INVESTMENTS AND TAX POLICIES

In recent years the Hungarian government has created a more investor-friendly financial environment in order to make real estate investment more attractive. Here we have summarized you the most important duty and tax rules for your information.

This section is updated to follow the changes of law, but please contact us directly as tax laws may be subject to change more often.

Taxes and duties related to real estate transactions

In order to increase your profit rate, we inform you about the taxes and duties payable and the allowances and exemptions in effect

Context of the Duty:
Real property, movable property (rights of pecuniary value related to real property, cession of the exercise of usufruct enjoyed in respect of real property etc.) and rights of pecuniary value.

General Rate of the Duty:
4% of the market value of the property acquired, including encumbrances. In the case of exchanging ownership rights of real properties, the basis of the duty shall be the market value of the real property acquired.

Duty for residential property:

With regard to purchasing a real property, the basis of the duty to be paid is the purchase price of the property. The rate of the duty for each housing unit is 2% up to 4 million HUF and an additional 4% for the portion of the market value above 4 million HUF.
E.g.:
Real property of 15 million HUF, the total amount of the stamp duty is 520.000 HUF
2% for 4 million (80.000 HUF)
4% for 11 million (440.000 HUF)

In respect of the acquisition of partial ownership, the 2% may be applied for the fraction of the 4 million HUF in proportion to the ownership percentage acquired, and the 4% for the amount in excess thereof. In the case of exchanging ownership of residential units, the basis of the duty is the difference of the full market value, including encumbrances. In the case of exchanging the ownership of more than two housing units, the basis of the duty is the differential of the lowest and highest full market value, including encumbrances.

Acquisition for Commercial Purposes:

Upon acquisition of ownership rights in a real estate property, the rate of duty shall be 2 per cent of the market value of the real estate property without any deduction of encumbrances, if the buyer:
a) is licensed to engage in the selling of real estate properties (hereinafter referred to as marketing of real estate properties), and whose net sales revenue for the previous tax year originate from such activities up to at least 50 per cent or more, or
b) is authorized by the Pénzügyi Szervezetek Állami Felügyelete (Hungarian Financial Supervisory Authority) to provide financial leasing services,
and he provides a statement before the order concerning payment of the duty becomes operative agreeing to sell the property within two years of the time of lodging the notification for dutiable purposes, or to transfer the real estate property by way of conveyance of title under lease contract at the end of the term.

Duty exemptions and allowances:

• acquisition of ownership (ownership share) of a landed property suitable for the construction of a residential building, and rights in such real estate property, if the party acquiring the property builds a residential building on such real estate property within four years of the date of submission of the contract for dutiable purposes, and the net floor space of the residential suite(s) contained in the building is at least 10 per cent of the permissible building space fixed in the general zoning plan. The party acquiring the property shall have until the order for payment concerning the duty becomes definitive to notify the state tax authority regarding his intention to build a residential building;

• when a new residential property or a share in such property – with a market value of 15 million forints or less – is purchased, if it has been built or developed by a company for the purpose of resale, including if developed by the conversion of a building that was not registered in the real estate register, or by expansion (e.g. addition of a mansard), and was not used as a residential building or residential suite.

• In case the purchase price of such residential property is more than 15 million HUF but does not exceed 30 million HUF, part of the purchase price above 15 million HUF is subject to stamp duty.

If the purchaser is under 35 years old, and buys his/her first real property, he/she is entitled to an allowance up to 50% of the payable duty, but not to exceed 40,000 HUF, if the market value of the property does not exceed 8 million HUF. Please contact us for further information.

Corporate Tax:

Fiscal year-end profit of the company is subject to 10% up to 500 million HUF tax base and 19% above.

Dividend Withholding Tax:

The rate of dividend withholding tax is 25%, companies are exempt from the payment.

Local business tax:

Maximum rate is 2%. To be paid based on the realized income to the local Council (rates according to the authority)

Construction Tax

To be paid to the local Council based on the size of the real estate. (rates according to the authority of construction and may vary in each district). Some districts give exemption from such tax.