In response to the international climate shaped by war, the government plans to expand its family-friendly tax policies: specifically, it aims to double the family tax allowance in two phases, retain tax exemptions for families with four children, mothers under 30, and individuals under 25, and extend the 5 per cent reduced VAT rate on residential property sales by two years, as announced by the Ministry of Finance on Wednesday in a statement.
According to the statement, the Ministry of Finance will submit proposed tax amendments for the upcoming year to the National Assembly on Wednesday. These amendments include adjustments to personal income tax, measures for reducing the grey economy, and proposals for reducing administrative burdens. The government seeks feedback from Hungarian citizens on various proposed tax reductions, such as the doubling of the family tax allowance and housing-related tax benefits, through a newly launched national consultation.
‘The reduced 5 per cent VAT rate on new residential property sales will also be extended until 31 December 2026’
If public support is confirmed, the government will increase the family tax allowance in two stages: from 1 July 2025, allowances will be raised to 15,000 forints for one child, 30,000 forints for two children, and 49,500 forints per child for three or more dependents. In the second phase, from 1 January 2026, allowances will further increase to 20,000 forints for one child, 40,000 forints for two children, and 66,000 forints per child for families with three or more dependents. To support family homeownership and the construction industry, the government is also extending the reduced 5 per cent VAT rate on new residential property sales until 31 December 2026. With certain conditions met, this reduced rate could remain applicable until 31 December 2030.
In 2025, an additional change will temporarily allow retirement savings to be used towards mortgage repayments, home renovations, and modernization for a one-year period. Moreover, subject to public endorsement in the national consultation, up to 50 per cent of balances on SZÉP (Széchenyi Leisure) cards may also be used for housing purposes. From 2025, the government will increase the tax allowance on commercial diesel for transport companies to the highest level permitted under EU regulations and expand the excise duty allowance on agricultural diesel, allowing a significant portion of excise duty on fuel used in certain agricultural activities, such as green manure and fallow land maintenance, to be reclaimed starting next year.
A key change, effective 1 January 2025, will be the phase-out of the airline tax; in line with its commitments, the government will also discontinue the pharmaceutical and telecommunications sectoral taxes by the end of this year. The government emphasized that its tax policy is primarily focused on tax reduction, support for families and businesses, simplification, and reducing the grey economy. As a result, over the past decade, the Hungarian government has achieved the largest reduction in labour-related taxes in the EU and has implemented one of Europe’s largest grey economy reduction programmes, creating one of the continent’s most competitive tax systems.
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