The Government, with Decree 205/2023 (May 31th 2023), has decided that, as of 01.07. 2023, natural persons will be liable to pay social contribution tax – in other words a social contribution tax of 13% will be payable on the amount of their interest income as defined in Section 65 of Act CXVII of 1995 on Personal Income Tax (hereinafter: the Personal Income Tax Act), with the exception of interest income from real estate fund units, which is taken into account as a basis for personal income tax on interest income.
The provision of Section 1 (1) of the Decree is in line with Section 65 (1) of the Income Tax Act:
a) to interest accrued for the period after the entry into force of this Ordinance in the case of interest income within the meaning of Section 1(a) of the Income Tax Act, and in the case of fixed-term deposits to interest accrued on deposits placed after June 30th 2023
in the case of interest income within the meaning of paragraph (b) to the interest or yield on securities acquired after the entry into force of this Regulation;
c) in the case of interest income within the meaning of subparagraph (c), to the full value of assets to which the individual is entitled as interest income for the period after the entry into force of this Regulation;
d) in the case of interest income within the meaning of subparagraph (d), to the insurance benefits of an insurance contract entered into on or after the date of entry into force of this Regulation
e) in the case of interest income within the meaning of subparagraph (e), to interest on a member’s loan granted on or after the date of entry into force of this Regulation
f) in the case of interest income within the meaning of subparagraph (f), to that part of the income referred to in that subparagraph which is pro rata to the period of conditional acquisition completed after the date of entry into force of this Regulation shall apply.
In daily practice, this means that the tax rate on interest income accrued on any deposit of a credit institution (savings deposit), payment account, interest and yield on sight deposits, fixed-term deposits and investment funds other than real estate funds, corporate bonds, profit deposits, winnings, winnings on objects is determined on the basis of the amount taken into account as a basis for personal income tax.
It shall also apply to members of an occupational pension institution on the part of the income specified therein in proportion to the period of conditional acquisition of rights completed after the entry into force of this Regulation.
The above also means that no tax is due:
- on capital gains realised on real estate funds;
- on VAT-exempt investments, such as government bonds and part of insurance policies.
The change will enter into force on July 1st 2023, but the rule may be different for different interest income.
- In the case of deposits, the maturity date will count, and time deposits up to June 30th 2023 will not be subject to the new tax regardless of the maturity date. For sight deposits, the new tax will also be due on interest due from July 1st.
- For debt securities, typically corporate bonds, the date of purchase will be relevant. Securities purchased before July 1st will not be subject to the new tax.
- For insurance policies subject to personal income tax, the date of purchase will be relevant.
It is important to note that the bank is responsible for the deduction and payment of the tax in the case of bank payments and the payer in the case of payments to the payee.
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