Hungary’s new government has unveiled plans for a 15% exit tax on unrealised investment gains for wealthy individuals who move their tax residence abroad. The proposed measure, which could take effect on 1 January 2027, would mean some people face a tax bill even if they have not sold their investments.

The detailed rules were published on Tuesday evening alongside the government’s wealth tax bill, according to Hungarian financial news outlet Portfolio. The government says the measure is intended to prevent capital from leaving Hungary in ways that reduce the country’s right to tax it.

Who would be affected by Hungary’s new exit tax?

Under the proposal, the tax would apply to individuals who meet all three of the following conditions:

  • They were Hungarian tax residents for at least five of the previous ten tax years.
  • Their relevant assets have a combined market value exceeding HUF 500 million (approximately EUR 1.36 million), or they own at least a 20% stake in a company worth at least HUF 250 million (approximately EUR 681,000).
  • Moving their tax residence abroad would end or restrict Hungary’s right to tax gains from the subsequent sale or disposal of those assets.

The proposed tax rate is 15%, matching Hungary’s standard personal income tax rate.

Crucially, the measure would target unrealised capital gains – increases in the value of investments that have not yet been converted into actual profits through a sale.

Under the proposed rules, the tax authorities would calculate the gain using the asset’s market value on the day before the individual’s Hungarian tax residence ends. This means that moving abroad could trigger a tax liability even if the investor continues to hold their investments.

Which assets would be covered?

The proposed legislation covers a broad range of financial assets, including:

  • Shares and other securities
  • Company ownership stakes
  • Certain options and derivative positions
  • Cryptocurrency assets
  • Certain rights associated with long-term investment and retirement savings accounts
  • Residual rights under life insurance policies, including pension insurance.

Ordinary cash, money held in standard bank accounts and bank deposits would not be covered in their own right. However, cash held within certain long-term investment or retirement savings arrangements could fall within the scope of the rules.

Another important detail is that gains on individual assets would be added together, but losses could not be offset against gains when calculating the taxable amount. This could increase the tax burden for investors whose portfolios contain both profitable and loss-making assets.

Moving to the EU could mean a payment delay

The proposed rules distinguish between people moving to EU or European Economic Area (EEA) countries and those relocating elsewhere.

Individuals moving to an EU or EEA country would generally receive an automatic, interest-free deferral of payment, provided they meet the relevant tax return and reporting requirements. The tax would still be assessed, but payment would typically be postponed until the assets were sold or otherwise realised.

The deferral could end earlier in certain circumstances, including when assets are transferred without payment, substantial value is withdrawn, the individual moves to a country outside the EU or EEA, or serious reporting obligations are breached.

Those moving to countries outside this framework would generally have to pay the tax by the filing deadline for the relevant tax year.

This distinction could be particularly important for wealthy Hungarians considering a move to the United States or another destination outside the EU and EEA.

Why is the government introducing the tax?

The exit tax is part of a larger package of proposed tax changes, including a new wealth tax planned for 2027.

The government argues that the measures are intended to discourage people from moving assets abroad to avoid Hungarian taxation. Prime Minister Péter Magyar has previously indicated that the government wants to prevent wealthy individuals from escaping the proposed wealth tax by transferring their assets overseas.

The wealth tax proposal would impose an annual levy on substantial personal fortunes, with different rates applying to different levels of wealth. The exit tax is intended to address a related issue: the potential loss of Hungary’s right to tax investment gains when a person changes their tax residence.

The government’s position is that people who accumulated wealth in Hungary should continue to contribute to public services through an appropriate share of taxation.

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Concerns over the practical implications

The proposal is likely to raise questions about how the market value of certain assets, particularly privately held companies, would be established. Tax experts consulted by Telex have previously highlighted the potential difficulties of valuing businesses and the additional administrative burden such rules could create.

Exit taxes also raise legal questions within the EU, where rules must be consistent with the principles governing the free movement of capital and people. The proposed payment deferral for qualifying moves to EU and EEA countries is intended to address some of these concerns.

The legislation is currently a proposal, meaning its final wording could change during the parliamentary process.