Hungary: Taxation of high-value property

In a decision issued at the end of January the Hungarian Constitutional Court annulled the residential property related provisions  in the framework of the taxation of high-value property (“HVP Act”). The Court stated that the market value of real properties as defined by the HVP Act is uncertain, and therefore taxpayers will not be able to comply with the requirement to assess the market value of the real properties they own.
In addition, the Court ruled that the HVP Act gives the Tax Authority broad powers to impose penalties, and thus the responsibility for assessing the market value rests entirely with the taxpayers. As a result, the Court ruled that the HVP Act’s residential property related provisions create legal uncertainty and are therefore unconstitutional.
However, under the HVP Act, the owners of high-performance passenger cars, boats and aircraft (as taxable high-value personal possessions) will still be liable to property tax. Property tax will have to be paid on a particular taxable high-value property if the property was owned on the first day of the year.
Private individual taxpayers must submit their returns on taxable high-value property together with their personal income tax returns. Private individuals who are not required to file personal income tax returns, or if their employer prepares the personal income tax return on their behalf, must submit their property tax return separately. Sole traders and private individuals required to pay VAT must submit their property tax returns by 25 February 2010. For all other private individuals, the deadline is 20 May 2010.
Non-private individuals required to submit a tax return must comply with their property tax obligation as follows: taxpayers liable to pay corporate income tax will have to file their property tax returns at the same time as their corporate income tax returns. Taxpayers who are required to pay simplified entrepreneurial tax (“EVA”) and who fall within the scope of the Accounting Act must submit their property tax returns at the same time as their EVA returns. The deadline for both groups is 31 May 2010. The deadline for EVA taxpayers that are outside the scope of the Accounting Act is 25 February 2010.
Non-private individual taxpayers who are not required to submit corporate income tax returns or EVA returns must submit a separate property tax return by 20 May 2010. High-value property tax must be paid in two equal installments. The first will have to be paid when the return is filed, while the second will have to be paid by 30 September of the tax year in question.

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