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Reduced Vat Rate of 5% Again for New Flats

Reduced Vat Rate of 5% Again for New Flats

Hungary
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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

Hungary Knowledge Partner

Nagy és Trócsányi was founded in 1991, turned into limited professional partnership (in Hungarian: ügyvédi iroda) in 1992, with the aim of offering sophisticated legal services. The firm continues to seek excellence in a comprehensive and modern practice, which spans international commercial and business law. 

The firm’s lawyers provide clients with advice and representation in an active, thoughtful and ethical manner, with a real understanding of clients‘ business needs and the markets in which they operate.

The firm is one of the largest home-grown independent law firms in Hungary. Currently Nagy és Trócsányi has 26 lawyers out of which there are 8 active partners. All partners are equity partners.

Nagy és Trócsányi is a legal entity and registered with the Budapest Bar Association. All lawyers of the Budapest office are either members of, or registered as clerks with, the Budapest Bar Association. Several of the firm’s lawyers are admitted attorneys or registered as legal consultants in New York.

The firm advises a broad range of clients, including numerous multinational corporations. 

Our activity focuses on the following practice areas: M&A, company law, litigation and dispute resolution, real estate law, banking and finance, project financing, insolvency and restructuring, venture capital investment, taxation, competition, utilities, energy, media and telecommunication.

Nagy és Trócsányi is the exclusive member firm in Hungary for Lex Mundi – the world’s leading network of independent law firms with in-depth experience in 100+countries worldwide.

The firm advises a broad range of clients, including numerous multinational corporations. Among our key clients are: OTP Bank, Sberbank, Erste Bank, Scania, KS ORKA, Mannvit, DAF Trucks, Booking.com, Museum of Fine Arts of Budapest, Hungarian Post Pte Ltd, Hiventures, Strabag, CPI Hungary, Givaudan, Marks & Spencer, CBA.

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