Property acquisition tax and tax exemption in the real estate market

11/08/2023

What does the amount of property acquisition tax depend on and how can a residential property be tax-free? In this article, I go over the most common questions related to wealth acquisition tax, from the perspective of the real estate market.

The point - as in the case of many legal procedures - lies in the details, but if you pay attention to them or ask for the help of the right expert, there should be no problem.

The concept of refundable property transfer tax

The concept speaks for itself:

reciprocal means that it binds the parties to an obligation
asset transfer refers to the fact that the owner of the asset (property, movable property, real estate, shares) changes after the process is completed
az illeték pedig egy, az állami-társadalmi működéshez való hozzájárulás, azaz az állam bevétele

It is important that the tax is paid by the person who acquires the property: that is why the shorter name of the refundable property transfer tax, the wealth acquisition tax, was created.

The most typical cases of paying wealth acquisition tax are the purchase of an apartment or residential building.

XCIII of 1990. The law on the acquisition of property stipulates that an obligation to pay tax is created

on the date of conclusion of the contract,
in the case of an auction purchase, on the day of the auction,
in the case of acquisition of real estate, chattels, property rights by court or official decision, on the day the decision enters into force and becomes final,
in the cases not mentioned in the points above, when acquiring property.

After getting to know the concept of wealth acquisition tax, let's start with the best available option: tax exemption.

Duty-free: when is it due?

Illetékmentességet hat esetben élvezhetünk:

As spouses, siblings, direct relativest (grandmother-grandchild, parent-child). The tax-free transfer of assets is actually equivalent to gift giving. It is important to know that the tax exemption remains even after the dissolution of the marriage: in case of divorce, you can buy out the other party without paying tax, and in case of widowhood, there is no mandatory tax payment on the inherited property.
When buying a building plot if, within four years, we build a property reaching at least 10% of the useful floor area of the lot.
In the case of the purchase of a newly built property worth no more than HUF 30 million, we only enjoy a tax exemption of up to HUF 15 million. That is, for example, in the case of a rural residential property worth HUF 20 million, we are only obliged to pay the tax after HUF 5 million.
If our newly purchased property does not exceed the value of the previous property. This is true if the new property was purchased within three years after the sale of our old property.
If we purchase real estate in the capacity of the Hungarian State, local government, church legal entity, public body, or non-profit organization with public benefit.
In the case of property purchased using the Family Home Creation Allowance (CSOK), you also do not have to pay property acquisition tax. You do not need to apply for a CSOK loan for the tax exemption.

Amount of property acquisition tax, calculation

The amount of the property acquisition tax depends on the purchased property itself, that is, on its purchase price fixed in the sales contract. So we will have to pay a different amount to the state coffers when buying a property worth 30 million and another (larger) amount when buying a property worth 80 million.

The property acquisition tax is equal to 4 percent of the purchase price in the basic case. So, in the case of a HUF 80 million property, we have an additional HUF 3.2 million tax liability if we are not entitled to a tax exemption.

Many people do not calculate the tax in the purchase price before purchasing, and therefore before taking out a loan.

If the value of the selected property is over HUF 1 billion, the wealth acquisition tax is reduced to 2%, and in total it cannot exceed HUF 200 million.

How is the property acquisition tax reduced?

It is possible to reduce the wealth acquisition tax in several ways.

As young people under the age of 35 buying their first home, we get a 50% discount on all newly built properties worth less than HUF 15 million. The precondition for the discount is that the young person has not yet owned a home or owned more than 5% of the property. With today's real estate prices, this type of discount has already expired and is practically unusable.
In case of property exchange, if the value of the new property is higher than that of the previous property, and the new property was purchased within 3 years after the sale.
In case of property exchange, if the value of the new property is higher than that of the previous property, and the new property was purchased 1 year before the sale.

In the latter two cases, the tax must be paid only on the difference in value of the two properties. Staying with the above numbers: after selling an apartment worth HUF 30 million, we buy a property worth HUF 80 million within 2 years. In this case, you will not have to pay tax on HUF 80 million, but only on HUF 50 million, which means a discount of more than HUF 1 million.

Fee payment in installments

With the NAV, it is possible for all natural persons to request an automatic installment payment once a year for a tax debt of less than HUF 1 million, which can be a maximum of 12 months and is automatic without an examination of income and property conditions, if the taxpayer meets the amount limit. Also, now, due to the epidemic situation, it is possible to request a longer-term installment payment (maximum 36 months, in exceptional cases 48 months), but here there is already an examination of income and property conditions.

The installment payment of the wealth acquisition tax is therefore not automatically created, but must be applied for. It is possible to submit the application within 30 days of the entry into force of the sales contract.

In case of acceptance, it is very important to meet the installment payment deadline, because if we miss even once, we have to pay the entire amount together with a late fee - at once.

Property acquisition tax: millions depend on it

Compared to the purchase price, the 2-5% is dwarfed - in reality, hundreds of thousands of forints or millions can depend on whether we pay attention.

In order for everything to go smoothly, it is worth discussing the steps of buying a property with a legal or real estate expert.

If you have any questions about the topic, feel free to ask!