Hungary Property Buying Guide
It is becoming increasingly easy for a foreign person to own real estate in Hungary. In order to do this the purchaser must first apply to the local Municipality (council) for permission with the assistance of a Hungarian solicitor. This petition, whilst it can be refused, is usually granted within 3 months and the costs associated with the procedure are approximately €250
The second option is to form a Hungarian company to purchase the property. We recommend this option for individuals that wish to purchase numerous properties. This approach can be done relatively quickly and inexpensively, keeping taxation low and simple, and is likely to assist in the onward sale of the property in future years when the company may be sold rather than the property. This thereby eliminates stamp duty to the future purchaser.
Mortgages in Hungary
The Hungarian banks are, for the most part, hesitant to lend to a foreign individual for the purchase of property locally. They are also very reluctant to lend to foreign-owned companies set up for the purpose of purchasing property, unless the company has at least a track record of one year and is profitable. For these reasons it is recommended that any required funding be obtained from your home country.
Taxation in Hungary
It is recommended that you seek the advice of your own tax advisor before undertaking any investment activity.
The following basic taxes apply in Hungary:
Annual personal taxes on rental profit - 20%. Note: Profits may be taxable abroad though Hungary has double taxation treaties with most countries.
Annual corporation taxes on profit - 18%. Note all expenses, interest costs and some depreciation on the property and its contents are tax deductable.
Capital gains tax on property sold by an individual - 20% (which reduces after six years)
Capital gains tax on property sold by a company -18%
Capital gains tax on the sale of a company containing property - 5%
Purchasing Costs
Legal fees: 1-5% of the purchase price – depending upon the amount and legal work required.
Stamp Duty: HUF4,000,000 (€16,500) = 6% of purchase price, HUF4,000,000 = 2% of purchase price.
If a company owning a property is purchased then this stamp duty can be avoided however it is extremely important to have sound legal representation to perform a detailed due diligence procedure
Company Formation: Limited Liability company €1,000
Notary Fees: €3 per copy if done locally.
Company Stamp Duty: 2% of the company capital – min. €250 / max. €2,500
Bank Introduction and Account Opening: €0
New Lease: One month rental fee
Management: 10% of the annual rental plus VAT
Accounting: For managing the regular VAT returns & Annual Returns of the company the charge is usually €50 per month plus VAT
Renovation: Labour involved plus 10% for management of the project
Please note all fees are subject to VAT at 25%. The above costs are all tax deductible from your Hungarian rental income.