Wealth tax: the HUF 1 billion threshold may be closer than many think

The draft legislation brings resident and non-resident individuals within the scope of the Hungarian wealth tax, together with resident and non-resident asset management structures treated as taxpayers in their own right. The latter category includes, among others, assets held under fiduciary asset management arrangements, private foundations and foreign structures serving the same or a similar purpose.

Hungarian tax resident taxpayers would be subject to wealth tax on their worldwide assets. By contrast, the tax liability of non-resident taxpayers would be limited to the following specified assets connected with Hungary:

• real estate situated in Hungary and any property rights attached thereto;
• equity interests held in companies incorporated under Hungarian law;
• equity interests held in foreign companies qualifying as Hungarian real estate holding companies.

Under the draft legislation, the wealth tax follows a progressive, two-band rate structure. The tax rate is 1% on the portion of net wealth exceeding HUF 1 billion but not exceeding HUF 100 billion, and 1.5% on the portion exceeding HUF 100 billion.

Given the HUF 1 billion threshold, it is easy to conclude that wealth tax will concern only those with substantial financial savings. Under the current concept, however, this is not necessarily the case. For wealth tax purposes, the value of wealth does not correspond to its everyday meaning, such as a bank balance or annual income. As per the draft legislation, the tax base includes real estate, equity interests, securities, cash and bank balances, crypto-assets, and also certain categories of movable property. The draft legislation sets out detailed valuation rules for each asset category, with prescribed methodologies applying in certain cases.

The position of taxpayers is eased somewhat by the fact that outstanding and duly substantiated liabilities specified in the legislation may be deducted from the value of their assets (from the tax base). These include, in particular, liabilities arising from loans and credit facilities associated with the acquisition, construction or enhancement of taxable assets.

In addition to the above, the wealth tax liability (tax payable) of the taxpayers may be reduced by (i) 50% of the fees paid (and properly substantiated) for expert advisory, valuation or business valuation services required by law or otherwise necessarily used to determine the value of the asset or assets concerned, subject to a cap of HUF 2 million per year; and (ii) local taxes, vehicle tax and foreign taxes of the same or a similar nature, provided that they relate to an asset included in the tax base and fall due and are paid in the tax year that includes the last day of the relevant calendar year.

The threshold may be exceeded without acquiring any new assets

As noted above, the draft legislation sets out detailed valuation rules for assets falling within the scope of wealth tax, with prescribed methodologies applying in certain cases. The following example illustrates how these rules could operate in practice.

Consider a realistic example of a Hungarian tax resident private individual holding the following assets:

• a 150 m² apartment in Budapest’s District II, purchased in 2015 for HUF 80 million;
• a 200 m² residential property in Siófok, purchased in 2021 for HUF 130 million;
• 100% of the shares held in an unlisted Hungarian manufacturing company with equity of HUF 450 million according to the latest financial statements available when the tax return is prepared, and profit after tax of HUF 100 million in each of the past three years;
• a passenger car manufactured in 2024, purchased in 2025 for HUF 20 million;
• a bank balance of HUF 30 million.

Adding together the purchase prices of the two properties, the company’s equity, the purchase price of the car and the bank balance gives a total of HUF 710 million. This simple aggregation does not, however, establish the values at which the individual assets would need to be taken into account for wealth tax purposes.

Under the draft legislation, the calculated value of real estate situated in Hungary should, in general, be determined by applying the following methods in order:

• If the property was acquired within the preceding 12 months and none of the statutory exceptions applies, its calculated value would be the transaction value. In practice, this would be the purchase price in the case of an acquisition for consideration, or the market value determined by the Hungarian Tax Authority in the transfer tax assessment procedure.
• If the property was acquired more than 12 months ago, but no more than ten years ago, and no significant change affecting its value has occurred, the original transaction value would have to be indexed in accordance with the rules prescribed by the draft legislation.
• If neither of the first two methods can be applied, the calculated value would be determined using the Hungarian Tax Authority’s nationwide mass appraisal model.

Alternatively, taxpayers could elect, subject to specified conditions, to use the market value determined by an independent valuer.

In this example, the Budapest apartment purchased in 2015 would generally be valued using the Hungarian Tax Authority’s nationwide mass appraisal model, as the acquisition took place more than ten years ago. Reflecting current market levels, this could result in a value of HUF 250 million (an estimate used solely for illustrative purposes). The purchase price of the Siófok property acquired in 2021 would generally need to be indexed. Taking account of price increases in recent years, this could produce a value of HUF 190 million. For the purposes of this example, the combined value of the two properties would therefore increase to HUF 440 million.

A similar approach would apply to the shares held in the Hungarian company. Under Annex 1 of the draft legislation, the calculated value of an unlisted equity interest should be determined by taking the weighted average of the company’s equity and its earnings-based value, with a one-third weighting for equity and a two-thirds weighting for the earnings-based value and applying the relevant ownership percentage. The earnings-based value would be calculated by dividing the average profit after tax for the last three financial years by a capitalisation rate of 15%. For companies with equity exceeding HUF 500 million, equity would also need to be increased by hidden reserves. Based on the financial figures in this example, the equity interest would be valued at HUF 594.4 million.

The passenger car and the bank balance would also form part of the tax base. The draft legislation exempts only motor vehicles with a calculated value of no more than HUF 10 million. Accordingly, vehicles valued above this threshold would fall within the scope of wealth tax. As the car was purchased more than 12 months before the end of the relevant calendar year, its value would need to be determined by reference to comparable market data. For this example, the car is assumed to be worth HUF 18 million and the year-end bank balance to be HUF 30 million.

Assuming that the individual has no deductible liabilities, their net wealth would amount to HUF 1,082.4 million, exceeding the HUF 1 billion threshold by HUF 82.4 million. On this basis, the wealth tax liability for the 2026 tax year would be HUF 824,000.

What should potential taxpayers consider now?

Even before the final legislation is published, those potentially affected should assess which of their assets could fall within the scope of wealth tax, how those assets would be valued under the proposed rules and how the annual tax liability could be funded. This assessment should include a review of significant Hungarian and foreign assets and the associated ownership arrangements, including matrimonial property agreements and asset management structures.

Importantly, under the draft legislation, the tax authority could examine whether rights have been exercised in accordance with their intended purpose during the period beginning when the introduction of wealth tax became public knowledge. According to the explanatory notes of the draft legislation, this is the date on which the relevant Government resolution was published (14 May 2026). Any restructuring of asset holdings undertaken since that date should therefore be supported by genuine economic or other circumstances unrelated to the tax liability, and those circumstances should be demonstrable.

Our specialists would be pleased to assist with a preliminary assessment of potential wealth tax exposure, the valuation of assets under the proposed rules and related compliance matters.