As part of the fall tax package, the Hungarian Government proposed an automatic, inflation-tracking increase of tax on, inter alia, energy products as of 2025. The actual increase from 1 January 2025, however, significantly exceeds the current (and expected) inflation levels. This might concurrently lead to increased inflation again.
Under the automatic tax increase system, after 2024, the rate of the taxes and duties in question would be the amount of the tax rate (or amount) for the year before the tax year in question, valorised (i.e. increased) by the change in the consumer price index for July of the year before the tax year in question compared to the same period of the previous year, as published by the Central Statistical Office (KSH). For 2025, this means an increase of 4.1%, which is equal to the official inflation rate in July 2024.
There are three main areas where the new inflation tracking taxation (or duty obligation) was introduced as of 2025:
(1) motor vehicle-related taxes and duty, including registration tax (payable on cars and motorcycles), car tax, company car tax (from 2026) and transfer duty on the transfer of motor vehicles and trailers;
(2) energy products, including tax on petrol, diesel and LPG; and
(3) the specific excise duty on alcohol products - beer, wine, spirits - and tobacco products
Although the official inflation rate is 4.1% - and the 2025 draft budget law only foresees an inflation rate of 3.2% (at least for pension payments) - the increase of excise duty on some energy products is more than threefold that and goes into two-digit territory, as follows:
- 12.5% for natural gas (when offered, sold or used as fuel by road vehicles - +4 HUF per standard m³);
- 11.2% for coal (+325 HUF/1000 kg); and
- 11% for electricity (+39.5 HUF/MWh).
This increase applies to non-residential consumers (practically for B2B relations). However, it is also likely to be reflected in the pricing of corporate power purchase contracts, as the increased costs are likely to be passed on in prices. It also follows that if energy prices go up, it would trigger an indirect increase in the inflation level as well, further triggering automatic excise duty increases in the following years.
By Balint Zsoldos, Head of Tax, KCG Partners Law Firm
