Two banks in Hungary announce passing on raised transaction tax

As is known, from 1 August 2024, the government will increase the financial transaction tax by amending Government Decree 197/2022 (4.VI.) on extra profit taxes, which, with special exceptions, will affect essentially all domestic customers who, for example, initiate a transfer from their bank account or withdraw cash.

For those transactions that have already been subject to transaction tax, the tax will change from 1 August:

• in general cases (including securities transactions), the levy will be raised to 0.45% from 0.3%, with a maximum of HUF 20,000 per payment transaction (up from HUF 10,000);
• the financial transaction tax on cash withdrawals will go up to 0.9% from 0.6%.

In other words, the burden of the normal transaction tax will increase by one and a half times, and it will double for larger transactions, as the upper limit will rise to HUF 20,000 from HUF 10,000.

Under the law, the levy is payable by the banks. although they may pass on the raise to the ftt to their customers, the law stipulates that retail customers cannot have their fees increased - either directly or undirectly - until 31 December 2024.

Gránit Bank and K&H Bank are the first to raise fees

The government has issued a decree forbidding banks from directly or indirectly passing on the FTT hike (from 1 August) to retail customers until year-end, said Péter Gergely, financial expert at BiztosDöntés.hu. But there is no such ban in the case of businesses. It was therefore only a matter of time before the levy started to be passed on to the banks' corporate clients, i.e. domestic entrepreneurs and companies.

According to the banks' announcements,

• Gránit Bank will raise its transaction fee for businesses as of 16 September, and
• K&H Bank will raise its accounting fee for businesses as of 26 September to the level of the FTT raised by the government as of 1 August.

Customers have the right to terminate their bank account contracts immediately and without any fees, charges or other payment obligations due to the change, at the latest until the day before the amendment enters into force. Businesses that do not terminate their bank account contracts will automatically pay the higher fees for their financial operations from the indicated date.

All domestic banks will be more expensive to transfer money or withdraw cash

Under the changes, for example, a domestic transfer of HUF 1 million will cost businesses HUF 1,500 more, while withdrawing the same amount of cash will cost double that, i.e. HUF 3,000 more. For the HUF 1 million used in the example, the total levy for non-cash transactions will go up to HUF 4,500, while for cash transactions it will increase to HUF 9,000.

Businesses are likely to include the increase in duties in their costs, depending on their cash flow, and where they see the need to raise prices, they will make their customers pay for it, said Péter Gergely. This change could start as early as this autumn.

Gránit Bank and K&H Bank are just the first two banks in a row to pass on the FTT hike to their business customers. Just as the banks have passed on all previous fee increases to their customers without exception, it is expected that the other banks will follow suit.

We should expect all banks to follow suit by October at the latest and have their corporate clients pay the higher transaction tax. The public, i.e. retail customers should expect the same after 1 January 2025.