February 2025 – It has become standard practice in Hungary for solar power plants to be developed on greenfield agricultural land owned by third parties. Due to legal restrictions regarding the use of agricultural land, developers are unable to acquire these plots until the project is completed.
Unlawful taxation practice challenged
Recently, the National Tax and Customs Authority (the "Tax Authority") calculated the transfer duty not only based on the market value of the underlying land but also included the market value of the solar park entirely constructed by the developer, which resulted in exorbitant tax burdens.
The Hungarian Supreme Court (the "Kúria") recently ruled against the Tax Authority regarding its above-described practice of levying real estate transfer duties.
Kúria's ruling: clarifying the legal basis for taxation
The Kúria has now established that real estate transfer duty is based on the movement of assets. As ownership of the solar plant remains with the developer at all times, there is no asset transfer in this respect. Consequently, including the solar park's value in the tax calculation is unlawful.
The impact of the decision
- Ongoing lawsuits: Lower courts can now settle similar cases in favour of developers, reducing transfer duty amounts imposed by the Tax Authority.
- Future projects: Developers can plan their transactions with greater certainty, mitigating tax risks through well-structured land sale and purchase agreements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
