Hungary’s Finance Ministry published a draft law that would tax net wealth above 1 billion forint at 1% a year. It adds a second band, at 1.5% on the part of the tax base above 100 billion forint.
The law would take effect on December 15 this year, and the first bill would fall on wealth owned on December 31, 2026. Returns and payment would be due by August 31, 2027.
People who live abroad would also owe the tax on their Hungarian property and company stakes. Hungarian citizens would count as resident until they have lived outside the country for ten years.
Prime Minister Peter Magyar presented the plan in a Facebook video on October 6, and the ministry posted the text for public consultation the same day. Comments were due by October 14.
Magyar told viewers that the government had decided on the details. A note repeated throughout the draft’s explanatory memorandum says the government has not discussed the proposal, and that the text cannot be taken as the government’s position.
Reuters reported that parliament, where Magyar’s Tisza party has a large majority, is expected to approve the tax.
What the draft taxes
Net wealth up to 1 billion forint would work as an allowance, so that amount would be untaxed. At the rate Reuters used on October 6, that amount is about US$3.08 million.
Each spouse would have a separate allowance.
Net wealth means taxable assets minus the kinds of debt that the draft lists, which must exist and be documented. They are debts based on a law or on a final court or official decision, and loans set out in a formal deed.
The asset list covers property, company stakes, cash, securities, investment-grade precious metals, crypto assets, and rights under insurance contracts.
Everyday belongings for personal use would fall outside the base. Art, collections, and jewelry worth more than 3 million forint per item would be taxable, and so would vehicles worth more than 10 million.
“A billionaire on paper is not necessarily a billionaire in cash,” argues Csaba Magyar, CEO of Crystal Worldwide Group. “Taxing illiquid business wealth creates a very different challenge from taxing liquid investments.”
The ministry’s impact assessment expects the tax to reach 15,000 wealthy individuals and 2,000 asset management taxpayers. That second group covers private foundations, fiduciary arrangements, and comparable foreign structures.
The same document puts the gain to the budget at 800 billion forint over the four years after this one, with nothing in the current year. In June, Prime Minister Magyar told reporters that Hungary planned for 300 to 600 billion forint a year in revenue.
Who counts as resident
Residents would pay on their worldwide wealth. The draft starts from the income tax definition of a resident, adds one group and excludes three others.
The income tax treats Hungarian nationals as resident, according to PwC. Dual citizens with no registered address in Hungary are the exception, and the draft would count them as resident too.
A Hungarian citizen would stop counting as resident after living abroad for at least ten years, measured on the last day of the tax year.
A tax treaty that covers wealth taxes overrides the draft.
Someone whose residence ends during the year, and does not resume before the year ends, would be assessed on what they owned the day before their residence ended.
The draft excludes two groups of foreigners. Workers posted to Hungary by a foreign employer with no Hungarian registration would not be resident for five years from the day they start work.
People with a national residence card issued in the national interest would not be resident in a year when they spend fewer than 183 days in Hungary. The minister responsible for aliens policing and asylum issues that card, and may weigh Hungary’s economic, national policy, scientific, cultural, and sports interests.
What non-residents pay on
A non-resident’s base would be limited to four kinds of Hungarian asset. They are property, rights over property, stakes in companies formed under Hungarian law, and stakes in foreign companies whose balance sheets are more than 75% Hungarian property.
Non-residents could deduct the debts tied to those assets, but not their other debts. The 1 billion forint allowance would apply to that narrower pool.
Gabor Fajcsak of the advisory firm RSM told Telex that the rule could make foreign business owners liable for their Hungarian companies. His example was a mid-sized German automotive firm, owned by a family, with a subsidiary in Hungary.
The ministry’s summary says the rules prevent anyone from taking Hungarian assets out of the tax by putting a foreign company in between.
How the draft values assets
Hungary’s Constitutional Court annulled the residential property rules of Act LXXVIII of 2009, a tax on high-value assets, in 2010, with retroactive effect, as IMI covered in September. That law required taxpayers to declare a market value, and the court found that this left the whole risk of a wrong value with them.
Csaba Magyar sees valuation and legal certainty as “the real test” of the new tax. “How do you determine the fair value of a privately held company when there is no active market or recent transaction?” he asks.
For a stake in an unlisted company, the new draft gives one-third weight to book equity and two-thirds to capitalized earnings, at a capitalization rate of 15%.
Companies with equity above 500 million forint would have to adjust that equity for hidden reserves. For minority stakes, the draft allows a discount of 25% or 30%.
Under the draft, Hungarian property would follow a fixed order of methods. A sale in the past 12 months would take priority, followed by an indexed sale up to ten years old, the tax authority’s mass appraisal model, and an independent expert.
Foreign property would start from its purchase price and rise each year by 3% or by the local official property price index, as the taxpayer chooses.
An expert valuation of property made under the draft’s rules would protect the taxpayer from a penalty or late-payment surcharge if the tax authority later finds a higher value. The taxpayer must have given the expert full and accurate data, and the difference in tax would remain payable.
The look-back to May
The tax authority could examine transfers and restructurings made after the tax became public knowledge. The explanatory memorandum dates that from May 14 this year, when the government ordered the finance minister to prepare the tax.
Taxpayers would have to show that such a step had an economic reason, or another reason unrelated to the tax.
Csaba Magyar asks how taxpayers can “plan confidently if transactions undertaken before the law takes effect may be scrutinised under a broad anti-avoidance rule.”
Guest investors
Investors qualify for Hungary’s Guest Investor Program through units in a property fund registered with the central bank, or through a donation to a higher education institution.
On the draft’s wording, fund units are not among the four kinds of asset that non-residents pay on. The draft excludes collective investment securities from its definition of a company stake.
A guest investor permit does not on its own make someone a Hungarian tax resident, as IMI reported in September. An investor who becomes resident would owe the tax on worldwide wealth above the allowance, fund units included.
“A residence permit gives you the right to live in a country; it does not, by itself, determine where you pay tax,” notes Csaba Magyar. “Under a wealth tax, understanding that distinction becomes even more important.”
The program drew 25 residence permit applications by February 2025.
What comes next
Fourteen business groups asked the government for a lower third rate on wealth between 1 and 5 billion forint. The news site 444 reported their joint statement the day after the consultation deadline.
The groups include the Chamber of Commerce MKIK and VOSZ, the National Association of Entrepreneurs and Employers. VOSZ opposes the tax in its current form.
The government is set to present its 2027 budget later in October.
