When shall one pay duties?

In the event that title to real property (whether land or housing / residential property) is acquired in return for consideration, the party acquiring the real property (i.e. the buyer) shall – as a general rule – pay duty on onerous transfer of property. 

Duty on onerous transfer of property shall be paid on the acquisition of certain rights of pecuniary value related to real property, acquisition of property through the termination of such rights and the transfer of the exercise of usufruct enjoyed in respect of real property. In this context, right of pecuniary value means tenement, usufruct or right of use – including the rights of use defined in the provisions concerning cooperative housing property – and asset management.

Duty base, rate of duty – general rules

As a general rule, the general rate of the duty on onerous transfer of property is 4% of the market value of the property acquired, including encumbrances.

As opposed to this, in the case of exchanging the ownership rights of real properties, except housing property and related rights, the basis of the duty is the market value of the real property acquired thereby.

In the event that the acquisition of property is based on a contract for support, life annuity or inheritance, the basis of the duty is the market value of the property acquired.

In the case of usufruct or use established concurrently with an onerous transfer of property, the party acquiring ownership pays a duty on onerous transfer of property as per the market value, reduced by the value of usufruct or use calculated in accordance with certain rules,, while the usufructuary or user pays a duty corresponding to the calculated value of usufruct or use.

Duty on the onerous transfer of residential property

 In the case of the acquisition of residential property, the basis of the duty on onerous transfer of property is, pursuant to the applicable general rules, the market value of the residential property. The rate of the duty for each housing unit shall be 2% up to HUF 4 million, and 4% for the portion of the market value above HUF 4 million. In respect of the acquisition of partial ownership in a housing unit, the 2% rate shall be applied to the pro rata amount of HUF 4 million according to the ownership percentage acquired, and the 4% rate is applied to the amount in excess thereof.

If the party acquiring the residential property has been granted a home building allowance at the time of purchase, the amount of such allowance, with certain exceptions, shall be deducted from the market value.

In the case of exchanging the ownership of housing units, the basis of the duty is the difference of the full market value of the housing units exchanged, including encumbrances. In the case of exchanging the ownership of more than two housing units, the basis of the duty is the difference of the lowest and highest full market values, including encumbrances, of the real properties thus exchanged.

In the event that the private individual owner sells his other residential property within a period of one year preceding or following the purchase of the given flat, the basis of the duty is the difference between the market values of the properties purchased and sold, including encumbrances. (It follows from the foregoing that if private individuals sell their land property and intend to purchase a residential property from the proceeds therefrom, the above rule cannot be applied: this rule can exclusively be applied to the sale and purchase of residential properties.)

It is important to note that the difference may be of positive and negative value, therefore, it is irrelevant whether it is the residential property purchased or the one sold whose market value is the higher or the lower of the two.

If the value difference thus established is higher than the market value of the residential property purchased, the basis of the duty shall be the market value of the residential property purchased.

Duty exemptions and allowances applicable to the purchases of real property

Acquisition of the ownership (ownership share) of land property suitable for the construction of a residential building and the right of pecuniary value established on such real property is exempt from duty on onerous transfer of property if the party acquiring the property builds a residential building on such real property within 4 years of the date of submission of the contract for dutiable purposes, and if the net floor space of the residential suite(s) in the building is minimally 10% of the permissible building space fixed in the applicable general zoning plan. The party acquiring the property must notify the Tax Authority regarding his intention to build a residential building, until the date when the order concerning payment of the duty becomes definitive.

 The purchase of a new residential property with a market value of HUF 15 million or less, built or developed by a business entity for the purpose of resale, and the purchase of a share in such property are exempt from duty on onerous transfer of property. If the market value of the new residential property is over HUF 15 million but below HUF 30 million, and if the buyer does not provide proof of the sale of another property, the applicable duty must be established as follows: First, the amount of the duty that would otherwise be paid on the total value of the housing unit must be established (2% up to HUF 4 million and 4% for the amount in excess thereof), then the amount of the duty payable on HUF 15 million, calculated in accordance with the above method (i.e. HUF 520,000), must be subtracted from this amount. The sum that thus remains is the duty payable.

Payment relief: deferred payment and instalment payment with reference to the payment of duties

Deferred payment and instalment payment (hereinafter collectively referred to as “payment facilities”) may be granted if the person obliged to pay duty cannot pay it in one lump sum until the fixed date.

Thus, payment facilities can be granted if the payment difficulty

a) cannot be attributed to the applicant or if he has taken reasonable measures to prevent payment difficulty in a manner that can be expected in the given situation and, furthermore,

b) is of a temporary nature, that is, payment of the tax at a later time is likely.

In respect of private individuals, payment facilities may be granted despite point a) if the applicant foresees or is able to provide some form of evidence demonstrating that payment of the tax at that very time or in a lump sum would constitute unreasonable hardship on his family, given his income and his financial and social circumstances.

There is no statutory regulation prescribing the number of instalments for which an application can be lodged.

The form required for the submission of such application is free of charge and can be downloaded from our Hungarian site (www.apeh.hu) and, alternatively, the same form is available at any Customer Service Offices of the Hungarian Tax and Financial Control Administration (APEH).

Upon the request of a private individual, the tax authority may reduce or cancel payable duty debts, penalties and surcharges of the individual if payment of such duties would seriously endanger the livelihood of the person obliged to pay such duties and that of his close relatives living in the same household. The tax administration may make any reduction contingent upon the payment of part (or all) of the unpaid debt.

Notification of the tax authority of the acquisition of property

Acquisition (termination) of ownership rights in real property, or a right of pecuniary value related to such real property must be reported to the real property supervisory authority for dutiable purposes by way of the submission of the pertinent contract (document). Reporting for dutiable purposes shall be effected by filling out the appropriate application form for registration in the real property register. In the event of failure to fulfil the reporting obligation in connection with the property acquisition, by providing such report in default of the 30-day deadline defined in a separate statutory regulation, or by providing an incomplete report, the subject of duty payment obligation is liable to pay a default penalty, in excess of the duty payable, which amounts up to HUF 200,000 in the case of private individuals.