Who is eligible for tax benefits for home construction?

Since 2017 taxes on privately built family houses have been lowered considerably as a result of a government decision stipulating that private individual builders may reclaim 27% of the VAT on invoices for building materials of up to 5 million forints.

In the case of the construction of a new home, the adult natural-person builder or developer of a home of maximum 150 m2 or a one-unit residential building of maximum 300 m2 may use the tax rebate to cover the construction costs, or the owner of the construction plot may use it for the purchase of the construction plot on which the building will be erected.

The tax-rebate allowance for the plot purchase and that for the construction can only be requested together, at the same time (and so if the construction does not begin until a few years after the plot purchase, this allowance will not be payable).

Another important provision is that, with regard to the above costs, it is only possible to apply for the allowance using invoices issued on or after 1 January 2015. The allowance can be applied for until 31 December 2019 at the latest.

The allowance cannot be requested for properties that a contractor hands over to the customer in turnkey condition (i.e. properties that are ready to move into and to be registered in the land register), even if the beneficiary provided the building materials and other products needed for the building work.

Persons who do not meet one or more of the conditions required for a CSOK (housing allowance for families) application (e.g. no criminal record, no public debts, entitlement to social security benefits for at least 180 days) are not eligible for the allowance.

The amount of the allowance is equal to the amount of VAT indicated on, and paid according to, the invoice issued for the plot on which the building is erected, as well as for the materials purchased and services used for the construction of the home or residential building, but up to HUF 5 million at most.

The request for a VAT rebate must be submitted to the credit institution before the construction of the building that requires an occupancy permit, or that needs to be reported, is completed.

The portion of the allowance allocated for the plot is disbursed by the credit institution following the submission of the invoice issued for the purchase price of the construction plot, in a lump sum.
The tax rebate related to the construction is paid in proportion to the degree of readiness of the structure, in arrears, based on the submitted invoices.

Only persons receiving the tax rebate may acquire ownership in the newly built home. In the case of a married couple or common-law partners, both parties must possess an ownership title in the property (in any ratio) that is registered in the land registry.

The new property must be suitable for residential purposes, according to the expert opinion of a property valuer.