Wealth tax and exit tax: legislation nearing completion

The headline parameters of the wealth tax are unchanged from the draft released for public consultation on 6 October. The Act would enter into force on 15 December 2026. The tax would apply to net wealth above HUF 1 billion, at 1% up to HUF 100 billion and 1.5% above that. The first filing and payment deadline would be 31 August 2027, based on wealth held on 31 December 2026.

The valuation rules, however, have changed substantially in several respects. The two most important changes concern the valuation of shareholdings, and they could fundamentally alter the wealth tax position of many owners of family and operating businesses.

Key change: companies with equity below HUF 100 million may be valued at equity

As a general rule, the calculated value of a shareholding in a company not listed on a stock exchange is the weighted average of equity and the earnings-based value (the latter counted twice), attributable to the ownership share. The earnings-based value is the average profit after tax of the last three closed financial years divided by 15%. For profitable businesses with low equity, this formula may produce a value that is a multiple of their equity.

The proposal introduces a new option. If the company’s equity, as shown in its financial statements for the last closed financial year, does not exceed HUF 100 million, the taxpayer may, instead of applying the formula, determine the value of the shareholding as the amount of equity attributable to the ownership share.

Consider an illustrative example (the figures are used solely for illustrative purposes):

• the company's equity is HUF 90 million;
• its average annual profit after tax is HUF 150 million;
• the owner holds a 100% shareholding.

The value under the formula would be approximately HUF 697 million, whereas under the optional method it would be HUF 90 million. If the owner's other assets amount to HUF 500 million, applying the formula would result in net wealth of HUF 1,197 million and wealth tax of approximately HUF 2 million. Under the optional method, net wealth would be HUF 590 million, which remains below the threshold.

As a result, many owners of businesses engaged in production or services may fall below the HUF 1 billion threshold and be exempt from wealth tax. However, it should be borne in mind that transactions carried out after the wealth tax became public knowledge (14 May 2026) may be examined as to whether rights have been exercised in accordance with their intended purpose. For example, if equity is reduced below HUF 100 million specifically so that the new method can be applied, the economic rationale for doing so must be substantiated.

Key change: the definition of a holding company has been reshaped

The value of a shareholding in a holding company is the equity attributable to the ownership share, without taking the earnings-based value into account. Qualification as a holding company may therefore have a significant impact on the tax base. Under the draft, a holding company was a company in which shareholdings represented at least 90% of total assets.

The proposal combines two conditions:

• Purpose of activity: the company’s primary purpose is not the production of its own products or the direct provision of services, but holding shareholdings in other companies and exercising control through them.
• A broader range of assets in the 90% test: in addition to shareholdings, securities, other financial investments, cash and cash equivalents, real estate used for own purposes and receivables from owned companies are also taken into account.

As a result, holding companies that exercise actual control and have accumulated significant liquid assets may also qualify as holding companies, and their shareholdings may be valued without regard to the earnings-based value. At the same time, the purpose-of-activity condition prevents an operating company from qualifying as a holding company merely on the basis of its asset structure. Importantly, where equity exceeds HUF 500 million, the adjustment for hidden reserves must also be applied to holding companies.

Stricter discount for minority shareholdings

Where the share of ownership is less than 50%, the value of the shareholding may be reduced: by 25% for a share of at least 33%, and by 30% for a share below 33%. Under the proposal, the ownership shares of close relatives as defined in the Civil Code must be aggregated when determining minority status.

• Two spouses holding 30% each, together hold 60%, so neither qualifies as a minority shareholder and the discount is not available at all.
• Two siblings holding 20% each together hold 40%, so only a 25% reduction may be applied instead of 30%.
• A cohabiting partner does not qualify as a close relative, so their shareholding does not need to be aggregated.

In family businesses, where ownership is typically shared among several family members, this change may increase the value of the shareholding.

Further changes in the valuation of shareholdings

For shareholdings listed on a regulated market or regularly traded, an average price must be applied instead of the closing price if the difference between the two exceeds 10%. The average must be calculated for the last 180 days of the tax year, rather than the 30 days set out in the draft. The draft would still have allowed the tax-year average price to be chosen for shares for 2026, but this option has been removed. A transitional option remains available only for debt securities.

A question of interpretation arises from the fact that, for 2026, the proposal defines the tax year as the period from the date of entry into force (15 December) to 31 December. This may imply that, in 2026, the ‘last 180 days of the tax year’ covers only a few trading days in December.

The proposal also contains a fallback valuation rule. If the value of a shareholding cannot be determined either by the formula or by an independent business valuation, because the necessary information is unavailable for reasons not attributable to the taxpayer, the acquisition cost must be applied. This is not a freely selectable alternative.

A domestic company with equity exceeding HUF 500 million is required to provide its owners and the Hungarian Tax Authority with the data needed to determine hidden reserves only if at least one owner requests it. The deadline is 30 days after the approval of the financial statements. This may represent significant administrative relief.

Real estate: a new valuation step, a broader tax authority model and stricter control over valuers

Foreign real estate. Where the value cannot be determined under the general rules, which will typically be the case for properties acquired earlier, the proposal introduces a new step. The starting point is:

• for acquisitions for consideration, the contractual purchase price;
• for acquisitions free of charge, the value determined by the foreign authority at the time of acquisition.

This amount must be increased, for each full year since acquisition, by 3% per year or by the official real estate price index of the country concerned, and value-enhancing investments must also be indexed. Only after this step may the foreign cadastral or tax value be used.

Tax authority model. The Hungarian Tax Authority's nationwide mass appraisal model now covers holiday homes and building plots in addition to residential properties and agricultural land without buildings and calculates values based on the characteristics provided by the taxpayer. As a new safeguard, the tax authority may depart from the value determined by the model only if it proves that the taxpayer did not provide the actual parameters of the property.

Valuers. The market value of domestic real estate may only be determined by an expert included in the register published on the Hungarian Tax Authority's website, including forensic experts. If, as a result of a breach of the rules, an expert determines a value below 70% of the actual market value, they may be fined HUF 100,000. Three final fines within 365 days result in removal from the register.

Foreign assets: the method of exemption with progression has been clarified

Under a tax treaty, a foreign asset may in some cases be taxable in the other state, while still being taken into account when determining the tax on the remaining assets. For such cases, the proposal clarifies the calculation: (i) first, the tax must be determined on the basis of total (domestic and foreign) wealth; then (ii) the ‘notional’ tax that would be attributable to the foreign portion if it were treated as separate wealth must be deducted from it. In this calculation, the related liabilities and the HUF 1 billion threshold must also be applied.

The proposal thus confirms the position we have taken on the basis of the draft: exempt foreign assets are not subject to tax, but total wealth must be taken as the basis for applying the threshold and the progressive bands. However, this also means that exempt foreign assets worth, for example, less than HUF 1 billion are still included in the tax base, while the tax attributable to them is zero, so there is no amount to deduct. In effect, foreign assets use up the tax-free threshold.

New exit tax rules in personal income tax

From 1 January 2027, the tax package would introduce a new taxable event into personal income tax. If an individual transfers their tax residence abroad and, as a result, Hungary loses, or may only exercise to a limited extent, its right to tax income from the subsequent sale of their investments, the accumulated but unrealised gain will be taxed at the time of the change of residence.

The rule applies if the individual was resident in Hungary for at least five of the ten tax years preceding the change of residence, and the aggregate market value of the assets concerned exceeds HUF 500 million, or the individual holds a shareholding of at least 20% with a value of at least HUF 250 million. Assets concerned include, among others, shareholdings, securities, crypto-assets, long-term investment accounts (TBSZ), voluntary pension savings accounts and life insurance policies. Cash and bank deposits are not included.

Income must be determined as if the assets had been sold at market value on the day preceding the change of residence. The tax base is the difference between this value and the documented acquisition cost. The calculation is made asset by asset, and a loss on one asset does not reduce the gain on others. The tax rate is 15%.

In the case of a move to an EU or EEA state, an automatic, interest-free deferral of payment applies. The deferred tax becomes payable if the asset is sold or gifted, if a significant distribution is made from the shareholding, or if the individual moves on to a state outside the EU and the EEA. The deferred tax lapses if the individual moves back to Hungary or dies. In the case of a move to any other state, the tax must be paid by the filing deadline.

What should be considered now?

Wealth tax calculations prepared on the basis of the draft should be (re)performed in line with the proposal, especially in the following situations:

• owners of companies with equity below HUF 100 million;
• holding structures;
• businesses owned by several family members.

In these cases, the previously calculated value may shift significantly in either direction. In addition, individuals planning to move abroad should assess in advance which of their assets fall within the scope of the exit tax and collect the documents supporting their acquisition cost, as acquisition costs that cannot be documented cannot be taken into account.

Our colleagues would be pleased to assist with a preliminary assessment of potential exposure, the valuation of assets under the proposal, and compliance matters relating to wealth tax and exit tax.