Hungary warned by EC over tax system for foreign property investors

The European Commission (EC) has warned the Hungarian government about its taxation system for foreign buyers from within the EU. If no changes are made, Hungary could face referral to the European Court of Human Rights.

The EC has issued a 'reasoned opinion' to the Hungarian government, demanding that Hungary change its policies towards foreign buyers, reports Overseas Property Professional (OPP).

Under current Hungarian law, when a foreign investor buys property in Hungary, and the taxpayer's former home was in another EU state, the taxation penalty levied is calculated as a percentage of the value of the property purchased and does not take into account the value of their former home. When the taxpayer's previous home was in Hungary, however, the tax is only levied if the value of the new property is more than that of the previous one.

OPP comments: "As a result, people who move to Hungary and sell their homes in other member states are treated less favourably compared to Hungarian residents buying a new dwelling to replace their existing one situated in Hungary."

If no satisfactory outcome has been reached within two months, the EC will report the matter to the European Court of Human Rights. The Hungarian government has, as yet, not issued an official response to the EC's action.

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