Rust zone tax incentive in Boróka Park
At the end of August 2024, construction work started on the fourth phase of Boróka Park in Kecskemét. As the new residential area is located in Homokbánya, next to the former barracks, in a rehabilitated area, the fourth phase has been granted the so called “rust zone” status, which allows the 5% VAT on the sale of housing to be reclaimed as a tax discount.
What is a rust zone?
According to the official definition, a rust zone is a favorable location in the urban fabric, but a typically unused or underutilized former industrial area, economic area, or abandoned, unused barracks area.
According to the official definition, a rust zone is a favorable location in the urban fabric, but a typically unused or underutilized former industrial area, economic area, or abandoned, unused barracks area.
Today, more than half a hundred investments across the country are classified as rust zone action areas. Based on the regulations currently in force, a so-called rust zone committee decides whether a submitted initiative is classified as a rust zone.
Rust zone tax incentive
The so called “rust zone action areas” are areas designated in the Government Decree issued on the basis of the ordinance, which include areas with transport, utilities and institutional infrastructure, or which can be provided in a sustainable manner, suitable for residential and other uses, typically brownfield areas.
For the sale of new apartments with a total useful floor area not exceeding 150 m 2 to be built or developed in a multi-family residential building located in a rust zone action area, the law introduced a reduced VAT rate of 5%
The 5% VAT is refundable!
Based on the decision of the Rust Zone Committee, the fourth stage of Boróka Park has been granted the rust zone status. This decision is important not only for the investor but also for the buyer. In case of a residential property, a Hungarian citizen who buys an apartment with a floor area of less than 150 m 2 can claim back the reduced 5% VAT on the final purchase contract from the Hungarian State Treasury.
From the buyer's point of view, the possibility of reclaiming the five percent housing VAT and the fact that the reduced VAT rate can be applied without a time limit for investments in rust zones can be a serious price advantage.
Conditions for receiving the subsidy
Under the Regulation, the subsidy may be claimed by a person who:
- has Hungarian citizenship, or
- exercising the right of free movement and residence in Hungary for more than three months,
- in case of third-country nationals, they have an immigrant or settled legal status, or
- has the status of a stateless person
The conditions for applying for the subsidy include that, at the time of submitting the subsidy application, the applicant has no public debt registered with the state tax and customs authorities, the apartment is listed as an apartment in the real estate register, and the applicant's ownership is registered in the register.
If the claimant acquires partial ownership in the apartment through the purchase, the claimant can claim the subsidy in proportion to the share of ownership to which he/she is entitled. More information can be found on the website of the Hungarian State Treasury.
This information is for information purposes only and the seller is not responsible for any changes in legislation or other technical changes to the application process.
The rust zone regulation: https://net.jogtar.hu/jogszabaly?docid=a2100619.kor
More information on reclaiming the VAT in rust zone areas:
https://www.allamkincstar.gov.hu/egyeb-lakossagi-ugyek/Egyeb_juttatasok/rozsda
