Frequently Asked Questions Hope this helps?
At CD Properties we specialize in districts V and VI of down town Budapest, not only are these districts the most attractive architecturally, but are first for shopping, parks, restaurants, hotels, theatres and opera and car parking. Overall foreigners prefer to rent in these two districts because of the attractions and locality to their places of work. There are up and coming districts, however, they will unlikely to be as popular as the two most exclusive districts and foreigners prefer to be in V and VI.
There are two primary costs associated with purchasing residential real estate: lawyers’ fees and stamp duty paid to the Hungarian treasury.
Under Hungarian law, the buyer’s lawyer prepares the sales contract. The lawyers fee will be between .5% to 1.5% (plus 27% VAT) of the asking price.
Stamp duty (lakásvásárlási illeték) is 2% of the purchase price up to the first 4,000,000 Ft, and 4% above this. If a property is bought and sold within two years by a company having it’s main business activity of real estate purchase and selling, the stamp duty is a reduced 2%, if however the property fails to sell within the specified two years, a hefty penalty of 8% will be charged.
The capital gains tax for private individuals is 16%. However, this general rate is applicable only in the year of the purchase and the year following. From the second year a decreased tax base is applied, which is reduced to zero following the 5th year after the purchase. In practice, this means there is no personal tax on long-term capital gains.
Finally, if a property is sold via an estate agent, expect to pay fees ranging from 3% to 6% of the asking price, plus VAT.
In most cases, no. If you purchase more than one property as an individual, permission is required by the authorities, but this is normally granted within 30 days. Meanwhile, if you are purchasing a property in a listed historic building, pre-emption rights are applicable from various authorities, and it can take up to 90 days to obtain such permission. Buying a listed property can also involve having to obtain permission for certain interior renovations.
Our management fees are 10% plus VAT for a full package of services (please refer to our property management page). A withholding tax of 10% on rental income is applicable if you are renting your apartment as a foreign individual non resident in Hungary (if you are a Hungarian national with an income tax number the rate is 39%), this is deducted either by your management company or your tenant’s company, who are liable to deduct this tax on your behalf. Most EU countries have dual taxation treaties with Hungary.
Most tenants come directly via relocation or estate agents, who work closely with the international companies, these agents will charge an owner a ‘tenant finding fee’ these range from one month’s rent or 12% of the annual rental income. These charges are subject to VAT and are only applicable for the FIRST year’s lease agreement. These fees are also pro-rated if the tenancy is less than 12 months and should be reimbursed should a tenant on a 12 month lease, break the agreement earlier.
There are other nominal costs, including insurance, condominium fees and standby utility and management charges. Should your apartment be owned by a Hungarian company you will need to instruct your accountant to register the property with the district council, who in turn will charge a building tax levy based on the size of the property. The tax varies from district to district; in District V and District VI they are currently just over Ft 1,000 per square meter per year. If the property is held in the name of an individual this tax is also applicable.
In most cases VAT is not appliable on residential rent unless the property is owned by a VAT recraimable company which in this case, rent is changed plus 27 % VAT.
This really depends on the individual purchaser’s circumstances. For those who wish to purchase several flats, or who are buying as part of a consortium, setting up a company can often make the most sense. It is relatively easy to set up a Hungarian company, and the basic company tax rate of 16% is not onerous. Meanwhile, when it comes to selling the property or properties, the company rather than the individual properties can be transferred, allowing the new owner to avoid paying stamp duty. Accounting fees can vary, but for a company which owns one or two rented apartments the fees are around Ft 35,000 per month plus 27% VAT.
For any further information, we suggest you contact the following companies, who we trust and recommend to provide you with all the latest up to date information:
- Legal: Dr. Balázs Tóth
- M. Tóth Law Office
- Tel: +36 1 267 0858
- Email: balazs@mtoth.com
- Accounting: Mr. Zsolt Kozma
- Forgoeszkoz Kft
- Tel: +36 1 239 1817
- Email: zkozma@t-email.hu