This content is from: Local Insights


Since mid-1997, Hungarian legislation has imposed taxes on money transfers in cash so that cash payments made by companies over a certain sum (about Ft1.2 million (US$5.454 million)) entail various tax disadvantages. In an attempt to curtail cash payments, Hungary intended, on the one hand, to encourage non-cash money transfers common throughout Europe and, on the other hand, to gain greater control over the so-called black market.

The unfavourable tax provisions were recently challenged in the Constitutional Court of the Republic of Hungary on the grounds that this type of state intervention was violating entrepreneurial autonomy, did not take into account Hungary's economic situation and only benefited the banks.

By its order No. 31 of 1998 the Constitutional Court sustained this motion. The court's reasoning indicates that the legislative goal of decreasing the number of cash payments may not be achieved primarily through administrative restrictions but through conditions imposed on money transfers by the banks to stimulate the interest of those participating in business transactions in non-cash payment methods. Because cash payments are not expressly forbidden under any law, the contested tax law provisions constitute in the court's view a quasi-sanction of activities which are not illegal.

Accordingly, the Constitutional Court abrogated the cash payment provisions of the Hungarian tax laws as well as the relevant modified government order No. 224 of 1996 with effect from June 25 1998.

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