Parliament approves tax package reducing bank levy and grandfather provision

Hungarian lawmakers on Tuesday approved a package of tax changes that reduce the bank levy and introduce a grandfather provision allowing the continued application of the preferential 5 percent VAT rate on home construction to projects for which builders already have a permit or a registration.

The package was approved with a vote of 115 for, 20 against and 36 abstentions.

The amendments cut the upper rate of the bank levy to 0.20 percent from 0.21 percent from 2019.

The rate paid on a tax base up to 50 billion forints will remain at 0.15 percent.

Credit institutions pay the levy on adjusted total assets.

The upper rate of the bank levy was lowered to 0.31 percent from 0.21 percent from 2017.

The package also applies the 5 percent preferential VAT rate to residential projects with either a building permit or a registration (freestanding homes under 300sqm require only a registration) on November 1, 2018. However, homes in these projects must be sold no later than December 31, 2023 for the exemption from the main VAT rate to apply.

Lawmakers introduced the preferential rate on home construction from the start of 2016, but it is set to revert to the main 27 percent rate at the start of 2020.

The amendments exempt from the financial transaction duty payments for government securities made between private individuals and the State Treasury.

The package raises the annual revenue threshold for VAT exemption for small businesses to 12 million forints from 8 million from next year.

(HUF 100 = EUR 0.3107)

Source: MTI