By concluding a donation contract under Budapest law, one of the parties shall be obliged to grant his own property to the other party as a gratuitous material bequest. Contracts for the donation of real properties shall only be valid if concluded in writing and registered in the property register under Budapest law, requiring legal representation (countersignature of a lawyer). A donor shall be entitled to refuse performance of a donation contract if he is able to prove that his performance of the contract can no longer be expected due to a significant change in his circumstances – particularly in his relationship to the donee – after the offer has been made or the contract has been concluded.
A donor shall only be liable for any significant deficiency in the donee's acquisition of property or in the object matter of the gift or for damages sustained in the course of giving the gift if the donee is able to prove that the donor's conduct is wilfully or seriously negligent. A donor shall also be liable for damages if he fails to inform the donee regarding any important characteristics of the gift that are unknown to the donee. A donor shall be liable, in accordance with the general provisions, for any damage caused to the donee's other property in connection with the gift.
Reclaiming a gift
A donor shall be entitled to reclaim a still existing gift insofar as the gift is essential for his livelihood and the return of the gift does not jeopardize the livelihood of the donee. If a donee (or a relative living in the same household) commits a serious legal injury under Budapest law to the detriment of the donor or one of his close relatives, the donor shall be entitled to reclaim the gift or demand its replacement value. A donor shall also be entitled to reclaim a gift or demand its replacement value under Budapest law if the assumption that provided the sole basis for giving the gift subsequently and permanently disappears and if the gift would never have been given without this assumption. A gift cannot be reclaimed if the gift itself or its replacement value no longer exists at the time the legal injury is done or if the donor has condoned the injury. Gifts of common value shall not be reclaimed.
Gift duty
Donation shall be subject to payment of a duty by the donee if it has been documented or, in respect of movable property, if the market value of the movable property granted undocumented to any one donee exceeds 150,000 forints. Such gifts shall be reported to the state tax authority within 30 days. Real properties shall be reported by submitting the donation contract to the land office.
The rate of the duty shall be 18% or 9% of the net market value of the gift or residential property (and of the associated rights), respectively. In respect of donation of ownership title to (or any rights in) motor vehicles and trailers, the rate of the duty shall be twice the duty charged on the onerous transfer of property of a motor vehicle or trailer. In several cases, exemption may be granted from payment of duties, in particular, gifts acquired by the donor’s next of kin is exempt of duty and the Act on Personal Income Tax also provides for exemption of duty and tax for small gifts.
Nevertheless, exemption of duty for donation between next of kins – irrespective of the object of the gift – is a material change in legislation compared to the previous period.
If you have any questions relating to donation contracts under Budapest law, you may contact us also via our online consultancy section.
