30
Sat, May
98 New Articles

New Duty Payment Obligation to Hinder Real Estate Specula

New Duty Payment Obligation to Hinder Real Estate Specula

Hungary
Tools
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

At the beginning of December 2019, the Hungarian Parliament accepted an amendment to the Hungarian Duty Act, which is supposed to enter into force on 1 February 2020.

It is clear that the market value of properties in external area increases once they are drawn into inner area. According to the reasoning of the amendment, the objective of the new law is to discourage speculative activities, the sole intention of which is to realize material profit from drawing properties in external area into inner area. The duty payment obligation aims to reduce this speculative method and curb the abuses.

Based on the amendment, the transfer of a property drawn into inner area or of the share of a company owning such plot will be subject to duty payment obligation. The amendment introduces the definition of the “property drawn into inner area” (in Hungarian: “belterületbe vont ingatlan”), which means a plot that has been drawn into in inner area during the owning period of the seller or during the period of being the beneficiary of its pecuniary rights, but not earlier than within 10 years prior to the transfer. This rule will also be applicable in certain other cases, for example if the property has been drawn into inner area not by the seller, but by a person who donated the plot to the seller. However, a plot should not be considered as a property drawn into inner area that has been specified as inner area in the 6th year following the acquisition of the plot by the seller or later, or if it has been inherited by the seller.

The basis of the duty is the difference between the market value of the property transferred and the market value of the property at the time of its acquisition (i.e. the profit realized). The rate of the duty is 90% and it must be paid by the seller. In addition, the sellers of such properties or the share of a company owning a plot drawn into inner area will have notification obligation to the tax authority. 

The rules mentioned above will be applicable for cases where the drawing of property into inner area has been executed following 31 January 2020.

By Lidia Suveges, Attorney at law, KCG Partners Law Firm

KCG Partners at a Glance

KCG Partners is a Hungarian business law firm providing a comprehensive range of legal services to international and local clients seeking local knowledge and global perspective. The firm comprises business-minded lawyers with sector-specific expertise, creating value for clients by applying a problem-solving approach and delivering innovative solutions.

The firm has a wealth of knowledge in corporate law, M&A, projects and construction, energy, real estate, tax, employment, litigation, privacy and forensics, securitization, estate planning and capital markets.

To address clients’ regional and international concerns, the firm maintains active working relationships with other outstanding independent law firms in Central and Eastern Europe, whilst senior counsel Mr. Blaise Pásztory brings over 40 years’ of US capital market and fund management experience.

KCG Partners Law Firm is the result of the teamwork of passionate and talented lawyers guided by the same principles and sharing the same values: 

  • Our most valuable asset is our people. They are the engine of our business and the key to our success.
  • We push boundaries by looking for innovative solutions that can empower our clients to achieve greater results.
  • We place our experience, commitment and professionalism to your service.
  • We are driven by our vision to shape and lead the Hungarian legal market and become a first choice law firm in our practice areas.

Firm's website: http://www.kcgpartners.com