Taxes on property investment in Hungary

Types of taxes to pay after Hungarian property investment

While the taxes on property investment will strongly depend on your legal status in Hungary and on the type of business you will use for your investment, it still might be easiest to group taxes according to the life cycle of your investment:

• Taxes on purchase
• Taxes on rental
• Taxes on sale

Taxes on property purchase in Hungary

1. License

If you are a Hungarian or an EEA citizen (so not a third-country national), you can buy residential property without restrictions. If you are a third-country national, you will need a permit from the local government. The application fee is HUF 65,000 (ca. EUR 180), unless you are a permanent resident who has already applied for citizenship, in which case it is only HUF 13,000 (ca. EUR 35). The procedure takes currently 4-6 weeks.

If you are planning to buy property through a Hungarian company, no license will be needed, since the buyer will be a Hungarian legal person. If your main activity in Hungary would be this real estate investment and rental, you can also set up a company specifically for property management. As a bonus, you will become eligible for Hungarian residency too, which offers visa-free access to the Schengen zone.

2. Property tax: 4%

Standard property tax is 4% of the purchase price. Normally, it is to be paid in a few months after purchase – whenever communication happens between the Land Registry and the Tax Authority; the tax will be levied by the Tax Authority. If you do not get a payment notice, you are still supposed to pay by the end of the tax return season (which is May 20 the following year).

In some cases, the tax can be lower, but that is rarely relevant for investors. Examples include when the buyer is under 35, this is their first real estate purchase, the total value of the purchase is below HUF 30 million (ca. EUR 86,000), or the property is a new build.

3. Local land taxes

Local governments sometimes levy additional taxes, especially if you are purchasing a vacant lot for development. As a result, it is essential that you check local regulations before making a purchase.

Taxes on rental

Income from property rental is normally taxable in Hungary, even if you are not a tax resident in Hungary. Since Hungary has double taxation agreements in place with many countries around the world, you will probably not have to pay taxes both in Hungary and in your country of tax residency – but it is best to consult a tax advisor on the topic. Let us know, and our experts will be happy to guide you!

Next, taxes on your rental income will depend on the business structure in which you are realizing your investment.

• As a natural person: 15% income tax
• As a freelancer: 15-24%, depending on the tax regime (available options depend on your revenue)
• As a company: 9% corporate tax + 15% dividend tax

Regardless of the business structure, you should expect to pay a 2% local business tax.

Rental fee is normally exempt from VAT (which is 27% in Hungary). However, you might want to opt in under certain circumstances, especially if you are planning to rent the property to businesses.

If you are a tax resident in Hungary, you might need to pay social security contribution (18.5%) and social contribution tax (13%) too.

Taxes on sale

Again, the taxes on sale will depend on the business structure in which you are realizing your investment.

• If you own real estate through your Hungarian company, the company will have to pay corporate tax (9%) after the profit made from the sale of the real estate. Of course, costs are deductible from the revenue.
• If you own real estate as a natural person or as a freelancer, you must pay personal income tax (15%) after your income from the sale.

The personal income tax payable can be reduced in line with how long you owned the property before you decided to sell it. After 5 years, the sale will be exempt from personal income tax. See our following example, showing PIT connected to real estate sale if the property was purchased in 2020:

• 100% in the year of purchase and the following year (in 2020 and 2021)
• 90% in the 2^nd year after purchase (2022)
• 60% in the 3^rd year after purchase (2023)
• 30% in the 4^th year after purchase (2024)
• 0%, so tax free from the 5^th year after purchase (from 2025)

Of course, both corporate tax and personal income tax apply only to your profit (which is the sale price minus your expenses). In line with this, the following costs are deductible from the sales price if they are properly documented with invoices:

• costs of acquiring the property (purchase price, realtor, lawyer)
• renovation and maintenance (materials and labor)
• costs of sale (realtor, lawyer)

Avoid double taxation

Real estate related taxes are typically paid in the country where the property is located, so you will probably pay taxes on your property investment in Hungary, even if you are not a tax resident.

If you are a tax resident elsewhere, there is a chance that you might need to pay a “source tax” after your Hungarian income. However, Hungary has double taxation treaties with many other countries to prevent that – although you might still need to report the income in both countries.

To avoid paying taxes twice after the same income or being fined for failing reporting obligations, it is essential that you consult a tax advisor before making your property investment in Hungary. The Helpers Team has 20+ years of experience supporting international clients with business setup, investment, and accounting matters, and we would be happy to help you too.

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