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Reduced Vat Rate of 5% Again for New Flats

Reduced Vat Rate of 5% Again for New Flats

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At the beginning of October 2020, the prime minister has announced that the Hungarian Government continues the family protection measures and for this purpose, the VAT tax rate of new flats will be again 5% instead of the general VAT rate of 27% in case of constructions commenced until 31 December 2022.

It is not yet clear whether this deadline is applicable for the existence of the building permit or the commencement of the actual construction, since until now the bill regulating the amendments has not been published. However, the provisions on the reduced VAT rate will enter into force on 1 January 2021 and will be applicable expectedly for flats to be constructed or existing in a multi-unit residential building with a total net floor space not exceeding 150 square meters or for one-unit residential properties with a total net floor space not exceeding 300 square meters as it was regulated until 31 December 2019.

In addition, the state secretary responsible for family and youth affairs has also announced that in case a family purchases a new apartment using the Family Housing Subsidy Program (Hungarian abbreviation: “CSOK”), the reduced VAT rate of 5% may also be recovered from 1 January 2020.

The above measures may result in the construction of 100-200,000 new flats in the following 5-10 years and may also have an effect to the prices of the older flats.

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