respectively, to receive the tax advantage.

Law also permits payers to utilise the savings accrued on a NYESZ account before reaching retirement age, in which case the state support has to be repaid and the personal income tax has to be paid.

Withdrawing the money from the account results in the termination of the NYESZ contract. If the account is terminated, the cash remaining on the account and the balance of any financial instruments will be transferred to the main account linked to the NYESZ-R account.

^* Persons who reach retirement age before 1 January 2020 are eligible to receive a maximum savings support of HUF 130,000 per year; other persons are eligible for HUF 100,000 per year. If a private person provides for the transfer of a certain portion of taxes in a voluntary mutual fund statement, retirement savings account statement, and a pension insurance statement, the amount transferred by the tax authority in total may not exceed HUF 280,000 per year.

Further information on the retirement savings account (NYESZ-R) offered by Equilor is available by clicking on the following link:

• Consumer protection information
• Notice on the financial instruments that can be credited to retirement savings accounts, available NYESZ-R transactions

More important information is available under the Frequently asked questions menu item

LONG-TERM INVESTMENT ACCOUNTS

Did you know that

• you can reduce the tax payable for profits on your investments to 0% if you have a long-term investment account (TBSZ)?
• if you open a TBSZ by 31 December 2023, you can save the 12-month savings year?
• investment service providers offer a range of investment products through a TBSZ account?
• TBSZ accounts opened in 2018 can be extended or reopened based on the client’s statement?
• you can transfer an existing TBSZ account to another service provider?
• TBSZ accounts extended in 2018 (and opened in 2013) can be extended or reopened based on the client’s statement?

TBSZ accounts opened in 2018 or opened in 2013 and reopened in 2018 have come to a turning point. If you opened a TBSZ account in 2018 or in 2018 you extended a TBSZ opened in 2013, you can access the yield accrued on your long-term investment account tax-free starting from 31 December 2023.

If you have a TBSZ account that was opened or extended in 2018, read about what tasks and opportunities here

If you don’t have a TBSZ account yet, the following information can help you make the right decision:

Long-term investment accounts aim to motivate private people to put aside long-term savings by offering substantial tax advantages or even complete tax exemption for the revenue realised on the account.

Instead of the 15% tax rate on interest and exchange rate gains generally applied, if the conditions specified by law are met

• the tax rate drops to 10% after 3 contiguous investment years and
• the tax rate drops to 0% after 5 contiguous investment years.

If the account holder accesses the invested funds within the 3 or 5 year period most advantageous for tax purposes, no fines are incurred: only the usual taxes have to be paid or, if funds are withdrawn after 3 years, the lower tax rate is applied.

TIP: Long-term investment accounts (TBSZ) are available at a number of service providers. However, the investment vehicles you gain access to through the TBSZ account differ, as the various service providers offer different possibilities. Before making your decision, learn about the transactions and financial instruments executable in TBSZ contracts!

KEY FEATURES OF LONG-TERM INVESTMENT ACCOUNTS

• The facility consists of a collection year and a savings period. (See: “A detailed description of how a long-term investment account (TBSZ) works”)
• Payments can only be made to a TBSZ account during the collection year.
• The account fee is HUF 0 for the first (collection year), after which we charge the discount rates specified in the current Terms and conditions.
• What investment instruments are available for the amounts paid to the TBSZ account? Starting from January 2012, transactions on long-term investment accounts can also be performed for financial instruments (e.g. government bonds, bonds, shares, or investment certificates) denominated in foreign currencies. These products can be freely sold during the deposit term and the portfolio composition can be changed at any time by reinvesting the realised value. Notice on the transactions and financial instruments executable in TBSZ contracts
• A client may open only one long-term investment account (TBSZ) per year at any given (investment) service provider. By using more than one service provider, the client may dispose of more than one long-term investment account for the same year.
• Capital can only be withdrawn from the TBSZ account at the maturity dates of the 3 or 5 year deposit periods, otherwise the TBSZ account will be immediately closed.

ADVANTAGES OF LONG-TERM INVESTMENT ACCOUNTS

1. Possibility to optimise the tax payable for the yield on investments, or even to achieve total tax exemption.
2. The long-term investment account (TBSZ) can also be used to deposit financing instruments denominated in foreign currencies, making it possible to trade on any international markets with a tax advantage or totally tax exempt.
3. Possibility to actively trade, to continuous modify the portfolio, and to achieve optimal yield on the account.
4. Clients who choose a portfolio management service can also make use of the tax advantage.
5. It is advantageous for all investors: despite undertaking a long-term commitment, the TBSZ can be closed at any time during its term, in which case the tax rate is applied to the results achieved on the normal investment account (15%).

A DETAILED DESCRIPTION OF HOW A LONG-TERM INVESTMENT ACCOUNT (TBSZ) WORKS

Collection year

The year the account is opened. Payments can be deposited into the account until 31 December in the collection year, and the 5-year savings period starts in the following year. An unlimited number of payments may be made in the collection year. One TBSZ account can be opened per year per (investment) service provider. However, by using more than one service provider, the client may dispose of more than one long-term investment account for the same year.

3-year deposit period

If any funds are withdrawn in the three calendar years following the collection year, the account will be automatically closed. A 15% tax will be payable for the yield realised on the account. An important feature of the facility is that the following possibilities are available on 31 December following the end of the 3-year deposit period, i.e. at the end of the 3rd calendar year:

• The withdrawal of the entire amount on the account, in which case a 10% tax is payable on profits; this results in the closure of the account.
• Withdrawal of a part of the account balance and keeping the account. In this case, the 10% tax applies only to the proportionate increment of the paid amount.

5-year deposit period

If the payer does not withdraw any amounts from the TBSZ account in the 4th and 5th years, the investment and its yields become available tax-free at the end of the 5th year.

If the payer initiates any withdrawals during this period, the long-term investment account will be automatically closed and a 10% (discounted) tax will be payable for the investment yield.

Extension and reopening at the end of the 5th year

After the end of the 5th year following the collection year, the TBSZ account facility can be reopened, which results in the extension of the long-term investment relationship. If the account is extended, there is no new collection year: the amount originally deposited on the extended TBSZ account and the yields achieved are capitalised. Since 2017, there is a possibility to withdraw a part of the balance even if the TBSZ account is extended, with the condition that the account balance cannot fall below HUF 25,000 after the withdrawal.