Feb 1, 2011

How will the New Hungarian Income Tax Save you Money?

Hungary has introduced a new income taxation system, enabling property buyers and sellers to realize savings on their residential real estate transactions. The overhaul applies to income from employment along with capital gains from the sale of real estate.

Taxes when Selling Property in Hungary
Hungary implemented a flat income tax of 16% effective January 1, 2011, replacing the progressive tax rate of 17% and 32%. Gains earned from selling property will be taxed at the 16% rate. Private individuals pay capital gains tax for five years at the following rate:

       1st year after sale: 100% of profit taxed at 16%
       2nd year after sale: 90% of profit taxed at 16%
       3rd year after sale: 60% of profit taxed at 16%
       4th year after sale: 30% of profit taxed at 16%
       5th year after purchase – no capital gains tax

Deductible expenses include the legal, broker agent and advertising fees, stamp duty and renovations that increase value, such as expansion or the installation of a new heating system.

The new taxation system also clarifies rules regarding property sales. A PWC Alert published by Portfolio.hu reports that "the definition for the date on which a particular income was received will also apply to the acquisition of real estate (in whole or in part). In addition, the Bill stipulates that the rules on the successive acquisition of shares of ownership in real estate will also apply to renovated, separated and shared properties". 

Taxes when Buying Property in Hungary
When buying property in Hungary, the taxation system remains the same: buyers must pay a stamp duty based on the value of the property.

Purchases of new-built property for less than 15 million HUF are exempt from paying a stamp duty. Purchases above 15 million are taxed at 4%.

A stamp duty is imposed on the purchase of resale property if the price exceeds 30 million HUF. The same applies to new-built property purchased for more than 30 million HUF. The following calculation is applied:
Up to 4 million HUF (14,700 EUR), the tax rate is 2%. The remainder of the purchase price is taxed at 4%.

Read about new taxation rules in Bratislava, Moscow, Prague and Warsaw, and and how they apply to property here.
You can see more properties for sale in Budapest on our website, www.athome-network.com

Dávid Ábrahám is the key account manager for luxury property sales in Budapest for At Home Network.
To contact him, call or write an e-mail
Mobile: +36 70 930 3821
Tel: +36 1 880 3264
e-mail: david@athomebudapest.hu

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