Fiduciary asset management in Hungary serves as the closest equivalent to the Anglo-American concept of a trust. While Hungary does not formally recognize trusts under its civil law system, this legal structure allows a settlor to transfer ownership of assets to a trustee, who manages them for the benefit of one or more beneficiaries.
What Is Fiduciary Asset Management in Hungary?
In a fiduciary asset management arrangement, the settlor may appoint any natural or legal person as beneficiary—including themselves or the trustee—provided that the trustee is not the sole beneficiary, unless acting through a fiduciary foundation. It’s even possible to authorize the trustee to select the beneficiary at a later stage.
This structure is frequently used for wealth preservation, family asset protection, and succession planning in Hungary.
Key Benefits: Asset Protection and Legal Separation
A major advantage of fiduciary asset management is asset protection. Once assets are transferred, they are no longer part of the settlor’s estate. They are also shielded from the trustee’s creditors, including spouses or civil partners, offering an effective legal barrier in both personal and business contexts.
Trustees must manage assets in line with the contract and are not subject to the settlor’s instructions, although supervision is allowed. Separate accounting, strict confidentiality, and regular reporting are mandatory.
How to Establish a Fiduciary Structure in Hungary
Fiduciary asset management can be established via a written contract or, in some cases, through a unilateral declaration, such as a will. Businesslike fiduciary services require a license from the National Bank of Hungary, while private (non-business) arrangements must still be reported to authorities.
Previously, such structures were sometimes used to avoid legitimate inheritance claims (known as legitime), but amendments to the Hungarian Civil Code have closed this loophole.
Despite this, fiduciary asset management remains a powerful solution for inheritance planning in Hungary, especially when managing complex or income-generating estates.
Taxation of Hungarian Trust-Like Structures
Tax treatment is a critical issue. For personal income tax (PIT) purposes, if the assets are held under fiduciary management for at least five years, no PIT is due when the beneficiary receives the assets. Transfers made earlier are taxed as dividends—but without the 13% social contribution tax.
From a corporate perspective, assets are generally subject to Hungary’s corporate income tax (flat rate of 9%). However, a tax exemption may apply if both settlor and beneficiary are individuals, and the assets generate only income from securities.
VAT Implications for Trusts in Hungary
Hungarian VAT law may also impact fiduciary arrangements:
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VAT may apply when the settlor transfers assets to the trustee, depending on their taxable status.
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The trustee’s asset management may trigger VAT if carried out in a business capacity.
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No VAT is due if only money is transferred to the beneficiary; other asset types may have different implications.
Conclusion
While Hungary does not formally recognize trusts under its legal system, fiduciary asset management offers a highly effective alternative for asset protection, estate planning, and succession management. With favorable tax treatment in many cases, it remains a flexible and strategic option—especially when supported by professional legal guidance.
For advice tailored to your needs, contact PETERKA & PARTNERS Hungary, your regional partner for legal and tax advisory services in Central and Eastern Europe.
