Based on the provisions of the VAT Act, the 5 percent reduced tax rate can be applied to the sale of new real estate that meets the specified conditions until December 31, 2022, however, Government decree no. 267/2022. (VII. 29.) extended the application of the reduced tax rate for another two years, until December 31, 2024.
Under Points 50–51, Part 1, Annex No. 3 of Act CXVII of 2007 on Value Added Tax effective from January 1, 2021 (VAT Act), a 5 percent tax rate applies to the sale of residential properties specified in Points ja) or jb) Subsection (1) Section 86 of VAT Act if the following special conditions are met:
- the transaction must be classified as a product sale according to the provisions of the VAT Act; and
- the subject of the sale must be a new property;
- the property must be a residential property; and
- the usable floor area of the residential property may not exceed 150 or 300 square meters.
Legislation in effect before the effective date of Government Decree no. 267/2022 (VII. 29) on the application of the reduced VAT for newly built residential properties stated that the reduced tax rate of 5 percent would apply to advances received and credited and sales completed after 31 December 2022 but before 31 December 2026 if the following are met:
- in the case of construction work subject to a building permit, the building permit for the construction of the residential property became final until December 31, 2022; or
- construction activities subject to simple notification according to the Act on the Formation and Protection of the Built Environment were submitted no later than December 31, 2022.
However, the former rules will expire on 1 January 2023 pursuant to Government Decree no. 267/2022. (VII. 29.) since the reduced tax rate for the sale of newly built residential properties can be applied until 31 December 2024, and for this it is not required that the building permit to become final or for the notification to be made by 31 December 2022.