The wealth tax on residential property and holiday houses has been abolished by Hungary’s Constitutional Court due to a lack of legal certainty.
However, the wealth tax on sailing and motor boats, aircrafts and luxury cars was upheld.
The new tax was introduced just a few months ago to help the government meet the budget deficit target set in accordance with the expectations of the IMF.
The Constitutional Court did not find the concept of a wealth tax on properties unconstitutional but took issue with a lack of certainty in the means of determining the properties’ market value. This was determined by the owner through self-assessment but could be subject to a penalty where it differed by more than 10% from the Tax Authority’s own estimate.
This meant tax payers had to bear the risk of fluctuations in value which, given market volatility, were often as much as 30-40% and, in extreme cases, were even higher. The court ruled that this breached the principle of legal certainty.
Due to the forthcoming elections, the tax is not thought likely to be reintroduced in a modified form in the near future.
