Hungary’s proposed wealth tax: complex valuation rules and broader scope

Under the proposal, the legislation would take effect on 15 December 2026, with the first wealth tax liability assessed by reference to assets held as at 31 December 2026. Taxpayers would be required to calculate their liability, file their tax returns and pay the tax by 31 August 2027 under a self-assessment system.

Taxpayers, tax base and tax rates

The proposed wealth tax would extend beyond resident and non tax resident individuals to cover wealth management structures as well. The tax base would be determined using the statutory calculated value of assets, with only net wealth exceeding HUF 1 billion becoming taxable. Although the calculation is based on net wealth, liabilities would be deductible only subject to strict conditions, rather than automatically. Moreover, unlike the single rate previously envisaged, the proposed tax would be progressive: the first HUF 100 billion of the tax base would be taxed at 1%, while any excess would be subject to a rate of 1.5%, representing a significant increase for the largest fortunes.

Trusts and foundations as separate taxpayers

Assets held under a Hungarian trusts and asset management foundations and, in limited cases, foreign structures serving similar purposes would qualify as separate taxpayers, entirely distinct from the personal assets of their settlors, trustees and beneficiaries. Importantly, assets would have to be valued under the new statutory rules, rather than at their carrying amounts in the trust’s accounts, namely their acquisition values upon settlement.

The draft would also close off opportunities to multiply exemptions by splitting assets between wealth management structures. Under the proposed rules on related structures, where the settlors are the same persons, relatives of one another or affiliated undertakings, the trusts and foundations concerned would share a single annual HUF 1 billion exemption. The parties would have to submit consistent declarations regarding the allocation of that exemption; otherwise, priority would be given to the taxpayer established first. Distributing wealth among several entities would therefore not generate multiple exemptions.

How the wealth tax would apply across borders

The scope of the tax liability would primarily depend on residence. Hungarian residents would be taxable on their worldwide wealth, whereas, for non-resident taxpayers, the tax base would include Hungarian real estate, rights of economic value relating to such real estate, interests in Hungarian companies and interests in companies holding Hungarian real estate.

For individuals, Hungarian citizenship, including dual citizenship, would automatically result in Hungarian resident status even without a registered Hungarian address, unless the individual could demonstrate that they had habitually lived abroad for at least ten years. By contrast, foreign nationals employed in Hungary could, subject to certain conditions, be exempt from taxation on their worldwide wealth for the first five years.

When determining the tax liability of non-residents, the applicability and provisions of any double taxation treaty between Hungary and the relevant state of residence would also need to be examined in each case.

For wealth management structures, foreign registration would not automatically provide protection from Hungarian taxation. If a settlor exercising decisive influence or a beneficiary were resident in Hungary, the tax authority would presume that the structure’s place of effective management was in Hungary. To rebut that presumption, the taxpayer would have to provide detailed evidence that substantive strategic and economic decisions were genuinely taken abroad. Simple formal approval by the foreign entity would not suffice to avoid Hungarian taxation.

How company shares would be valued

For listed or regularly traded interests, the closing price on the last trading day would apply, unless it differed by more than 10% from the volume-weighted average price over the preceding 30 days, in which case the average price would be used.

Shares in unlisted companies, including most family businesses, would be valued by reference to both equity and earnings capacity. The valuation would combine one-third of the company’s equity with two-thirds of its capitalised earnings value, then multiply the total by the shareholder’s ownership percentage. The capitalised earnings value would be calculated by dividing the average annual profit after tax for the last three completed financial years by a capitalisation rate of 15%. If that average were negative, the capitalised earnings value would be deemed to be zero.

Value of the shares = [(equity + 2 × capitalised earnings value) / 3] × ownership percentage.

The draft would allow a minority discount for direct or indirect interests below 50%: a discount of 25% would apply to holdings between 33% and 50%, and a discount of 30% to holdings below 33%. In addition, the arm’s-length sale price of an interest of at least 10% could be used as a direct valuation benchmark for one year following the transaction.

For holding companies whose equity investments account for at least 90% of their total assets, no capitalised earnings value would need to be calculated; only the proportionate amount of equity would be relevant. Where the statutory formula could not be applied because of missing financial statement data, a material change in business operations or special membership rights, an independent expert valuation meeting the statutory requirements would replace the standard calculation.

Hidden reserves: unrealised gains could also have tax consequences

Where a company’s equity exceeds HUF 500 million, its equity would have to be adjusted for valuation purposes to include any excess of the fair market value of its non-current assets—including real estate, equity investments and securities—over their carrying amounts, net of deferred tax.

As a result, unrealised gains on assets could also increase the owners’ wealth tax liability. These hidden reserves would require review by an independent auditor, and the company would have to report the relevant figures to both its owners and the Hungarian National Tax and Customs Administration (NAV) within 30 days of the approval of its financial statements.

For trusts and asset management foundations, this adjustment would apply at the level of the companies they hold, under the general valuation rules, rather than directly to the tax base of the trust or foundation itself.

Determining the calculated value of real estate

For Hungarian real estate, priority would be given to a transaction value or a value determined by an authority within the preceding year. Failing that, a purchase price dating back no more than ten years could be used, adjusted by a price index, or the value would be determined using NAV’s nationwide valuation model or an expert appraisal, provided that substantial refurbishment or a change in the property’s condition had not rendered the earlier price obsolete.

A particularly stringent requirement would apply to properties worth at least HUF 500 million, excluding agricultural land: a registered judicial expert in real estate valuation would have to be appointed and would be required to apply at least two valuation methods. Any deviation of more than 20% from the value otherwise applicable would require detailed justification.

For foreign real estate, the starting point would be its acquisition value or a value determined by an authority. In addition to adjustments for documented capital expenditure, that value would have to be increased annually, at the owner’s election, either by a flat rate of 3% or by reference to the relevant official local price index. If the market value still could not be reliably determined, foreign cadastral or tax records would be used, with an independent expert appraisal serving as the final fallback.

Matrimonial property, minors’ assets and inheritance

Under the proposal, spouses would be treated as separate taxpayers, with their joint assets allocated for tax purposes primarily in accordance with any matrimonial property agreement. In the absence of such an agreement, they could file a joint declaration by the tax return deadline, choosing whether to attribute each asset entirely to its registered owner or divide its value equally between them. If no declaration were submitted, an equal split would apply automatically.

As a general rule, a minor child’s assets would be included in the parents’ tax bases and allocated equally between them where they exercise joint parental responsibility.

Inherited assets would also fall within the scope of the tax, although additional time would be allowed to meet the related obligations. Tax relating to an estate awaiting distribution would be payable by the end of the eighth month following the date on which the probate order became final. The heirs could meet this obligation by amending their tax returns without incurring penalties.

Any wealth tax liability arising during the deceased’s lifetime but remaining unpaid would also remain due. NAV would assess that liability within 90 days of the probate order becoming final.

Registration, filing and payment obligations

Hungarian wealth management structures and foreign structures falling within the scope of the tax would face substantial administrative obligations. If established after the legislation enters into force, they would have only 30 days from their establishment to register with NAV, which would issue a tax number for the fulfilment of their subsequent tax obligations. They would also be required to provide detailed information as part of that registration.

The tax would operate under a self-assessment system, with electronic filing and payment due by 31 August of the year following the relevant tax year. Preparing the return would be complex: the valuation method would have to be explained and supported by documentation for each individual asset.

Local taxes and motor vehicle tax could, however, be credited against the wealth tax payable, together with half of the mandatory expert fees, subject to a HUF 2 million cap on the latter. Where payment would impose a disproportionate liquidity burden, taxpayers could request payment by instalments or a deferral over 12 months, or exceptionally 24 months.

NAV would nevertheless apply strict scrutiny. If a taxpayer failed to clarify, within 15 days, an inconsistency in the data that reduced the tax base, or if a reduction in the tax base of at least HUF 500 million remained unexplained, the authority would immediately initiate a tax audit.

What would be excluded?

As a general rule, the draft would exclude individuals’ personal belongings and ordinary household furnishings and equipment from the tax base. Exceptions would apply, however, to works of art, collections and jewellery with an individual value exceeding HUF 3 million, and to vehicles worth more than HUF 10 million. Their full value would have to be included, rather than only the amount exceeding the relevant threshold. Collections would be valued as a whole, rather than item by item.

Anti-avoidance rules

One of the proposal’s greatest uncertainties lies in its anti-avoidance provisions. NAV’s scrutiny would extend beyond arrangements made after the legislation takes effect to those made once the introduction of the wealth tax became “public knowledge”— a starting point that is difficult to define with legal certainty. Earlier transactions could therefore also face retrospective scrutiny. To avoid sanctions, taxpayers would need clear, contemporaneous documentation demonstrating that their decisions were driven by genuine economic or family considerations.

Although the final rules may still change, a sensible first step is to take stock of assets and supporting records, then plan how to fund the expected tax liability. The proposed valuation methods, particularly the inclusion of hidden reserves, could bring some unexpected results. For many, the question may no longer be whether they consider themselves wealthy, but whether the statutory calculations make them forint billionaires on paper.