Exemptions and reductions in acquisition tax in the course of the purchase of real estate
If you are planning to buy real estate, in addition to the purchase price, the lawyer's fees, the real estate registration costs and any renovation costs, your real estate purchase will also have a "tax" element in the form of a real estate acquisition tax payable to the Hungarian State. Anyone who buys real estate and does not fall under one of the legal exceptions that provide for a reduction or total exemption from the real estate acquisition tax is liable to pay the real estate acquisition tax.
However, you can apply for an exemption from the tax or a reduction in the amount of the tax payable by submitting the appropriate application. In this article, we look at the most common exemptions and reductions that are available. For each of the exemptions listed here, it is true that the National Tax and Customs Board has no discretionary power in granting a reduction or exemption, i.e. if the conditions are met, the reduction or exemption will be granted.
Tax exemption for real estate purchases under the Family Home Benefit
If you're considering applying for a Family Home Loan (CSOK), you probably already know that one of the most compelling arguments for applying is the exemption from acquisition tax that comes with CSOK. If you are not yet aware of this issue, but you may be eligible for CSOK on the basis of both your family situation and the real estate you want to buy, it is worth checking with your bank or credit provider for the conditions for applying for CSOK.
Exemption from acquisition tax on real estate bought from a direct relative or spouse
If you are buying a real estate or part of a real estate from a relative or spouse (the latter may be the case if you are already co-owners), you are also exempt from the acquisition tax under the Duty Act. However, you should be aware of the difference between the rules on exemption from acquisition tax for a sale and a gift: a gift of real estate with your brother or sister is exempt from acquisition tax, but a sale is not. Therefore, if you acquire the real estate from your brother or sister for consideration, you will have to pay acquisition tax in the same way as if you had acquired the real estate from a non-family member.
Acquisition tax reduction for replacement purchase
The best-known acquisition tax relief rule is the relief for replacement purchases. If you 'exchange' real estates for housing purposes, i.e. sell the existing one and buy a new one, you pay acquisition tax on the difference in value between the two properties. In other words, you will only pay the difference, not the full purchase price. The logic of the legislation from the point of view of asset acquisition is that the value of your new real estate as an acquired asset is reduced by the value of the real estate you have sold, so that as a replacement buyer your assets will increase not by the value of the real estate you have bought but only by the difference between the values of the two properties, provided that the purchase price of your new real estate is higher than the purchase price of the real estate you have sold. If the purchase price of your new real estate is lower, you do not have to pay any acquisition tax. To be able to use this relief a maximum of 3 years can elapse between your sale and purchase, but if you buy earlier and sell later, a maximum of 1 year can elapse.
Automatic instalment facility for first-time buyers
If you are buying your first home, you are entitled to 12 months of automatic interest-free instalment repayments. If you apply for this relief, you must pay the real estate purchase tax in 12 equal monthly instalments.
Calculation of acquisition tax
Your real estate acquisition tax is based on the purchase price of the real estate you bought, or, if you are claiming the replacement purchase tax credit, the difference between the purchase price of the real estate you sold and the real estate you bought. The National Tax and Customs Board will impose the acquisition tax at the rate of 4% of your tax base.
Imposition of the acquisition tax
To be able to calculate in advance, you should calculate the expected amount of the acquisition tax in advance, as described above. The National Tax and Customs Board's fee department will levy the acquisition tax after your ownership has been registered, and a decision will be sent electronically to your client portal. The date may vary depending on your sales contract. The conclusion of your contract may not be immediately followed by the registration of your ownership. This is the case, for example, if you take out a bank loan for the purchase. In this case, the land registry does not register your title after the conclusion of your contract, your application for registration will only appear as a draft on the title deed. The final registration, and the subsequent payment of the acquisition tax, can only take place after the bank has paid the seller the loan part of the purchase price.
If you are looking to buy a property, for more information or to request an offer, please contact me at any of my contact details:
📞+36304572289
📧drszalai@drszalailegal.hu