Hungary: Taxes and Costs

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Hungarian taxes are moderate to high

Private Route

Personal Income Tax

For non-resident individuals owning and renting out Hungarian property, there are two possible routes of taxation:

Private Route #1:

Rental income is taxed separately from other income. The 25% tax rate is levied on the gross rental income, without any cost deduction.

Private Route #2:

The taxable income is computed by

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

Net rent income is taxed at the following normal progressive rates:

Corporate Route

Corporate Income Tax

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	18.7%	29.6%	32.8%
Click here to see a worked example
Source: Disclaimer

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

Hungarian companies are liable to corporate income taxation on profit, after deductions and adjustments at 16% (10% for income up to HUF5,000,000 (€18,545), if certain conditions are met). In general, the depreciation rates of real estate vary between 2% and 5%.

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).

Building Tax

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

1. A maximum of HUF900 (€3.62) on a per square metre basis or
2. 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:

1. Per square metre of the plot at the maximum rate of HUF 200/sq. m. (€0.81), or on the
2. 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.

Note that 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.

Capital Gains Tax

Net capital gains incurred by an individual 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. Note that these expenses should be documented, otherwise the 25% rate will be applied to the gross gains.

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.).

Corporate Route

Capital gains realized by companies are taxed as profit under the corporate income tax regime (see above). 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

Your Comments

posted by Ian McS | 2008-01-08

Accountant- trainee, Ireland

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