Limits on cash transactions at your Hungarian business

Cash transactions in Hungary

A cash transaction involves the use of coins and bank notes. Since cash transactions pose a higher risk of fraud, governments are typically trying to direct transactions toward electronic avenues. At the same time, cash payment is now a constitutional right in Hungary, meaning that customers are supported in their continued use of cash. They need this too, as according to latest data, around 30% of the population receives at least some of their income in cash, and 10% receives all of their income this way. The monthly limit of free cash withdrawal from ATMs has also just been raised to HUF 300,000 for retail customers.

In line with this, the following limits should be considered regarding cash transactions:

• B2B cash transactions are limited to HUF 1.5 million / month / contract
• B2C cash transactions are somewhat limited, as above limit transactions are subject to background checks
• Cash transactions between natural persons are rarely regulated, although sometimes taxes may apply above certain thresholds (e.g. for major gifts)

Businesses typically need a rulebook that defines how they are supposed to handle money. The law does not stipulate a limit on available cash, but businesses should set limits for themselves in their rulebooks, usually defined based on a percentage of their previous yearly revenue.

The main rule regarding cash transactions is that when they are invoiced, the deadline should always be immediate.

B2B cash transactions

Cash transactions are considered B2B when both parties are legally required to have Hungarian bank accounts. This includes not only companies, but also most freelancers. B2B cash transactions are most typical for SMEs, especially in construction and hospitality, and at wholesale markets.

A business can make cash payments of up to HUF 1.5 million (ca. EUR 4,000) per calendar month per contract. This limit is separate from the total cash limit set in the rulebook, but it should be kept it in mind when defining limits for the business.

When determining if a cash payment is below the HUF 1.5 million limit, keep in mind that it should be considered if it is a price. Additionally:

• The limit includes VAT, not only the net price.
• Instalments paid over the same month are considered together; however, instalments paid in a separate calendar month are considered separately.
• The limit includes any deposit made in advance in the same calendar month.
• Currency does not matter; if the payment is not made in HUF, the foreign currency should be considered at the daily exchange rate of the Hungarian National Bank.
• Payments beside the price set in a contract are not considered, e.g. penalties, late fees, compensations for damages.
• A repayment of a shareholder loan is not a price, and as such, it is not considered. At the same time, the interest on the loan is in fact considered a price.

It might happen that you have multiple contracts with the same provider regarding different products. If the contracts and products are handled separately, the HUF 1.5 million limit will apply to them separately. Watch out: DO NOT split one deal into separate contracts just to circumvent the limit. That is against the spirit of the law and can be penalized as such.

At the same time, a business customer is allowed to deposit cash directly in the bank account of the seller. This will not be considered a cash transaction, and as such, the HUF 1.5 million limit will not apply to it.

For making B2B cash transactions above the limit, the penalty is 20% of the sum above the limit. The penalty will be applied to both parties. Such transgressions are usually caught when there is an audit at one of the parties, and the other party will be fined automatically.

Cash transaction between affiliated companies

When cash transactions are made between affiliated companies, there is an additional task. If the transaction is above HUF 1 million, the Tax Authority should be notified within 15 calendar days.

Forbidden B2B cash transactions

Cash transactions between businesses are not allowed at all if they concern products subject to excise duties, such as:

• alcoholic beverages,
• tobacco products,
• motor fuels.

B2C cash transactions

Cash payment is now a constitutional right in Hungary, so every business is supposed to provide options for cash payment. At the same time, some restrictions apply. For example, if a customer wants to pay in coins, a seller is not required by law to accept more than 50 coins at a time (unless its own money management rulebook requires it).

Additionally, a business can accept high amounts of cash from customers only if they perform a background check to confirm the source of the money. That also requires the creation of an anti-money-laundering policy. If a business does not want to deal with the additional paperwork this involves, they are allowed to refuse cash payments above certain thresholds.

• Service providers (e.g. lawyers, notaries, accountants, realtors): HUF 4.5 million
• Sellers of goods: HUF 3 million

Cash transactions at your Hungarian business

When you first set up your Hungarian company and discuss your expected revenue with your accountant, make sure to include the volume of expected cash transactions too. This way your cash management rulebook can be set up in a way that will fit your business needs.

Helpers Finance offers accounting and bookkeeping services to foreign-owned SMEs in Hungary. With our help, you can rest assured that your business remains compliant to local regulations throughout its operation.