Non-residents are taxed in Hungary on income arising from Hungarian sources only. You are considered tax resident in Hungary if you spend at least 183 days there per year or if your main resident home is located in Hungary.
You will also be obliged to file a tax return detailing your worldwide income in your home (tax resident) country.
Where a double taxation agreement exists between Hungary and your home country, which provides for double taxation relief, then a deduction for tax paid in the foreign country can be offset against tax on the same income in your home country.
Tax on purchase:
Hungarian Transfer Tax : The transfer of property which is used as a dwelling is subject to stamp duty ranging from 2%-4% depending on value. 4% is applied to the first HUF 4,000,000, 6% thereafter. It is payable by the purchaser.
The purchase of shares in Hungary is not subject to stamp duty.
Hungarian VAT is charged on newly build property at 27% (2012) or if the seller elects to be vatable. VAT is generally not levied on rents unless the landlord is in the business of letting accomodation or elects to be vatable.
Ongoing property taxes:
Hungarian Income Tax : Non-resident property owners must pay income tax on rental income arising from the letting of a Hungarian property. New rules apply from 2011 whereby a flat tax rate of 16% applies to income earned eg net rental income. Previously income was taxed at progressive rates between 17% - 32%.
An annual income tax return must be submitted before 20th May following the relevant tax year end.
Hungarian Corporate Income Tax is payable if a property is purchased through a Hungarian company. Net profits after allowable costs are taxed at 10% - 19%. Income over HUF500 million is taxed at the higher rate of 19%. Capital gains earned in a company are taxed as company income ie 10-19%.
Local Property Tax are also payable and vary per location. The average cost per annum is HUF 900 (circ €3.13) per sq/m or a max. of 3% of market value of the property for building property; land tax is 500HUF per sq/m or a max. of 3% of market value.
Transfer taxes:
Hungarian Capital Gains Tax : For residential property, if the property is sold after 5 years, reduced rates of Hungarian CGT apply ie 10% reduction per annum after year 5. No Hungarian CGT applies if sold after year 15. Irish CGT still applies at 30% (from 2012).
For taxable gains, an individual pays Hungarian CGT tax @ 16%.
The rules relating to re-investment changed from 1 Jan 2008.
Hungarian Inheritance Tax : The amount of inheritance tax due depends the value of the property transferred and the relationship between the individuals that are party to the inheritance. The inheritance is taxed progressively (from 2.5% - 21%) in accordance with the table below :
For residential property transfers only:
| Taxable Inheritance HUF (€) | 1 | 2 | 3 |
|
|
2.5% | 6% | 11% |
| 18,000,000 - 35,000,000 (€140,777) |
6% | 8% | 15% |
|
|
8% | 12% | 21% |
1. Children, Spouse, Parents ; 2. Other close relatives ; 3. Non-Relatives
Worldwide income
If you are resident in Ireland or the UK, you will be obliged to declare and file your Hungarian income in Ireland/ UK also. There is a double taxation agreement between Hungary and Ireland / the UK so relief for certain Hungarian taxes will be given against Irish/ UK taxes payable on your Hungarian income.