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This is a 91m2, three bedroom, classic apartment at the foot of Margit Bridge in Pest’s mainly residential, though still central, 13th district. The building features elevator, a well-maintained stairwell and a great view to the Buda Hills, taking in the Danube, the Margit Bridge and Margit Island. Public transport and a small park are both on the doorstep. Spacious layout, with rooms reached from a central hallway, given the wonderful location and the quality of the building, offers outstanding potential. Rooms are large, and retain all original parquet flooring, doors and windows.Currently is operating as an office. Ready to move in. Because of its location its good opportunity.

Price: HUF 35 000 000

Price: EUR 129 000 circa

Area: 91 m²

[find out more]

INVESTOR CENTER Taxes and Legal Procedures

 

 

Tax

 

FOR THE MOST UP-TO-DATE INFORMATION ON TAXES IN HUNGARY PLEASE GO TO: English-language website of the Hungarian Tax and Financial Control Administration (APEH)

 

http://en.apeh.hu/taxation

 

 

Please note that the information regarding taxes below may be out of date and is only there for historical purposes. Please click the link above for the most up-to-date information.

 

Tax liabilities arising from income generated from the transfer of movable and immovable property

In order to establish private individuals’ income from the transfer of movable property, Article 58 of Act CXVII of 1995 on Personal Income Tax must be applied.

Movable property is any entity not qualifying as immovable except for means of payment, securities, unharvested crops sold without the transfer of the property of the land (for instance, a standing tree).

Income received from the transfer of movable property must be established in such a manner that substantiated expenses charged to the transferring private individual are subtracted from the proceeds. Such expenses are the amount used for the acquisition of the property and related expenses, investments of value increase and expenses incurred in connection with the transfer.

 If the sale of the movable assets is performed within a business activity framework, the income less costs shall qualify as income from an independent professional activity (see: Brief summary on the taxation of private individuals 2017) and be taxable. Business activity is any activity performed by a private individual on a professional basis or on a permanent or regular basis, for a consideration in money, the performance of which is carried out independently.

Irrespective of the above, if the revenues of a private individual from the sale of movable assets does not exceed HUF 600,000 within a fiscal year, these revenues shall not qualify as income.

The income received from the transfer of movable property qualifies as the so called “income separately taxed” at a rate of 15 percent.

The tax is assessed by the private individual selling the movable property, is declared in their tax return and is paid by the same deadline as the one prescribed for filing the tax return.

The portion of the tax on the combined income received during a year from the transfer of movable property that is not in excess of HUF 30,000 shall not be paid - if it is not a business activity.

In practice, this means that if a private individual earns HUF 300,000 in income from the transfer of movable property, of the HUF 45,000 tax on this income, only HUF 15,000 has to be paid.

If the private individual’s income from transfers of movable property during a year - it does not qualify as a business activity - is less than HUF 200,000, such an amount need not be declared.

Income from the transfer of real property

In order to established private individuals’ taxable income from the transfer of real property, Articles 59-63 of Act CXVII of 1995 on Personal Income Tax, as amended several times, must be applied.

What follows are the definitions of a few important terms used in connection with the establishment of income.

Proceeds

Proceeds means all types of payments received by a private individual in connection with the transfer of real property.

The proceeds from the sale of real property serve as a point of reference for the establishment of income. Proceeds includes, among other things, the sales price, the fair market value, effective on the day of transfer, of an asset received in exchange, and late payment penalty interest paid by the buyer.

Costs

Another important step in determining the income from the sale of real property is the identification of eligible costs.

As a general rule, the following are eligible costs:

  • The amount spent on the purchase and related expenditures. Such expenditure includes:
    • in the case of immovable property purchased through a sales agreement, the amount specified in the agreement; in the case of property purchased through the exchange of ownership, the value specified in the exchange agreement;
    • in the case of property acquired by inheritance, the amount considered for establishing the duty, if there was no duty established, the value specified in the inheritance records;
    • in the case of property acquired as a gift, the amount considered for establishing the duty, if there was no duty established, 75 percent of the revenue;
    • in the case of construction, reconstruction or the enlargement of the floor space carried out after January 1, 2008, the invoices issued to the name of the person ordering construction work up to the date of the transfer of ownership or at least the value of the material used for the construction;
    • in the case of property purchased from a local authority as a tenant, the actual purchase price specified in the agreement;
    • duties related to purchase, lawyer’s and notary public’s fees, expert fees, etc. related to the purchase and certified by invoices.
  • The value of added value investments. These costs may include, among others:
    • any investment that adds to the value of the property (e.g.: public utilities development; establishing a sauna or swimming pool; installing (a) property protection system(s); in the case of arable land, drainage or establishing an irrigation system; the costs of construction or additions made before January 1, 2008);
    • the costs of preservation work performed in the 24 months prior to the sale where these surpassed 5% of the purchase price according to the agreement on the transfer of ownership.
  • expenditures incurred in connection with the transfer and verified by invoices. (e.g. expert's, land agent's fee)

Specifying the date of obtaining income from the sale of real property

Income from the sale of real property is considered obtained on the date when a referent valid contract (document, court or official decision) pertaining to such transfer is filed with the real estate supervisory authority.

 Specifying the date of the acquisition of real property

In respect of real estate properties, the date of acquisition is the date when a referent valid contract (document, court or official decision) pertaining to such transaction is filed with the real estate supervisory authority. In the case of inheritance, the date of acquisition is the date of the death of the bequeather.

As regards the construction of an edifice on a property after 31 December 2007, as a rule, the effective date of the resolution containing the last occupancy permit, the acknowledgment of the entry into usage, or in case of a building built on the basis of simple notification the day of issuance of the authority certificate confirming the accomplishment of the building is considered the date of acquisition. The foregoing notwithstanding, under the applicable law, the private individual may, at his/her discretion, identify the date of acquisition of the real property in existence already before the above date and the date of acquisition of the real property constructed or of the extension made subsequent to the above date as separate dates.

Establishment of the income

As a first step of establishing the income, eligible costs must be deducted from the proceeds. The amount thus obtained is the calculated amount. (At this point, it is important to note that eligible costs cannot exceed the proceeds, that is the calculated amount can be minimum 0 HUF.)

If immovable property is sold within a business activity framework, the income less costs shall qualify as income from an independent professional activity (see: Brief summary on the taxation of private individuals 2017) and be taxable. Business activity is any activity performed by a private individual on a professional basis or on a permanent or regular basis, for a consideration in money, the performance of which is carried out independently.

The calculated amount can be further reduced in regard of the passing of years.

According to the rule effective from the 1st of January, 2017 the rate of reduction is the same in case of all real properties (e.g.: home, cottage, arable land, building plot). This means that in case of any income received after the above date it is unnecessary to investigate whether the private individual sold a home, a residential property or any other real property. In case a real property and an intangible asset (right of usufruct) is transferred in 2017, the sum determined below will qualify as income, depending on the date of acquisition:

 

 

Year of acquisition

Income

(% of the accounted sum)

2017 Year 0

100

2016. Year 1

100

2015. Year 2

90

2014 Year 3

60

2013 Year 4

30

2012 Year 5

0

 

 

On the basis of the above, if the private individual sells his/her real property in 2016 that was acquired in 2012 or before he/she will not have any taxable income.

The rate of tax

Income from the sale of real property is taxed separately, i.e. it is not included in the consolidated tax base.

Once the income from the sale of real property has been established, the amount of the tax payable on it must be calculated using the applicable rate of tax, which is 15 percent.

The tax is determined by the private individual in his/her annual tax return, and is paid by the same deadline as set for filing the tax return.

Private individuals must use Personal Income Tax Return Form No. 17SZJA to declare their income from the sale of real property in 2017. The tax return must be filed by the applicable deadline and the tax shall be paid by the same deadline as set for filing the tax return.

 

 

Taxes payable by persons renting real estates – 2017

Obligation to register, tax number

If a person in Hungary leases out property within the framework of an activity in compliance with the Act on VAT, this activity may be pursued without a tax number.

Value Added Tax

As a rule, leasing out immovable properties, with the statutory exceptions, qualifies as a VAT-exempt activity, which means that the lessor shall not pay VAT on this activity. However, the lessor does not have the right of VAT deduction, either.

In terms of VAT exempt let, the taxable person has the right, subject to the prior notification of the Tax Authority, to opt for VAT taxation (which, in turn, means that he also has a right of VAT deduction). Opting for VAT taxation may, depending on the taxpayer’s decision, pertain to all types of immovable properties that are being let or only to a restricted scope of such properties: immovable properties other than residential buildings. If a taxable person made their choice, it will bind them until the end of the fifth calendar year following the year of this choice. In this case, the private person concerned shall register with the tax authority through form “T101” and apply for 1 a tax number.

Personal income tax liability

In case of real estate property not qualifying as arable land, the income of the private individual generated by renting the property is an income from independent activities and is a part of the consolidated income.

The rate of tax shall be 15 percent of the tax base.

Income generated from renting a property is either 90 percent of the revenues (rental fee + reimbursed utilities costs) or the actual difference between revenues and actually incurred and substantiated costs.

Private individuals pursuing this activity as private entrepreneurs cannot exercise this option.

Taxpayers must pay tax advance on their income from leasing immovable properties already during the tax year. The available two alternative options are as follows:

  • If the lessee qualifies as a payer (e.g. a business association or a self-employed individual), lessee shall deduct from the private individual, depending the private individuals’ statement, a tax advance from the income in compliance with the rules on independent professional activity and, if the private individual concerned is resident under the Social Security Act2 – and the income in question equals or is more than 1 million HUF, the lessee shall deduct, considering the private individual’s statement on reaching the upper threshold of contribution payment, a health care contribution of 14 percent.

1 Form could be submitted in two hard copies in the territorially competent first instance tax authority or by electronically through the Client Gateway.

  • If the lessee is not a payer or if the tax, tax advance and/or the health insurance contribution was not deducted for any reason, the lessor is obliged to pay these amounts by the 12th day of the month following the relevant quarter.

Obligation to pay health insurance contribution

Private individuals resident in Hungary are obliged to pay 14 percent in health insurance contribution on the entire amount of their income in excess of HUF 1,000,000 originating from the lease of immovable properties. This obligation continues to apply up until the upper limit pertaining to compulsory contributions (HUF 450,000) is reached.

The private person is not obliged to pay health insurance contribution after his income got from another member state being subject to community regulation. The exemption from the obligation to pay health insurance contribution is certified by the private person with a certification issued by the competent foreign authority evidencing the existence of insurance in another member state.

The 14 percent health care contribution cannot be accounted as a cost.

2 Act LXXX of 1997 on the Eligibility for Social Security Benefits and Private Pensions and the Funding for These Services


 

 

Short summary of the taxation of private persons in 2017

Personal income tax

 

1. Taxpayers

Private persons resident in Hungary are subject to tax liability in respect of all their income whether earned in Hungary or abroad. The tax year is identical with the calendar year.

 

2. Taxable income

Save the exemptions provided by law, all types of income of private individuals are subject to income tax. The Personal Income Tax Act (Act CXVII of 1995 and its amendments, hereinafter PIT) distinguishes between the following categories of income in the case of private individuals:

  • incomes to be consolidated: income from activities other than self-employment, income from activities of self-employment and other incomes to be consolidated;
  • incomes taxed separately: (e.g. income from capital gains, income from private businesses and income from the sale of movable and immovable assets).

Since 2016 the rate of the personal income tax is 15 percent.

 2.1. Tax-exempt income

 Tax-exempt benefits are listed mainly in Article 7 and Appendix 1 of PIT. Among others, such benefits include:

  • some forms of state support for fostering and raising a minor;
  • scholarships paid by non residents to students studying in a foreign educational institution or researchers working abroad;
  • certain services of the insurance companies;
  • pension.

2.2. Income from activities other than self-employment

Income from non-independent activity includes activity carried out in employment, the activity of the leader of an economic organisation, and the activities of the private individual who is an owner of a company.

Income from activities other than self-employment includes, in particular, salary and remuneration received by private individuals in payment for such activities, and income paid for personal participation and for activities as senior officers and elected office-holders. As a rule, these costs cannot be deducted from the revenue.

2.3. Income from self-employment activities

As a main rule, outside the framework of one-man businesses, income from independent professional activity shall be calculated as the difference of all revenues and expenditures. Private individuals with an independent professional activity include primary agricultural producers, private entrepreneurs, lessors of property, appointed auditors and employees in a commissioned employee status.

The taxpayer can choose between the two options of cost accounting:

-  itemized accounting,

-  10% of revenues can be regarded as cost accounting

Within one fiscal year only one way of cost accounting can be applied.

Income from royalties at its original holder is taxed in accordance with the rules applicable to income from self-employment activities.

Special rules apply to private entrepreneurs.

Primary agricultural producers may opt for flat rate taxation instead of the itemized accounting or the 10% expenditure rate.

2.4. Taxable allowances where the tax is to be paid by payer

These include among others allowances and services provided under the title of representation and business gifts; products and services given to all employees (or, based on employer’s internal regulations, to certain groups of employees) free of charge or at discount prices; meals and other services related to business travel. The tax base shall be 1.18 times the value of the allowance, to be paid by the payer / employer. The tax rate is 15%. Besides the personal income tax, the payer, employer is obliged to pay 22% health care contribution.

 

2.4.1. Fringe benefits

The following qualify as fringe benefits:

  • The share of the assigned amount that is not more than the annual allocation (HUF 100,000);
  • The Széchenyi Recreation Card
  • max. HUF 225,000 transferred to the sub-account of an accommodation service,
  • max. HUF 150,000 transferred to the sub-account of a catering service,
  • max. HUF 75,000 transferred to the sub account of a leisure service.

The sums transferred to the concrete sub-account shall not exceed the above limits even in case of several providers.

The same employer is entitled to provide as fringe benefits max. HUF 450,000. If it is a publicly financed institution, the upper limit is HUF 200,000.

The tax base is 1.18 times the value of the allocation which has to be paid by the payer, employer. Tax rate is 15%. Besides the personal income tax, the payer, employer is obliged to pay 14% health contribution according to prevailing regulations in 2017.

2.4.2. Low interest rate loans

In case of interest free or low interest loan extended by the payer is payable by the payer or the employer. The tax base is 1.18 times the interest allowance, the tax rate is 15%. When profit from interest-free or low interest rate loans is established, the base rate of the National Bank of Hungary plus 5 percentage points serves as a benchmark to which the interest actually charged must be compared.

Income from interest allowance is tax-free in cases adjusted by the law.

2.4.3. Shares and options

If a company grants its employees shares under an employee stock option scheme, no taxable income is generated if the total regular market price of the securities thus acquired is lower than HUF 1 million.

2.5. Pensions

“Pension” means

  • state pension,
  • pension payments provided by a private pension fund,
  • income defined as pension in the provisions of treaties on the exclusion of double taxation.

3. Income from private entrepreneurial activities

Entrepreneurial withdrawals (the actual remuneration of a private entrepreneur) originating from business activities and recognised as costs must be recorded among incomes to be consolidated. Private entrepreneurs are subject to entrepreneurial income tax payment liability and entrepreneurial dividend tax payment liability. The private entrepreneur may, provided that certain statutory conditions are met, opt for flat-rate taxation or Simplified Entrepreneurial Tax (EVA), or for Fixed-Rate Tax of Low Tax-Bracket Enterprises and on Small Business Tax (KATA).

The tax base of entrepreneurial income is the difference between the total income and total costs. The law stipulates a minimum income tax base and a minimum contribution base for private entrepreneurs.

The rules governing depreciation write-offs are similar to those applied by companies.

Self-employed individuals may carry forward their losses without a time limit but within the framework specified under the law provided that these losses were incurred in compliance with the principle of the proper exercise of law.

The rate of income tax for the self-employed is 9%.

Entrepreneurs opting for flat-rate taxation pay tax on the difference between their total income and a fixed proportion of costs ranging from 40 to 93 percent, depending on the activities pursued. A progressive tax rate is applied to the income of the entrepreneurs opting for flat-rate taxation. Flat rate incomes shall be treated as parts of the consolidated tax base.

A 37% tax rate is applied to the income of taxpayers paying simplified entrepreneurial tax (EVA).

Taxpayers paying the Fixed-Rate Tax of Low Tax-Bracket Enterprises and on Small Business Tax (KATA) will, as a main rule, pay a specific monthly tax of 50,000 HUF – or 75,000 HUF and if they choose to do so.

4. Capital gains

Dividend incomes shall be paid by the payer after the deduction of tax.

The relevant treaty on the exclusion of double taxation provides for non-resident private individuals’ tax payment liability on dividends paid by Hungarian companies. In the absence of such treaty, the applicable tax rate is 15 percent.

In respect of dividends from abroad received by Hungarian resident private individuals, the dividend tax paid abroad can be deducted from the 15 percent tax if evidence of such tax payment is provided. In the absence of an international agreement on the exclusion of double taxation, at least 5 percent must be paid as dividend tax in Hungary.

A 15 percent tax rate is applied to interest income as well. Interest income means, among others, interest paid on savings account deposits as well as interest on and other income from publicly offered and traded debt securities and investment fund shares.

A 15 percent tax rate is applied to income (traded price gains) from the sale of securities. The tax base is the difference between the sales price and documented costs, like the purchase price and transaction costs.

A 15 percent tax rate is applied to income from property withdrawal from a business.

Any interest, dividends or traded price gains paid by a legal person or other organisation established in an offshore state is/are taxable as consolidated income.

It is worth noting that under certain conditions and for individuals defined as domestic individuals in accordance with the Act on the Eligibility for Social Security Benefits and Private Pensions and the Funding for These Services (henceforth: Tbj), a 14 percent health contribution is also payable on incomes from dividends with a 15 percent tax burden, on exchange gains, and on incomes withdrawn from the business.

 

5. Exclusion of double taxation

The exclusion of double taxation is based on the provisions of double taxation treaties or, in the absence of such, the Hungarian law.

If there is a double taxation treaty in force, the provisions of the relevant treaty must be applied to income earned abroad.

Taxable income of private individuals who are not residents in Hungary become taxable as per the rules on taxable income in Hungary applicable to Hungarian residents under the convention to avoid double taxation. Income of private individuals who are residents in Hungary that are liable to tax outside of Hungary based on the convention (typically except for dividends) is exempt from taxes in Hungary.

Unless otherwise provided by an international agreement or the principle of reciprocity, calculated tax is reduced by 90% of the tax paid on the income abroad or maximally by the tax calculated by applying the tax rate to the tax base of this income.

6. General administration (filing of tax returns, payment of taxes)

The completion of tax returns is based on self-assessment.

The filing of tax return is based on self-assessment. The tax authority prepares a plan for the tax return of private individuals who are not entrepreneurs on the basis of the available data. This plan becomes final if the private individual accepts it or he/she does not file the tax return in any other way.

Employers and payers are obliged to deduct taxes and/or tax advances from wages and other payments. Private individuals are obliged to pay income tax and/or income tax advances themselves if their income is from sources other than payers or employers.

Private individuals must file their annual tax returns by the 20 May of the year following the given tax year, private individuals required to pay VAT and individual entrepreneurs must file by the 25 February of the following year. The possible outstanding taxes are also to be paid by these dates, taking the already withheld tax and paid tax advance into consideration.

The obligation to file a tax return must be performed on the ‘SZJA form of the current year –in the case of income for the year 2017 on 17SZJA form.

 

 

Please note that the information regarding taxes below may be out of date and is only there for historical purposes. Please click the link at the top of the page for the most up-to-date information.

 

 

The Hungarian government has increased its standard VAT rate by 2%, from 25% to 27%.

Update: click here to read about EU's comments on Hungary's new 27% VAT rate

The current 25% rate was set in July 2009.  This new rise comes as part of a package of budgetary measures aimed at achieving 300 billion forints savings and 450 billion new revenues.


 

 

Tax Changes:

Tthe most important changes of the tax regulations concerning year 2011:


Corporate tax
In terms of the business year beginning after the 31st of December 2010, 10% corporate tax applies for the entire tax year up to HUF 500 million tax base. Concerning the part above HUF 500 million tax base, 19% corporate tax applies.

Personal income tax
15% personal income tax applies in terms of the income of private individuals belonging to
the consolidated tax base, and the same tax rate is applicable for the separately taxed incomes..

Communal tax, tourism tax
The communal tax of the entrepreneurs and the tourism tax payable after the holiday resorts cease to exist from the 1st of January 2011.

Building tax
The upper limit of the building tax – if the tax base is the useful basic area – changes from
HUF 900/m2 to HUF 1100/m2, and in case of corrected market value based taxation, the
upper limit of the tax increases from 3% to 3,6% from the 1st of January 2011.

Bookkeeping in Euro
According to their own decision, the corporations – independently from the rate of
their Euro based settlement – can have Euro based bookkeeping and Euro based annual
reports from 2011. The change can be made with the balance sheet closing date, but its
precondition is to implement this change in the deed of incorporation of the company – which means that in order to apply this change in year 2011, the owner(s) shall make a decision on it until the 31st of December 2010.

Default penalty
In case the published annual report of a company is not in compliance with the
requirements set out in the Act on Accounting, the taxpayer can be fined with a default penalty up to HUF 500.000 from the year 2011. In case you have any questions in relation to the tax changes, the attorneys of our office would be pleased to answer them.

 


 

 

May 26 2010 important update ---------- Stamp Duty in now 4% for residential and commercial.

 

Last partial update, May 2009

Hungary's taxation of an individual's income is progressive. In other words, the higher the income, the higher the rate of tax payable. In 2009 the tax rate in Hungary for an individual is 18% or 36% , There are reduced rates of tax for certain income earners.
Corporate tax in Hungary in 2009 is fixed at 16%. There is an additional 4% solidarity tax.
Corporate tax for income up to HUF 50 million is 10%, subject to certain conditions. 

Hungary Individual Income Tax
An individual pays tax on his income as a wage-earner or as a self-employed person. Tax for an individual who meets the criteria of a "permanent resident" in Hungary will be calculated on his income in Hungary and abroad. A foreign resident who is employed in Hungary pays tax only on his income earned in Hungary.
To be considered a Hungarian resident, there are a number of criteria to be met, such as ownership of an apartment, the permanent place of residence of the family and the criterion of spending more than 183 days a year in Hungary.
An employer is obligated to deduct, immediately on a monthly basis, the tax payable on an employee's salary. A self-employed person must prepay income tax that will be offset on filing an annual return. The advance payment is determined on the basis of the return made for the previous year. In the event of a new business, the advance will be calculated on the basis of estimates made by the owner of the business. 
Certain payments are deductible from taxable income as detailed below. 

Hungary Individual Income tax rates for the year 2009 (HUF):

Tax base (HUF) Tax
1-1,700,000 18%
1,700,001 and more 36% of base in excess of 1,700,000 HUF

There is an additional 4% solidarity tax for annual salary income above HUF 7,446,000. 



Hungary Capital Gains
Capital gains in Hungarian companies are added to regular income. There is a participation exemption under certain terms .Dividend received by a Hungarian company is generally tax exempt .
Individuals pay 25% for capital gains and other investment income.
20% tax rate is paid on capital gains from sale of shares in EU and OECD markets.
Dividend income from shares in EU stock exchanges is taxed at 10%.
Interest income is taxed at 20%. 

Hungary Reporting Dates
The tax year in Hungary is the calendar year ending on December 31st. 

An Individual
If your income is only from a salary, you are not obliged to file an annual return.
An employer is obliged to deduct tax monthly at source from the wage of a hired worker. The tax deducted will be transferred by the employer to the Tax Authorities by the 12th of each month for the previous month.
An individual who is obliged to make an advance payment of income tax, will do so each month or each quarter, depending on the scope of his business.
The advance payment here too will be paid by the 12th of the following month.
The annual return for an individual including a supplement for any debt for tax arrears should be filed by March 20th of the year after the tax year. 

A Limited Company
A company is bound to prepay tax during the year. The advance payments are determined on the basis of the figures for the previous year. In the event of a new company, the advance payment will be calculated according to the assessment of the profits forecast for the first year. A report on advance payments is filed once a month, if the tax forecast is in excess of HUF 3 million. If the tax forecast is less than this, the report is filed once every three months.
The date for payment is the 20th day after the period of the report (whether monthly or quarterly as stated). The company will pay the difference between the tax it forecast and the tax due for the current year by December 20th.
The date for filing an annual return is May 31st in the year following the year reported. 

Hungary Corporate Tax
  • The rate of Hungary corporate tax in 2009 is 16%, plus a 4% solidarity tax


Hungary Taxation of Employees
The employer is obligated to deduct tax at source from a salaried worker and to allocate an additional sum for social insurance including pension, healthcare and unemployment.
The rates of tax are as follows:

  %
Employer 33.5
Employee 17


Hungary Dividend, Royalties and Interest
When payments of the above sorts are made to a foreign resident, the deductions at source are the following rates: 


  %
Dividend 0
Royalties 0
Interest 0

 

 

important update - 2008

  • Personal income tax (SZJA) modification in Hungary, ruling the income generated by the property sales ...

    Until the 1st of January, 2008
    Two important factor: 
    1. after 15 year of possession payable tax is 0.
    2. the income generated by the property sales could be endorsed into a new property sales with 0 tax to pay (free of tax). 

    From 1st of January, 2008
    1. 5 years time after the property purchase, the income generated by the sales is not taxable anymore
    2. to obtain a new property from the real estate sales income does not mean anymore that it would un taxable. 

    Summarized: if one purchases a property in Hungary it is beneficial to keep it in possession for 5 years time. Naturally possessing a property as a company holds the same corporate tax law. Here the tax base is the profit of the company: 16%.

    Deductible from the Tax base for companies: 
  • agent's fee
  • solicitor's fee
  • refurbishment costs

 

 

 

1. Stamp Duty

Stamp duty in Hungary has to be paid approximately 2-6 months after the purchase of property.

 

1.2 Stamp duty for residential properties

2% up to 4 million HUF of the purchase price

4% on the remaining amount of the purchase price

 

1.3 Stamp duty for commercial properties

4% of the purchase price

 

2. Tax on rent

2.1 Renting property as an individual

25% Note: profits may be taxable abroad though Hungary has double taxation treaties with most countries.

 

2.2 Renting property as a corporation

16% Note: all expenses, interest cost and some depreciation on the property and it’s contents are tax deductible.

 

3. Taxes on selling property

3.1 Individual is selling property - Personal income tax

25% (which reduces after 6 years). Note: This only applies to gains, that is the difference between the original purchase price of the property and the selling price.

3.2 Corporation is selling property - Corporate tax

16% Note: This only applies to gains, that is the difference between the original purchase price of the property and the selling price.


Hungary's taxation of an individual's income is progressive. In other words, the higher the income, the higher the rate of tax payable. In 2008 the tax rate in Hungary for an individual is 18% or 36% , There are reduced rates of tax for certain income earners.
Corporate tax in Hungary in 2008 is fixed at 16%. There is an additional 4% solidarity tax.
Corporate tax for income up to HUF 5 million, about EUR 20,00, is 10%, subject to certain conditions.

Individual Income Tax
An individual pays tax on his income as a wage-earner or as a self-employed person. Tax for an individual who meets the criteria of a "permanent resident" in Hungary will be calculated on his income in Hungary and abroad. A foreign resident who is employed in Hungary pays tax only on his income earned in Hungary.
To be considered a Hungarian resident, there are a number of criteria to be met, such as ownership of an apartment, the permanent place of residence of the family and the criterion of spending more than 183 days a year in Hungary.
An employer is obligated to deduct, immediately on a monthly basis, the tax payable on an employee's salary. A self-employed person must prepay income tax that will be offset on filing an annual return. The advance payment is determined on the basis of the return made for the previous year. In the event of a new business, the advance will be calculated on the basis of estimates made by the owner of the business.
Certain payments are deductible from taxable income as detailed below.

Hungary Individual Income tax rates for the year 2008 (HUF):

Tax base (HUF) Tax
1-1,700,000 18%
1,700,001 and more 36% of base in excess of 1,700,000 HUF

 

Capital Gains
Capital gains in Hungarian companies are added to regular income. The rate of tax imposed on capital gains is identical to the tax on regular company income.
Individuals pay 25% for capital gains and other investment income.
20% tax rate is paid on capital gains from sale of shares in EU and OECD markets.
Dividend income from shares in EU stock exchanges is taxed at 10%.
Interest income is taxed at 20%.

Reporting Dates
The tax year in Hungary is the calendar year ending on December 31st.

An Individual
If your income is only from a salary, you are not obliged to file an annual return.
An employer is obliged to deduct tax monthly at source from the wage of a hired worker. The tax deducted will be transferred by the employer to the Tax Authorities by the 12th of each month for the previous month.
An individual who is obliged to make an advance payment of income tax, will do so each month or each quarter, depending on the scope of his business.
The advance payment here too will be paid by the 12th of the following month.
The annual return for an individual including a supplement for any debt for tax arrears should be filed by March 20th of the year after the tax year.

A Limited Company
A company is bound to prepay tax during the year. The advance payments are determined on the basis of the figures for the previous year. In the event of a new company, the advance payment will be calculated according to the assessment of the profits forecast for the first year. A report on advance payments is filed once a month, if the tax forecast is in excess of HUF 3 million. If the tax forecast is less than this, the report is filed once every three months.
The date for payment is the 20th day after the period of the report (whether monthly or quarterly as stated). The company will pay the difference between the tax it forecast and the tax due for the current year by December 20th.
The date for filing an annual return is May 31st in the year following the year reported.

Corporate Tax

  • The rate of Hungary corporate tax in 2008 is 16%, plus a 4% solidarity tax


...Taxation of Employees
The employer is obligated to deduct tax at source from a salaried worker and to allocate an additional sum for social insurance.
The rates of tax are as follows:

  %
Employer 33.5
Employee 17


...Dividend, Royalties and Interest
When payments of the above sorts are made to a foreign resident, the deductions at source are the following rates:


  %
Dividend 0
Royalties 0
Interest 0


There is an additional 4% solidarity tax for salary income above 7,137,000.

 

Double Taxation

Hungary is a signatory to a Treaty for the Prevention of Double Taxation with many countries all over the world.
Draft agreements with additional countries are at the discussion stages.
A Double Taxation Prevention Treaty, in principle, enables offsetting tax paid in one of 2 countries against the tax payable in the other, in this way preventing double taxation.
Another important factor is the grant of an exemption or tax at a reduced rate on certain receipts such as interest, royalties, dividends, capital gains and others that are connected with a transaction carried out between parties associated with the Double Taxation Prevention Treaty.
It is of the utmost importance to stress that the Double Taxation Prevention Treaty takes precedence over the Hungarian Income Tax Ordinance. In other words, if certain income is taxable under the Hungarian Income Tax Ordinance but there is an exemption (reduced tax) under any Taxation Treaty, the income is taxed, if at all, but only according to the provisions of the Taxation Treaty.

Double Taxation Agreements, February 2006


Albania Australia Austria
Belgium Belarus Brazil
Bulgaria Canada China
Croatia Cyprus Czech Republic
Denmark Egypt Estonia
Finland France Germany
Great Britain Greece India
Indonesia Ireland Israel
Italy Japan Kazakh Republic
Korea Kuwait Latvia
Lithuania Luxembourg Macedonia
Malaysia Malta Moldavian Republic
Mongolia Morocco Netherlands
Norway Pakistan Paraguay
Philippines Poland Portugal
Romania Russia Singapore
Slovakia Slovenia South Africa
Spain Sweden Switzerland
Thailand Tunisia Turkey
Ukrainian Republic Uruguay USA
Vietnam Yugoslavia  

 

Legal Procedure

 

Information for purchasing real estate in Hungary

There are many legal opportunities for property investments in Hungary, out of which the two offering the greatest number of economical advantages are the property purchase or investment as a private person and the purchase through a Hungarian company.

 

1.         Purchasing as a private person

According to the Hungarian laws, foreign citizens have two possibilities to purchase real estates.
In the first case they undertake in the sales agreement to apply for the permission of the local self government allowing them to obtain the ownership of the real estate. This procedure costs HUF 50.000,- (approx. EUR 200,-) stamp duty, HUF 125.000 (approx. EUR 500,-) legal fee of the law office, the authorised copy of the passport of the buyer and it takes approx. 2 months until the permission is given.
If the foreign person decides to move to Hungary and have his primary residence there, he shall have the right to purchase the real estate serving for this purpose without the above permission. However, he has to sign a declaration in front of an attorney-at-law or a notary public stating that he is going to use this real estate as the primary residence which the authorities are entitled to check and punish if it is elsehow.

 

2.         Purchasing through a company

In Hungary, every legal entity has the right obtain ownership. The most common company forms used by foreign persons for this aim are the Partnership (“Bt.”) or the Limited Liability Company (“Kft.”), both requiring at least two members.

The stamp duty to incorporate a Kft. is HUF 370,000 (approx. EUR 1500 inc. VAT), while in case of a Bt. it is HUF 220,000,- (approx. EUR 900 inc. VAT,-), and in addition to the stamp duties, there is also a notary fee for preparing the specimen of signature.
In case the members or the managing director do not have a Hungarian address, a Hungarian delivery agent having a Hungarian postal address is needed. The reason for this is that the mail coming from the authorities is not going to be delivered outside Hungary.

    1. Partnership (Bt.)

The Bt. is a very simple company form, in which the so-called “general partner” who is entitled to represent and manage the company shall have unlimited responsibility, while the “limited partner” shall only be responsible up to the amount of the asset he put into the company. This company can be established with a very small amount of money (approx. HUF 20.000,-, corresponding EUR 80,-) and has a simple structure.

 

    1. Limited Liability Company (Kft.)

In the Kft. members have liability up to the amount of their contribution undertaken in the articles of association, and, with the exceptions set forth in the Hungarian Company Act, is not liable for the obligations of the Company itself.
A Kft. can be founded with a minimum of HUF 3,000,000 (approx. EUR 12.000), of which at least HUF 1,500,000 (approx. EUR 6.000) needs to be paid in to the account of the company simultaneously with the establishment, while the remaining 50% is to be paid in within one year from the establishment.
A Kft. is managed by a managing director who can either be one of the members or a third person. The managing director is appointed for a period of maximum five years.

 

    1. Documents to be prepared
  1. Articles of Association of the company
  2. Specimen of signature of the general partner or managing director of the company
  3. Power of attorney from the general partner or managing director to a Hungarian law firm to act in the registration procedure of the company
  4. Declaration of acceptance by the general partner / managing director
  5. Delivery proxies to the delivery agent
  6. Member’s list (in case of a Kft.)

 

    1. Documents necessary for the preparation of the above documents

 

To prepare the necessary documentation, the following information must be provided by the founders:

  1. Suggested name of the company (the law office setting up the company will check whether there is already a company having the same name with the same activity)
  2. Address of the seat of the company
  3. Rate of contribution of the members
  4. Personal information relating to the members
  5. full name
  6. mother’s full maiden name
  7. foreign address and Hungarian address (if any)
  8. place and date of birth
  9. citizenship
  10. passport number
  11. Hungarian tax identification number (if any) and Hungarian residency permit number (if any)
  12. Personal information of the delivery agent (name, Hungarian address, mother’s full maiden name)
  13. Contribution of the members of the company to the capital of the company

 

    1. Registration process of the company

 

The registration procedure can be carried out by a Hungarian Law Office, and consists of the following steps:

  1. The Hungarian law office prepares the documents described above (both in Hungarian and English language).
  2. The specimen of signature is prepared in front of the notary public and in case of a Bt., the whole capital, in case of a Kft. at least 50% of the capital of the company is paid in to the bank account of the company.
  3. The documents are handed in to the Court of Registration. The Court of Registration hands out a receipt, stating that the registration process started. It takes approx. 30 days until the resolution about the registration is made.
  4. The company is registered at the Hungarian Tax Office and the Hungarian Statistical Office.
  5. The company chooses a Hungarian auditor.

In the meantime (after having filed the documents to the Court of Registration and before the registration of the company) the company exists as a pre-company and has the right to obtain property.

 

3.         Real estate purchase and registration of the ownership

Once the Court of Registry hands out the receipt proving the receipt of the company papers and the start of the registration procedure, or if the real estate is purchased by a private person, the preparation of the sales agreement can start.
The Parties agree on the purchase price and on the payment schedule and provide the attorney-at-law with their personal data to be included in the sales agreement.
The attorney-at-law proves the property sheet of the real estate, kept at the land Registry Office and informs the Parties, especially the Buyer of the state of the real estate, including the potential burdens on it.
The sales agreement includes the following provisions:
- personal data of the Parties (Seller and Buyer);
- exact lot number, address and  size of the real estate;
- purchase price and payment schedule agreed upon by the Parties;
- take-over of the possession upon the payment of the total purchase price;
- security clauses;
- date, signature of  the Parties and the countersigning attorney-at law.

The Buyer generally hands over 10% to 15% of the purchase price to the Seller as a deposit. The rest of the purchase price arrives to the escrow account of the law office, where the legal fee and the fee of the real estate agency are to be sent as well.

Upon paying the deposit, the fact of the sale to the Buyer shall be registered at the Land Registry Office with reservation of title. Upon the payment of the last part of the purchase price, Seller is obliged to issue the so-called „permission of registration”, on the basis of which the ownership right of the Seller shall be deleted and the Buyer shall be registered as the new owner of the real estate.

 

Should you have any further questions, please do not hesitate to contact our Law Office!

[Click here to go to LAW FIRM]

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Bajcsy-Zsilinszky út 5.

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