From March 2024, Hungary will implement a new calculation method for registration taxes imposed on new and used vehicles imported from abroad.

Originally introduced in February 2004, this tax generates substantial revenue for the central budget.

The projected revenue for this year is 25.7 billion forints, representing an increase of eight billion forints compared to the previous year, marking a notable rise over the past years.

The government expects to generate this excess revenue through two primary avenues: an increase in the number of new and used vehicles registered, and alterations in tax rates that will generally increase the registration fees required for various vehicles to obtain Hungarian license plates.

Plans for raising registration taxes were first revealed at the end of October when Deputy Prime Minister Zsolt Semjén submitted a bill to parliament proposing amendments to various tax laws.

Under these changes, beginning in 2025, values such as alcohol, tobacco, fuel excise duties, vehicle taxes, and registration taxes will be adjusted in line with inflation.

Tax adjustments will occur automatically under this law, meaning no further legislative amendments will be required.

This inflation-linked increase will be applied to vehicle-related taxes first.

Such adjustments will significantly raise costs for drivers, particularly due to changes in the calculation method of the registration tax, which has replaced the previous consumption tax introduced 21 years ago.

Previously, the registration tax calculation considered several factors, including the type of fuel (petrol, diesel), engine capacity, and environmental classification as designated in the 6/1990. (IV. 12.) KöHÉM regulation, as well as the duration since the vehicle was first registered.

The older a vehicle, typically the lower its tax liability became over time, as the tax base decreased with age.

For instance, cars with an Euro 5 or better environmental classification and engines up to 1,100 cc would incur a maximum registration tax of 45,000 forints.

With the passage of time, specifically after 14 years of initial registration, this tax would reduce by 90%.

Conversely, larger engines exceeding 2,501 cc for petrol or 3,001 cc for diesel vehicles faced registration tax ranges typically from 400,000 to 4.8 million forints.

After the eleventh year, the tax amount remained unchanged, meaning all older internal combustion-engine vehicles were still subject to some registration tax.

The new calculation method for registration tax, set to take effect on March 1, 2024, continues to consider environmental impact and the vehicle's registration date but introduces a standardized base amount of 45,000 forints instead of the previously specified tax table.

Additionally, the method will shift from engine capacity to power output as the basis for calculating tax liabilities.

As a result, a high-performance vehicle—specifically those with 340 horsepower or more—could see a registration tax exceeding 9.7 million forints, although this might still drop significantly over time as its age affects the payable amounts.

The context of engine capacity has altered considerably as modern vehicle designs often feature engines that are smaller than their predecessors.

Current production models frequently come with engines ranging from 1,000 to 1,200 cc for petrol vehicles, with slightly larger capacities for diesel models.

Manufacturers have increased power through turbocharging, making tax calculations based on engine size alone less efficient than two decades ago.

In practical terms, a used 2007 Euro 4-compliant Alfa Romeo is facing a registration tax of 324,000 forints under the new system, compared to what would have been 160,000 forints previously, showing a stark increase.

Car dealerships are preparing for a shift in customer interest as the tax burdens become heavier

The increased costs will impact a range of vehicles.

For instance, the registration tax for a 2013 1.6-liter Nissan Qashqai has risen from under 13,000 forints in the past to approximately 57,000 forints now.

Similarly, the registration tax on a popular Ford Focus model has increased from 34,000 forints to 54,000 forints, illustrating the wider market effects of this tax adjustment.

Additional charges accompanying vehicle purchases will also rise, including fees for vehicle inspections, technical assessments for imported vehicles, and registration plates.

The rates for mandatory authenticity inspections for vehicles have also seen notable increases over recent months.

Overall, the Hungarian government anticipates that by revising these tax structures and potentially liberalizing the vehicle registration process through additional testing stations, more cars will be registered this year.

This might lead to a more significant influx of used vehicles in the market as the nation manages its automotive economy amid the persistent volatility in global markets.