Interest tax avoidance schemes raise doubts

Analysis

With interest income becoming taxable in less than two weeks ahead on Sept. 1 and taxpayers in a mad rush to precede the deadline, questions still surround the legality of long-term savings accounts designed by commercial banks to attract tax-shy clients, according to daily Népszabadság.
In line with the new tax regulations, money deposited in a savings account before the end of August will be exempt from the new 20% tax until withdrawn, however, there is uncertainty whether a Civil Code clause dating back to 1989 that requires banks to pay interest on savings at the end of each calendar year should be interpreted as restricting the maximum length of a deposit to 12 months before it must be renewed and lose tax-free status. To complicate matters, banks are currently not required to follow a standard format when advertising interest rates to make them comparable. According to business daily Napi Gazdaság, the State Financial Supervisory Authority (PSzÁF) requested the Finance Ministry to clarify these issues, but has not received any answers yet.

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