Mária Lakatos

Taxation in General: Hungarian Tax System

Online gambling is another special example

A new method for earning tuition fee is online gambling, the spreading of which raised a problem in connection with the taxation of personal income in Hungary. The problem is dual as where gambling actually takes place and where should those, who win, pay the tax thereupon and punctually, what kind of an earning activity is online gambling are all question that need to be clarified.

As the Hungarian Personal Income Tax Act was drafted in 1995, it did not yet reckon with the e-economy becoming widespread, or with the fact that avoiding strict state monopoly one can gamble from his/her home, from his/her armchair.

Accordingly, pursuant to Section 76(4) of Act CXVII/1995, among others, winnings from legitimately organized remote gambling do not classify as income. To organize remote (online) gambling the permit of the state tax authorities is required, something that only state-owned Szerencsejáték Zrt. has to its game of chance called tippmix.pro.

This means that if somebody is fortunate enough and wins, the winning from tippmix.pro is exempt of taxes.

However, also other games of chance can be played, and since the server on which they are played are run elsewhere and not in Hungary, they evade Hungarian legislation. But just remember, what we have mentioned in Chapter 3, namely, that the tax liability of Hungarian citizens extend to all of their incomes, irrespective of where they originate from. Accordingly, money realized from any kind of online poker is subject to taxation.

Then comes the classification of the activity which, obviously, cannot be work or independent earning activity (self-employment).

Still, it can be an independent earning activity if to acquire winnings is subject to performing some kind of an activity (such as playing poker, for example).

The income from an independent activity shall be determined so, that the recognizable expenditure and costs shall be deducted from all the income (winnings) resulting from the same type of activities (see Annex 2 to the Personal Income Tax Act).

The recognition of (accounting for) costs is possible by two different methods: according to the one, lump sum costs of 10 per cent are deducted, or, if the other methods is chosen, then itemized accounts of the costs must be made.

It is important to note, though, that within that and the same fiscal year, only one of these can be chosen, and this shall apply throughout the year to all income of the natural person originating from all independent activities. Still, if the natural person chose to use the 10 per cent lump sum cost method, at the end of the year, he/she can change to the itemized accounts if he/she has the proper certificates.

When the 10 percent lump sum cost method is selected, 90 per cent of the revenue are classified as income. In this case no other deduction can be made from the receipts but no certificates are required to evidence the costs, either.

If the itemized accounting for costs is chosen, then the justified costs actually incurred during the tax year in the interest of pursuing the activity, (i.e., the ones qualifying as recognized expenditure as such are defined in Annex 3 of the Personal Income Tax Act, i.e., the ones that can be recognized against the receipts in order to establish the income) can be accounted for.

Recognized costs are only expenditure that have been incurred and have actually been paid during the fiscal year and are duly certified (preferably be invoices). Costs can be deducted only to the extent of the receipts.

E.g., in the case of online poker, if the natural person can duly certify them, the ante, the fee paid to the services provider shall be considered as costs

Taxation in General: Hungarian Tax System

Tartalomjegyzék

Kiadó: Akadémiai Kiadó

Online megjelenés éve: 2022

ISBN: 978 963 664 137 5

Taxation is a scheme for the state to provide revenue. The so collected money could then cover the public spending of the government. These are the so-called allocative and redistributive functions of the state budget. Although, taxation theory discusses the various tax types and analyses the various taxation tools very extensively, there is no absolute answer to the question, when and what type of taxation system would be optimal. Thus this introductory book on taxation deals with the three basic types of taxes - the income tax, the VAT and the corporation tax - in a very pragmatic way. There are legal texts and cases from both the international and also from the relevant Hungarian practice.

This book is recommended not only for students of economics but also for law students and practitioners beside anyone who is interested in the basic regulations of taxation.

Hivatkozás: https://mersz.hu/lakatos-taxation-in-general-hungarian-tax-system//

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