Budapest, December 14 (MTI) – The VAT on home construction will be reduced from 27 percent to 5 percent as early as next year provided that parliament passes the relevant bill this week, the economy minister said.

Mihaly Varga told public Kossuth Radio that the bill is aimed at boosting the construction sector and preventing tax revenue losses in next year’s budget.

Varga expressed hope that the VAT reduction would lead to the construction sector adding a further 3,000 to 5,000 new homes to the current rate of 8,000 to 9,000 new homes a year. Varga said an additional 3,000 new homes in 2016 would be enough to ensure that the budget does not suffer tax revenue losses.


The bill authored by Antal Rogan, the cabinet chief, and Economy Minister Mihaly Varga, proposes that a 5 percent VAT rate should apply to homes built between 2016 and 2019. The proposal mainly applies to blocks of flats built in housing parks with total area not exceeding 150 square meters or stand-alone homes only not larger than 300sqm, the bill said.

The VAT cut was flagged yesterday by Prime Minister Viktor Orban at the Fidesz congress where he was re-elected as party leader. He said the aim of the proposal was to “ensure that every family has a roof above their head.”

The government expects the VAT reduction would increase the number of home constructions, Varga told a press conference on Monday. He said the 2016 budget was approved with more than 200 billion forints in reserves, so the revenue fallout would “not affect the budget’s leeway.”

The association of home builders EVOSZ welcomed the measure and said the market could significantly expand in 2017 as a result. Laszlo Koji, the president of EVOSZ, said the number of new homes built this year are estimated at 8,500-9,000 and this could increase by 30 percent in 2017 as a result of the VAT cut.

The opposition Socialists said the VAT cut on home building was a good idea, but the VAT cut on food to 5 percent should have come first. “Owning a new home is a distant dream for many who are unable to put food on their table day by day,” spokeswoman Bernadett Budai told a press conference on Monday.


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