Hungary: Taxes and Costs

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Last Updated: Oct 28, 2009

Hungarian taxes are moderate to high

INDIVIDUAL TAXATION

Non-residents are taxed only on their Hungarian-sourced income. Married couples are taxed separately.

INCOME TAX

Calculation of taxable income and applicable income tax rates depend on the category of income.

RENTAL INCOME TAX

Rental income is taxed at a flat rate of 16%. The taxable income can be computed by

Deducting expenses actually incurred and documented in the renting process such as lighting, maintenance, administrative costs, etc.
Or by deducting a 10% notional deduction from the gross income (10% expense ratio).

Under certain conditions, the income up to HUF50 million (€185,611) is taxed at 10%, while any excess is taxed at 16%.

CAPITAL GAINS TAX

Net capital gains realized by non-resident individuals on sale of real estate are taxed at a flat rate of 25%. Acquisition costs and related expenses, improvement costs, and cost of transferring the property can be deducted from the revenue to arrive at the net capital gains. If the deductible expenses are not documented and if the acquisition costs are not substantiated, the 25% rate will be applied to 25% of the gross proceeds.

The taxable gain is reduced by 10% every year after the fifth year, so that in the fifteenth year after acquisition, the taxable gain is reduced to zero (i.e. 10% reduction in the 6th year after the year of acquisition, 20% in the 7th year, 30% in the 8th year, 40% in the 9th year, 50% in the 10th year, etc.).

PROPERTY TAX

Note that the local government may or may not levy such taxes, and also that the rates vary for each municipality. This may be an important factor to consider, when choosing a property.

Building Tax

The building tax may be imposed by the local government, payable by the property owner each year. The rates and the tax base vary from each locality/municipality, subject to:

A maximum of HUF900 (€3.34) on a per square metre basis or
A maximum of 3% on the market value of the building

Land Tax

Land Tax may be levied on idle land on the portion classified as a “downtown area” by the local government council. The council either levies the tax as:

Per square metre of the plot at the maximum rate of HUF 200/sq. m. (€0.75),
Or on the adjusted market value of the property, in which case the maximum tax rate is set at 3%. Adjusted market value is generally 50% of the market value of the property.

CORPORATE TAXATION

Most lawyers advise foreign nationals to set up a company registered in Hungary in order to purchase property.

INCOME TAX

Income and capital gains earned by Hungarian companies taxed at a flat rate of 16%. Income-generating expenses and depreciation expenses are deductible from the gross income. In general, the depreciation rates of real estate vary between 2% and 5%.

Under certain conditions, the income up to HUF50 million (€185,611) is taxed at 10%, while any excess is taxed at 16%.

Solidarity Surtax

Enterprises are liable to pay additional solidarity tax on all their taxable income. Solidarity tax is levied at a flat rate of 4%.

Local (Municipal) Business Tax

Enterprises are liable to pay local business tax on all business performed in a municipality. Rates vary depending on the locality, and municipalities may choose not to levy the tax. The maximum rate is 2%. The tax base is the net sale revenue less some deductions (i.e. mediated services, material costs).

CAPITAL GAINS
Capital gains realized by companies are taxed as profit under the corporate income tax regime. Acquisition costs and related expenses, improvement costs, and cost of transferring the property are all deductible from the selling price.

Hungary - more data and information

Guide to buying houses and registering property sales in Hungary