If you have an investment, then the rate, rules and exemptions of interest tax will also affect you. This article takes a detailed look at the question of interest tax, to get answers to everything and do not have to “collate” the information further.
Interest and interest income
The term ” interest” includes both interest and intereston the use of borrowed capital , while the interest income subject to the separate tax rules is classified as itemized:
- the part of the capitalized interest accrued on the basis of a contract concluded between the individual and the credit institution on the basis of a public contract (business regulation, interest announcement) credited to the various credit institution deposits and receivables,
- interest / yield on debt securities, collective investment securities, publicly traded and marketed,
- the prize money for the prize book,
- income from individual insurance payments,
- the interest paid by the cooperative, if it exceeds the central bank base rate applicable during the period of liquidation by no more than 5 percentage points, provided that the cooperative does not provide credit beyond the statutory objectives and beyond the prescribed amount, does not cover the borrowing of the financial institution, does not make a guarantee, money for accounting – in addition to the standard required for normal business activities (eg material procurement, fuel billing) – does not give its members
- a member (beneficiary, heir) of an occupational retirement provision institution of a member who is in excess of the amount of the contribution supplement paid by the member due to the termination of the member’s employment relationship before the end of the conditional period of entitlement [Szja tv. Article 65 (1)].
Does not qualify as interest income…
The interest credited to the individual bank’s bank account must be considered as entrepreneurial income, except for the period during which it is suspended.
The interest for late payment shall be governed by the provisions governing the proceeds of which it was paid in the event of late or non-contractual performance. Section 1 (9) (b)].
The transfer of collective investment securities on a stock exchange law and on any stock exchange in an EEA State as well as in an OECD member state should not be subject to interest income but to a controlled capital market transaction.
Avoidance, optimization of interest tax
Obviously, our income taxable income arises when we want to get the money we invested and its yields.
The most important question is how to avoid or optimize the interest tax? In any case, the correct choice of the investment horizon or the right investment product can be the solution.
Such a product is typically a Long Term Investment Account and various insurance products (eg life insurance for single-premium investment units).
Interest income from insurance payments
We have to pay interest income from the payment of the insurance company upon repurchase if the performance of the insurer is not tax-free or does not constitute other taxable income.
The amount paid when the insurance event (accident, health, life, property damage, etc.) occurs is exempt. This provision also covers an insurer established in a State with which Hungary has a treaty in force to avoid double taxation.
Interest Income Discounts
Interest income from insurance (hence the associated tax liability) can be reduced by 50 percent :
single in the case of one-off contracts: maturity, repurchase and partial repurchase, if payment is made after 3 years after the conclusion of the contract but before the 5th year,
for regular fee contracts: maturity, repurchase and partial repurchase if the payment is made after the 6th year after the contract, but before the 10th year.
100 percent reduction (not taxable):
for one-off contracts: maturity, repurchase and partial repurchase, if the payment is made after 5 years after the conclusion of the contract,
for regular fee contracts: maturity, repurchase and partial repurchase if payment is made after 10 years after the conclusion of the contract.