Property transfers between siblings: duty-free from 8 July!

The legislative amendment affects inheritance and gifts

Act LXVI of 2020 enters into force in Hungary on 8 July, according to which duties are no longer payable on property transfers between siblings. The Act was adopted by the Hungarian National Assembly on 16 June 2020 and appeared in edition 2020/150 of the Hungarian Gazette on 23 June. The new rule applies to gifts between siblings and to inheritance between siblings.

What do property transfers between siblings mean?

Upon the elimination of duties for property transfers between siblings, the following rules are added to Act XCIII of 1990 on Duties (Duties Act):

  • The estate obtained by the sibling of the deceased is exempt from inheritance duty.
  • The gift obtained by the sibling of the donor is exempt from gift duty.
What is the current rule for property transfers within families?

According to the current regulation

  • the acquisition of property by a lineal relative (including relatives based on adoption) is exempt from the onerous property transfer duty in the case of property transfers between lineal relatives (including relatives based on adoption), and
  • the acquisition of property is exempt from the onerous property transfer duty if it originates from a property transfer between spouses.

In addition to this – regardless of threshold – the estate or gift acquired by the lineal relative (including relatives based on adoption) and widow(er) of the deceased is exempt from inheritance and gift duty.

To broaden the free transfer of property within families, the amendment – regardless of the value of the bequest or gift – extends the favourable duty rule to inheritance and gifts between siblings too.

According to the amendment, and to reduce the administrative burden of those obtaining property in terms of claiming the duty exemption, any duty-free gift acquired by the sibling does not have to be reported to the Hungarian tax authority. 

Who counts as a sibling?

Based on the amendment introducing duty exemption for property transfers between siblings, a precise definition of sibling has also been entered into the Duties Act. Accordingly, a sibling is “the person who has at least one parent (adoptive parent) the same as the parent (adoptive parent) of the deceased or donor.” So apart from one’s own brother or sister, a sibling is also someone who has at least one biological or adoptive parent the same as the biological or adoptive parent of the deceased or donor (i.e. half-siblings and adopted siblings).

The new rules regarding property transfers between siblings must also be applied in duty cases still awaiting judgement by the tax authority on 8 July.

When applying this favourable change to the duty rules the question may arise of what impact the amendment might have on expats living and working in Hungary. If you have any questions, our colleagues specialising in expat services will be glad to help.

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