On 1 December 2020, the Hungarian Parliament passed yet another tax-related bill, the purpose of which is to provide assistance to families in the creation of housing. The bill introduces a 5% rate of VAT for the sale of certain new residential properties, and also waives the property transfer tax for those receiving the family housing benefit (CSOK).
VAT
From 1 January 2021, the following will (once again) subject to 5% VAT:
- “new” condominium units with a total useful floor space of 150 square metres or less; and
- “new” single-unit residential properties (detached houses) with a total useful floor space of 300 square metres or less.
In the system of VAT, a property is to be considered as “new” if an occupancy permit has not yet been issued, or it was issued within the past 2 years.
The 5% VAT rate is temporary, and as a principal rule, it is applicable until 31 December 2022. However, under the transitory rules, the favourable VAT rate is still applicable for transactions completed between 1 January 2023 and 31 December 2026, provided that:
- the construction permit has become final by 31 December 2022; or
- the fact of the construction has been notified under the rules of the simplified notification procedure by 31 December 2022.
Property transfer tax
From 1 January 2021, the amended law provides a full exemption from the property transfer tax for the purchase of new or used residential properties in the framework of the family housing benefit (CSOK) scheme, independently from the market value of the property. The new provision can be applied to contracts dated after 1 January 2021. It is important to note that in case of advanced CSOK benefit, if the childbirth undertaken is not realized (with the exception of health-related reasons), or the subsidized loan is repaid before its maturity (e.g. due to a divorce), then the property transfer tax must be paid after all.
We do hope that we could be at your service with this information. Should you have any further queries, please feel free, to contact us!