Tax rates and tax-reducing items in the proposal – based on the draft

The threshold and the tax band would be separate steps

Before applying Section 9’s rates, the tax base would be established under Section 6(1)–(2). After deducting qualifying liabilities from taxable assets’ aggregate calculated value, only the amount exceeding HUF 1 billion would become taxable. That threshold would not prescribe a rate: it would determine how much of the appropriately netted amount entered the rate calculation.

The HUF 100 billion boundary in Section 9(1) would instead divide the resulting tax base into two bands. The HUF 500 million valuation thresholds would serve different purposes again: equity under Annex 1, point IV, and property value under Section 19 would not replace the rate boundary. These figures would concern distinct calculations and would not be interchangeable.

The higher rate would apply only to the upper band

Under Section 9(1), the portion of the tax base not exceeding HUF 100 billion would attract a one-per-cent rate. The excess would attract one and a half per cent. This would be a banded calculation: crossing the boundary would not retrospectively change the rate on the lower portion or expose the entire base to the higher rate.

The proposal could therefore not generally be described as a uniform flat-rate tax. Nor would the rates alone establish the payable amount, because Section 9(2)–(3) would introduce further reductions. Determining the tax base, calculating tax across the two bands and recognising applicable reductions would be distinct operations within the proposed structure.

Expert fees would reduce tax only under specified conditions

Section 9(2)(a) would cover independent expert, valuation or business-valuation services mandatorily required to determine an asset’s calculated value. The reduction would not extend to every valuation expense. Engagement would have to be compulsory under the draft; merely permitting a taxpayer to commission an expert would not establish entitlement to the same fee-related reduction.

The fee would have to be actually paid during the reference year or by submission of the return and supported by an invoice. VAT borne by the taxpayer would form part of the qualifying fee. Fifty per cent could reduce tax, subject to a HUF 2 million ceiling. Section 9 would thus combine service, timing, payment, documentary and monetary conditions rather than offer a general expert-cost deduction.

Other taxes would need a connection with an included asset

Section 9(2)(b) would recognise specified taxes paid on assets included in establishing the tax base. These could comprise local tax under the Local Taxes Act referenced by the draft and motor vehicle tax. Foreign taxes identical or similar to those categories could also qualify, but this would not encompass every foreign public charge.

For every category, the relevant tax year would be the one containing the reference year’s final day: the tax would have to be due and paid in that tax year. Amounts refundable to the taxpayer would be excluded. The provision would refer to external local-tax legislation without supplying its detailed rules, so those rules could not be derived from the proposal.

Treaty priority would operate only within defined limits

Under Section 8(1), a differing provision in an international treaty promulgated by statute or government decree would prevail if the applicable treaty contained wealth-tax rules. This would not create automatic treaty exemption for every foreign asset. The treaty’s relevance and content would first determine whether departure from the draft’s own provisions was possible.

Section 8(2)–(3) would distinguish two situations. If the treaty permitted foreign assets taxable in the other state to be considered when determining tax on the remaining wealth, their value would enter the calculation. If the treaty did not permit that consideration, the calculated value could not enter either the tax-base calculation or the tax calculation under the draft.

Included foreign wealth would receive a specific adjustment

Section 9(3) would specifically address the situation under Section 8(2). Tax calculated under the draft on the aggregate calculated value of domestic and foreign assets would be reduced by the tax calculated on the aggregate calculated value of the relevant assets taxable in the other state. Inclusion of foreign wealth would therefore be accompanied by a separate adjustment.

Section 9(2)(b) would not apply when calculating the amount to subtract. Reductions for local, vehicle and corresponding foreign taxes would consequently be omitted from that component calculation. This would not simply describe a general credit for foreign wealth tax actually paid, but a distinct value-based deduction. It could not be extended to the exclusion situation governed by Section 8(3).

Tax reduction and payment relief would be different

Section 25(7)(e) would require the return to identify deductible taxes and other reductions, their amounts and supporting data. Subsection (8) would require retention of substantiating documents. That information would explain the amount payable; it would not, by itself, alter the schedule for settling the liability.

By contrast, Section 26 would allow deferral or instalments on application where liquidity conditions made immediate payment disproportionately burdensome and later payment appeared likely. Relief could generally last twelve months, exceptionally twenty-four. Having at least half of included wealth in assets not directly generating the necessary liquid funds would be a specific consideration. Section 26(3) would expressly exclude the automatic-instalment rules referenced by the draft.

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