Buying real estate in Hungary: Property Acquisition Tax in 2023

április 16, 2023

In Hungary, the law requires us to pay taxes on our income and to pay property acquisition tax in the event of property acquisition. What do we mean by property acquisition tax? How do we pay the tax, and is it possible to be exempt from the obligation? Are there any discounts?

What is the property transfer tax?

Retroactive property transfer refers to a property exchange between contracting parties involving some kind of obligation, consideration or exchange of assets. The property can be any asset, movable or immovable, where the ownership of the owner changes at the end of the transaction in exchange for compensation. This legal process is simplified as property acquisition, so the buyer, who acquires the property, pays the associated tax. The tax is the state’s revenue, which is used to carry out various social tasks, and therefore proportional contribution is requested from citizens.

When is property tax payable?

According to the 1990 XCIII. law on taxes, the acquisition of property not subject to inheritance tax or gift tax entails the obligation to pay property acquisition tax, including the following rights of economic value related to the property:

  • Acquisition of economic rights related to real estate.
  • Transfer of usufruct of real estate.
  • Acquisition of ownership or economic rights of a structure located on public property that is not considered real estate.
  • Acquisition of a share in a domestic company that owns real estate assets.
  • Economic rights include land use, usufruct, right of use, as well as property management and operating rights.

The rate of acquisition tax

Acquisition tax is typically 4% of the purchase price when buying real estate, so it’s worth factoring this amount into your expenses even if you’re only buying a garage. If the purchase price of the property exceeds 1 billion forints, the tax rate decreases from 4% to 2% for the portion above that amount, but the maximum amount is capped at 200 million forints.

It’s easy to calculate that if you buy a family house worth 40 million forints, your tax liability will be 1.6 million forints, unless you’re eligible for exemption or reduction. It’s important to know that the tax authority is authorized to check the market value during an on-site inspection and determine a value different from the contractual purchase price. In such cases, the tax base can also change.

When is there a tax exemption?

The most common cases of tax exemption when acquiring real estate are as follows:

When buying a newly built property, there is no tax obligation up to 15 million HUF, provided that the value of the property does not exceed the threshold of 30 million forints. In these cases, we must pay 4% of the difference between 15 million and the purchase price to the tax authority. To illustrate this with an example:

When purchasing a house worth 25 million HUF, we calculate the 400,000 HUF owed to the state after the first 10 million.

If the value of the property exceeds 30 million HUF, then the tax rate is 4% of the total purchase price, so we must pay 1.2 million HUF.

Tax exemption can be granted when exchanging or purchasing a residential property, if we sell the previously acquired residential property within three years prior to the purchase or within one year after the purchase, and the purchase price of the new residential property is lower than the value of the exchanged or sold residential property.

When acquiring property between spouses, siblings, direct relatives, the transfer of property without consideration in these cases corresponds to a gift or inheritance, and transfers in exchange for consideration between spouses are also exempt from tax.

In case of termination of marital property community due to divorce or becoming a widower.

When buying a building plot, if we build a property that complies with the rules on it within four years, and we also receive a permit for use within this deadline.

From January 1, 2021, there is no property acquisition tax to be paid on real estate purchased with the help of the Family Home Creation Support (CSOK), regardless of the purchase price. The exemption does not require the use of a CSOK loan, eligibility is automatically available if we indicated this in the purchase agreement and the accompanying (B400) form.

Real estate tax benefits in 2023

Property acquisition tax can be reduced in the following ways:

Young buyers under the age of 35 who are purchasing their first home are entitled to a 50% discount if they purchase a new, residential property with a fair market value of less than 15 million HUF. The condition is that the buyer has not previously owned either an independent property or a 50% stake in a property. Since current property prices far exceed the specified value limit, few people are currently able to take advantage of this type of benefit.

In the case of property exchange (replacement purchase), where the fair market value of the new property is higher than that of the previously acquired property, we are only required to pay tax on the difference in value. For exchange transactions, the condition for the benefit is that the new property must be purchased within 3 years after the sale or within 1 year before the sale. For example, if we sold our apartment for 20 million HUF and purchased a new one for 30 million HUF two years later, we would only be required to pay tax on 10 million HUF.

Can the acquisition tax be paid in installments?

Yes, it is possible. Upon request of the taxpayer, the National Tax and Customs Administration automatically allows payment by installments when acquiring the first property or ownership share. This means that the tax can be paid in up to 12 equal installments from the due date. However, if the current installment is not paid, the installment payment option is lost and the remaining amount, together with a late payment penalty, must be paid in a lump sum.

Non-first-time property buyers can also request an automatic installment payment option, but only for tax debts of up to HUF 1 million and for a maximum period of 12 months. This type of discount can only be requested once a year.

A request for installment payment can also be initiated on a case-by-case basis. In this case, we must provide justification as to why we cannot pay in a lump sum, and the tax authority decides on the approval of the installment payment request. It is important to note that submitting a request does not have a suspensive effect, so if the tax authority rejects the request, the tax, along with fines and late payment interest, must be paid in a lump sum.

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