In early October, the draft legislation on the introduction of a wealth tax in Hungary was published, providing for an exceptionally broad tax base, detailed asset valuation rules and substantial documentation requirements. Under the draft, the new annual levy would apply at two progressive rates to net wealth exceeding HUF 1 billion. It would affect not only individuals but also assets held under fiduciary asset management arrangements, private foundations and certain foreign asset management structures.
The document has been released for public consultation, meaning that the final legislative text may still change substantially before its adoption. Nevertheless, the complexity of the published material indicates that determining and reporting wealth tax liabilities may in many cases require expertise in accounting, business valuation, real estate valuation and international taxation. Below, we summarise the key proposed rules and practical considerations.
When could the Wealth Tax Act enter into force?
Under the draft, the legislation would enter into force on 15 December 2026, and the first tax liability would arise based on the composition and value of the taxpayer’s wealth as at 31 December 2026. For these purposes, 2026 would constitute a short transitional tax year running from 15 to 31 December. The tax would not, however, be determined by reference to any increase in wealth during that period, but on the basis of the taxpayer’s total taxable wealth held on 31 December.
As a general rule, the first wealth tax return and the related tax payment would therefore be due by 31 August 2027. The draft contains a special transitional election for the 2026 valuation of certain listed equity interests and debt securities. Existing resident asset management taxpayers, as well as affected non-resident asset management taxpayers, would also be required to register with the Hungarian National Tax and Customs Administration (NAV) within 30 days of the legislation entering into force.
Who would be subject to wealth tax?
The draft identifies four categories of taxable persons: resident and non-resident individuals, and resident and non-resident asset management taxpayers. The latter category would include, among others, assets held under a fiduciary asset management arrangement, private foundations, and foreign entities, legal arrangements or segregated pools of assets that are comparable in purpose.
Resident taxable persons would be subject to unlimited tax liability and would therefore be required to take into account all of their Hungarian and foreign assets. By contrast, the liability of non-resident taxable persons would extend to real estate situated in Hungary and related rights of monetary value, equity interests in companies incorporated under Hungarian law, and ownership interests in companies holding Hungarian real estate.
The proposed concept of tax residence would differ in several respects from the traditional rules applicable for personal income tax purposes. For example, the draft would, as a general rule, treat Hungarian nationals with dual citizenship as resident taxpayers, while providing exceptions for certain Hungarian nationals who have lived abroad on a long-term basis, foreign nationals working in Hungary for a specified period, and certain persons holding a right of long-term residence.
What would constitute the wealth tax base?
The tax would be levied on net wealth. For a resident taxable person, the tax base would equal the difference between the aggregate calculated value of all taxable assets as at 31 December and the amount of liabilities actually outstanding and duly substantiated, less the HUF 1 billion threshold. A non-resident taxable person could deduct only liabilities directly connected with the acquisition, creation, maintenance or improvement of taxable Hungarian assets.
The definition of an asset would be exceptionally broad. In addition to real estate and equity interests, it would cover cash and cash equivalents, securities, investment-grade precious metals, gemstones, receivables, rights under insurance contracts, crypto-assets, options, vehicles and any other items or rights with an economic value that can be expressed in monetary terms. Ordinary movable property for an individual’s personal use would generally be excluded. However, works of art, collections and jewellery with an individual value exceeding HUF 3 million, as well as vehicles worth more than HUF 10 million, would be taxable.
Jointly owned assets would be allocated in proportion to the respective ownership interests. In relation to matrimonial property, a marital property agreement would take precedence. In the absence of such an agreement, spouses could make a joint election, in respect of individual registered assets, either to allocate the asset to one spouse or to divide it equally between them. In specified cases, the assets of a minor child would be included in the parents’ tax base.
The draft Wealth Tax Act would introduce two progressive rates
The draft would apply progressive tax rates: 1% on the portion of the tax base not exceeding HUF 100 billion and 1.5% on the portion above that amount. Since the tax base would comprise only the portion of net wealth exceeding HUF 1 billion, a taxable person with net wealth of HUF 1.5 billion would have a tax base of HUF 500 million.
The tax payable could be reduced, among other items, by local taxes and motor vehicle tax due and paid in the relevant tax year in respect of assets included in the tax base, as well as comparable foreign taxes, provided that the amount is not refundable to the taxable person.
The taxation of foreign assets in Hungary may also be affected by applicable international treaties. The draft specifically addresses cases where an asset taxable in another state may be taken into account in Hungary solely for the purpose of determining the tax payable on the taxpayer’s remaining wealth. The elimination of double taxation may therefore require a separate analysis for each asset and under each applicable treaty.
How would the tax be assessed and paid?
Wealth tax would operate on a self-assessment basis. Based on the composition and value of their wealth on the last day of the year, taxable persons would calculate, report and pay the tax themselves by 31 August of the following year. A return would be required only where an actual tax payment liability arises. Communications with the tax authority and the filing of the return would be electronic.
For each asset, the return would have to disclose, among other information, the legal basis and date of acquisition, identification details, the ownership interest, the calculated value, the valuation method applied, deductible liabilities and tax credits. Supporting documents would have to be retained until the expiry of the limitation period for the tax authority’s right to assess tax. In practice, the proposed rules would therefore require taxpayers with substantial wealth to prepare and annually update a detailed inventory of their assets.
General rules for the valuation of assets
Each asset would have to be taken into account in accordance with the specific valuation rule prescribed by the legislation. Where no specific rule applies to a particular asset, its fair market value as at 31 December would be used. Amounts denominated in foreign currencies would, as a general rule, be translated into Hungarian forints at the official year-end exchange rate published by the National Bank of Hungary.
The valuation framework is not limited to estimating market value. For certain asset classes, it prescribes fixed calculation methods, a mandatory hierarchy of valuation approaches, professional qualification requirements for experts and detailed documentation conditions. This is one of the most complex parts of the draft and is likely to become a central technical issue during the public consultation.
How would equity interests be valued?
As a general rule, the value of listed equity interests and equity interests regularly traded outside a stock exchange would be determined using the closing price on the final trading day of the year. If that price differs by more than 10% from the volume-weighted average price over the preceding 30 days, the latter would apply.
For unlisted companies, the draft would apply a blended formula similar to the Swiss model examined previously: the weighted average of equity and twice the capitalised earnings value would be multiplied by the taxpayer’s ownership interest. The capitalised earnings value would be based on the average profit after tax for the three most recently completed financial years, using a capitalisation rate of 15%. Where average earnings are negative, the capitalised earnings value would be zero.
For companies with equity exceeding HUF 500 million, the book value of equity would have to be adjusted for hidden reserves recognised in real estate, equity interests and securities. The company would have to provide the relevant data, reviewed by an auditor, both to its owners and to NAV. A minority discount of 25% or 30% could be applied, depending on the ownership percentage.
Where financial statement data are incomplete, the company’s operations have changed significantly, or special rights are attached to the equity interest, an independent business valuation could be required. In such cases, at least two valuation methods would have to be applied from among the income, market and asset-based approaches.
Valuation of Hungarian and foreign real estate
A mandatory hierarchy would apply to Hungarian real estate. First, the value of an appropriate transaction completed within the preceding 12 months would be used. If unavailable, the indexed value of a transaction completed no more than ten years earlier would apply. If neither is available, the value generated by NAV’s nationwide mass appraisal model would be used, followed, as a final option, by the market value determined by an independent expert.
For residential property, indexation would be based on the house price index of the National Bank of Hungary, while for agricultural land it would use the Hungarian Central Statistical Office’s agricultural land price data by land-use category. An expert valuation of high-value real estate worth at least HUF 500 million could be carried out only by a duly authorised forensic expert, using at least two valuation methods.
For foreign real estate, the starting point would be the acquisition value or a value determined by a public authority, increased by the cost of capital improvements. In subsequent years, the value would change, at the taxpayer’s election, either by 3% per year or in line with the foreign jurisdiction’s official property price index. Where neither method can be applied, an official value used for tax or cadastral purposes would apply, or, as a last resort, the market value determined by an independent expert.
Movable property, works of art and collections
As a general rule, movable property would be valued at fair market value at year-end. A collection would be valued as a single unit rather than as the simple aggregate of its individual items. The primary reference could be the purchase price in a transaction between independent parties completed within the preceding 12 months. Failing this, documented sales or auction data, publicly advertised prices, or an insurance value reflecting market value could be used. Taxpayers could also elect to obtain an independent expert valuation.
Detailed comparability criteria would apply to each type of vehicle. For motor vehicles, the manufacturer, model or body type, age, mileage, condition and equipment would be considered, while aircraft and watercraft would require the assessment of additional technical and usage-related data.
Financial assets and crypto-assets
Cash would be recognised at face value and bank deposits at their year-end closing balance. Exchange-traded debt securities would be valued at their average price over 20 trading days, investment fund units at net asset value, and non-traded bonds generally at face value. The outstanding principal would apply to receivables, positive market value to derivative positions, and surrender value to insurance policies.
The value of crypto-assets would be determined by multiplying the quantity held at year-end by the publicly available closing price quoted on a platform providing regular trading. Where no reference price is available, the taxpayer would be required to substantiate the market value in a credible manner. For standardised investment-grade precious metal products, the value would be based on the quantity of fine metal and the relevant international reference price.
Enhanced tax authority scrutiny and the risk of retrospective review
The draft contains a specific anti-avoidance principle. NAV could examine whether rights were exercised in accordance with their intended purpose from the date on which the planned introduction of the wealth tax became publicly known. Taxpayers may therefore be required to demonstrate that any subsequent transfers of assets, restructurings or unusual valuation methods were supported by genuine economic reasons or other reasonable circumstances independent of the tax liability. To clarify discrepancies between the data reported in the return and information held in its own records, NAV could issue a request for clarification with a 15-day deadline. If the taxpayer fails to respond, or the discrepancy remains unresolved and reduces the wealth tax base by at least HUF 500 million, a tax audit would be initiated. An independent real estate valuation prepared in accordance with the applicable rules could, subject to certain conditions, protect the taxpayer from a tax penalty and late-payment surcharge relating to a valuation difference. The underlying tax shortfall would nevertheless remain payable.