Taxes and Capital Gains Tax on real estate in Hungary
Robert Kemkers, Thursday, 19 September 2013
Many people have questions in respect to the tax consequences of the purchase of real estate in Hungary, whether it's a business, second home or permanent residence. On this page, you will find a lot of information about various taxes that may be of interest if you purchase real estate in Hungary. The text is fairly general. For special cases and further details please contact , your financial advisor or visit .
Transfer tax
When you buy property in Hungary you have to pay transfer tax, just as in the UK and most EU countries. Since 1/1/2013 there is an overall rate of 4% of the full purchase price specified in the contract. This applies to all property types, there is no difference anymore between homes and holiday homes, plots of land or other immovable property. Also the lower rate of 2% over the first four million forint is gonel! A few months after signing the contract you will automatically receive an assessmentof the Hungarian tax authorities, often accompanied by a letter in English. The period varies though. Previously, you had to pay about a year after purchase. Nowadays the tax office is often significant 'faster'.
If one buys a plot and constructs a building on the plot, one can recover the tax or request for a tax deferral.
Capital gains tax on the sale of your home
In Hungary everyone, regardless of nationality, has to pay capital gains tax when selling property with a profit. The law on capital gains tax has recently been amended (effective January 1, 2008) and applies to all sales after this date. This change is a nice boost for the Hungarian state in times of rapidly rising prices.
The argument that inflation occurred during the period between buying and selling won’t help you.
When you sell within five calendar years after buying a property that is registered as a main residence, you have to pay a percentage of 16% on the difference between the purchase price and selling price, minus any maintenance and renovation costs and other investments in the property. You should have invoices of all the expenses you’ve made. So in the case of periodic maintenance, renovation or expansion it is necessary to ask for bills and receipts and such.
The taxable amount decreases over the years: in the same calendar year and next year you pay a tax of 16% on 100% of the profits, from the 2nd calendar year on 90% of profits, after 3 years on 60% of the profit and after 4 years on about 30% of the profits. After five calendar years, you don’t have to pay the capital gains tax because the Hungarian government wants to stimulate the housing market.
For all other real estate (plots, winehouses, properties registered as holiday homes, special objects etc.) the old rule will apply: after 5 years, each year 10% of the profits will be deducted. In other words, when sold after six years, you only have to pay 25% tax on 90% of the profit, after 7 years of 80%. 15 years after the purchase, the profit is tax-free.
Until 2007, you didn’t have to pay the capital gains tax if you invested the profit in the purchase of a new home or the expansion (with at least 1 room) of a home already in your possession. This favorable law has changed, making profit now always taxed, whether you reinvest or not! From January 1 2008, the capital gains tax is deducted from the income tax in Hungary. As a foreigner and non-resident you need to make the payment yourself.
Inheritance Tax
You have to pay inheritance tax in Hungary. First-degree relatives pay less. The tax is related to the assessed value. The value of the property is estimated by the municipality. The tax is progressive: you usually pay a higher percentage for expensive property. The tax has a maximum limit.
This progressive tax is at first sight a strange phenomenon. It seeks to minimize the inheritance tax on small fields and simple houses. Debts and mortgages are of course deducted. Inheritance tax rates fluctuate and depend on many factors, it’s impossible to provide a complete overview. Each case has to determined on its own. First-degree relatives pay generally around 2.5% for small fields and simple houses. For other real estate, the death duties are around 11%.
Property taxes and other municipal charges in Hungary
In Hungary, there are hardly any direct local taxes resulting from ownership of real estate. However, there may be sewage and waste charges, even for holiday homes or homes that are barely inhabited. These charges are usually very low, often no more than a few euro per month.
In addition, municipalities have the option to tax property. But only up to a certain percentage. Most municipalities only tax inhabited houses, plots and agricultural land. Some municipalities also tax holiday homes and vacant homes. The tax amount is sometimes fixed and sometimes depending on the number of square meters. The tax varied in recent years between 12 and 55 euro per year for homes and a lower amount for plots and agricultural land.
In some municipalities, especially with many foreign property owners, there’s an additional municipal tax on houses that are not permanently inhabited. The amount is almost never above 250 euros per year.
There are also local authorities, especially cities like Pécs, where a tax exemption is valid for a maximum number of square meters in total or per person. In these cases, one doesn’t need to pay tax e.g. for apartments smaller than 70 m2, or for houses where the surface area is not greater than 25 m2 per occupant.
Rental income from your property in Hungary
If you already have an income in Hungary and you pay tax in Hungary, you have to add the rental income to your Hungarian income. Hungary has a fixed rate of 16% income tax. If you are not rateable in Hungary, you have to declare the rental income in the UK. For more information see on Hmrc.gov.uk.
Author : Robert Kemkers
Many people have questions in respect to the tax consequences of the purchase of real estate in Hungary, whether it's a business, second home or permanent residence. On this page, you will find a lot of information about various taxes that may be of interest if you purchase real estate in Hungary. The text is fairly general. For special cases and further details please contact , your financial advisor or visit .
Transfer tax
When you buy property in Hungary you have to pay transfer tax, just as in the UK and most EU countries. Since 1/1/2013 there is an overall rate of 4% of the full purchase price specified in the contract. This applies to all property types, there is no difference anymore between homes and holiday homes, plots of land or other immovable property. Also the lower rate of 2% over the first four million forint is gonel! A few months after signing the contract you will automatically receive an assessmentof the Hungarian tax authorities, often accompanied by a letter in English. The period varies though. Previously, you had to pay about a year after purchase. Nowadays the tax office is often significant 'faster'.
If one buys a plot and constructs a building on the plot, one can recover the tax or request for a tax deferral.
Capital gains tax on the sale of your home
In Hungary everyone, regardless of nationality, has to pay capital gains tax when selling property with a profit. The law on capital gains tax has recently been amended (effective January 1, 2008) and applies to all sales after this date. This change is a nice boost for the Hungarian state in times of rapidly rising prices.
The argument that inflation occurred during the period between buying and selling won’t help you.
When you sell within five calendar years after buying a property that is registered as a main residence, you have to pay a percentage of 16% on the difference between the purchase price and selling price, minus any maintenance and renovation costs and other investments in the property. You should have invoices of all the expenses you’ve made. So in the case of periodic maintenance, renovation or expansion it is necessary to ask for bills and receipts and such.
The taxable amount decreases over the years: in the same calendar year and next year you pay a tax of 16% on 100% of the profits, from the 2nd calendar year on 90% of profits, after 3 years on 60% of the profit and after 4 years on about 30% of the profits. After five calendar years, you don’t have to pay the capital gains tax because the Hungarian government wants to stimulate the housing market.
For all other real estate (plots, winehouses, properties registered as holiday homes, special objects etc.) the old rule will apply: after 5 years, each year 10% of the profits will be deducted. In other words, when sold after six years, you only have to pay 25% tax on 90% of the profit, after 7 years of 80%. 15 years after the purchase, the profit is tax-free.
Until 2007, you didn’t have to pay the capital gains tax if you invested the profit in the purchase of a new home or the expansion (with at least 1 room) of a home already in your possession. This favorable law has changed, making profit now always taxed, whether you reinvest or not! From January 1 2008, the capital gains tax is deducted from the income tax in Hungary. As a foreigner and non-resident you need to make the payment yourself.
Inheritance Tax
You have to pay inheritance tax in Hungary. First-degree relatives pay less. The tax is related to the assessed value. The value of the property is estimated by the municipality. The tax is progressive: you usually pay a higher percentage for expensive property. The tax has a maximum limit.
This progressive tax is at first sight a strange phenomenon. It seeks to minimize the inheritance tax on small fields and simple houses. Debts and mortgages are of course deducted. Inheritance tax rates fluctuate and depend on many factors, it’s impossible to provide a complete overview. Each case has to determined on its own. First-degree relatives pay generally around 2.5% for small fields and simple houses. For other real estate, the death duties are around 11%.
Property taxes and other municipal charges in Hungary
In Hungary, there are hardly any direct local taxes resulting from ownership of real estate. However, there may be sewage and waste charges, even for holiday homes or homes that are barely inhabited. These charges are usually very low, often no more than a few euro per month.
In addition, municipalities have the option to tax property. But only up to a certain percentage. Most municipalities only tax inhabited houses, plots and agricultural land. Some municipalities also tax holiday homes and vacant homes. The tax amount is sometimes fixed and sometimes depending on the number of square meters. The tax varied in recent years between 12 and 55 euro per year for homes and a lower amount for plots and agricultural land.
In some municipalities, especially with many foreign property owners, there’s an additional municipal tax on houses that are not permanently inhabited. The amount is almost never above 250 euros per year.
There are also local authorities, especially cities like Pécs, where a tax exemption is valid for a maximum number of square meters in total or per person. In these cases, one doesn’t need to pay tax e.g. for apartments smaller than 70 m2, or for houses where the surface area is not greater than 25 m2 per occupant.
Rental income from your property in Hungary
If you already have an income in Hungary and you pay tax in Hungary, you have to add the rental income to your Hungarian income. Hungary has a fixed rate of 16% income tax. If you are not rateable in Hungary, you have to declare the rental income in the UK. For more information see on Hmrc.gov.uk.
Author : Robert Kemkers
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