With effect from 12 September 2023, Parliament amended the provisions regarding the personal income tax on trusts, eliminating the notorious possibility of tax-free revaluation of assets. The new rules classified the transfer of assets as a sale, which assigned an immediate and direct tax point to such transfers. The new rules had barely entered into force before Parliament relaxed them.

Emergence and spread of BVK in Hungary
The history of trusts and their tax regime in Hungary is interesting. The civil law option was created by the new Civil Code, but the detailed rules were elaborated by a separate law, which closed the wide open door a bit when it differentiated between commercial fiduciaries and non-commercial fiduciaries by stating that only with a MNB licence can you act as a trustee of more than one assets under management.
The initial purpose of the tax rules was to promote the legal institution, but at least not to put settlors or beneficiaries in a worse position financially if they create a trust. In other words, the legislator’s aim in creating the legislation was not to introduce an additional tax burden into the system simply because the settlor had created a trust or because the beneficiary received income in that capacity.
Thanks to favourable rules, the centuries old legal institution has begun to spread in our country, but unfortunately often not in accordance with the legislative objectives and intentions. In many cases, people saw the BVK as an opportunity to avoid tax, rather than as an instrument to preserve wealth, preserve its integrity and keep it together across generations

The new regulation
In response to bad market practice, the legislator issued new rules in the summer of 2023, which may have put it over the edge. In fact, it imposed a tax burden on the creation of trusts that essentially made it impossible to create trusts. It has made the trust a sale, subject to tax under the rules applicable to sales if the subject of the trust is also subject to a revaluation.

The autumn tax package
Most law firms would have already begun archiving templates of well-crafted trust agreements when the Parliament proposed the fall tax package, which included amendments to the newly adopted trust rules. The pendulum did not swing completely to the other side this time, but rather stopped in the middle.
Under the new rules, which went into effect on December 30, 2023, if a trust property is revalued at the time of the trust settlement, the trustee must keep a record of the revaluation. If there is a disposal of assets within 5 years from the date of the asset transfer, the proportionate part of the revaluation will be taxed as dividends to the beneficiary. If there is no disbursement of assets from the trust within 5 years, the appreciation may be realised as a definitive tax benefit at the level of the individual. The amendment therefore limits the previous aggressive tax planning option without defeating the purpose of the legal instrument. The new more favourable rules also apply to those who set up a trust after the autumn tightening came into force.
The logic of this relief is not unfamiliar to the personal income tax system, as similar reliefs have been introduced for long-term investment accounts (TBSZ) and real estate: in both cases, capital gains on sales after 5 years of holding may be exempt from personal income tax.
The payment of the income from the management of assets remains unchanged and is taxed as a dividend for the individual, except that if the income is derived from a TBSZ account of the trust, in which case it is also exempt at the level of the individual, i.e. a TBSZ account can be opened and operated with an unchanged tax burden on the trust.
In this respect, however, it is important to highlight the important difference between trusts and TBSZs, whereby assets managed by a trustee are allowed to move during the trust period, whereas this is not possible under a TBSZ.
In view of the positive changes in the tax rules for trusts in the short term, it is worthwhile to continue to create trusts as a solution for a number of situations. If required, our experienced experts will be happy to demonstrate the benefits of a trust instrument and its tailor-made solutions.

The content of this post does not constitute legal or tax advice and does not create an engagement. In each case, detailed knowledge of the individual case is necessary to assess it and to find a tailor-made solution. If you have any questions, please do not hesitate to contact us at

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