Property in Hungary
Since buyers trust in the realty market is still quite low (though last quarter of 2011 show an increase in sales), introducing a property for sale in the real-estate market in Hungary is generally not recommend at present.
As a ripple effect originating from the credit crunch, many who bought apartments in Budapest over the past 10 years are facing an urgent need to sell, which combined with a depreciation of the HUF and the local market landlords requirements, have pushed the selling prices down, causing many investors to offer their properties in Budapest for sale at prices which are considerably lower than the purchase price. However, current situation have presented opportunities for more savvy and experienced buyers to purchase properties at prime location at prices which can get to as low as 50% per sqm compared to their purchase prices just a couple of years ago.
if you are interested in buying property in Hungary, below you can find a quick F.A.Q with important notes to consider:
Taking possession of a property:
After negotiation and acceptance of your price offer, your lawyer will check the owner’s ownership status at the land registry office. Having confirmed the status is legit, the buyer should put the down payment deposit (usually 10-20%) of the agreed sales price, and simultaneously sign the contract.
Afterwards, the purchasing contract will be filed by your lawyer at the land registry office, having your name recorded as the title ownership (in order to prevent the seller from taking any mortgage or reselling it).
After the completion of making all the payment, the buyer takes possession over the property, though the full registration at the land registry office will take further time to finalize.
Buying as a private person/company: to Buy
Buying as a private person or as a company is a case pending decision to make, as each way has its disadvantages and advantages.
Generally speaking, buying as a company may be more beneficial when purchasing several properties, however, for doing so – the buyer need to first register a company with the Hungarian authorities.
The main disadvantages of buying property as a private person is that it is problematic to purchase more than one property, as well as difficulties with writing off expenses related to the purchased property. Another aspect to consider is that since many private home owners do not open a tax entity in Hungary (though they should), they cannot issue invoices for rent, meaning that many foreign companies who are located in Budapest, and require invoices for paying rent on behalf of their expatriates staff cannot let the property.
The disadvantage of operating a company is that it will require a monthly payment for an accountant, a steady tax reports submission, and a seat for the company which must be registered in Hungary.
Opening a Hungarian company is a relatively easy process, which can take about a couple of weeks, in which the owner of the company needs to inject a certain amount of money as capital (around 2000 euro) which can be withdrawn as soon as the company is approved and operational. The lawyer’s legal fee for the creation of a “simple company” is about 500 euro. There are no special permits required for establishing a commercial entity in Hungary, and even a single foreign person can quite easily open a registered company in Hungary. (at least up to current 2012).
There are several ways for setting up a company’ s structure , the ones which are more common with foreign investors in Hungary are a LLC-kft or a Bt-partnership. The main difference between Bt and kft is that the Kft’s liability of the owner is limited to the amount of the foundation capital.
If buying as a private person, an Authorization of the Public Administration Office might be required, which might takes about 60 days to obtain from the official authority.
Related fees:
Costs to be paid for the purchasing of a property will include:
Income tax upon selling:
As a Private home owner: the tax incurred is 25% (December 2011),However, Hungary has long standing double taxation treaties with most countries, so it is wise to consult with a tax advisor for finding a way to reduce the related expenses.
As a Company there is a 16% tax on profit plus 20% of what’s left if money is withdrawn as dividend. In general, from the kept 82% profit, a 16.5% is a dividend tax. In any case, for companies owning property, the accountant should depreciate the annual amortization as well as account all related costs to the purchase (such as flights, fees, and accommodation in the city).
As a ripple effect originating from the credit crunch, many who bought apartments in Budapest over the past 10 years are facing an urgent need to sell, which combined with a depreciation of the HUF and the local market landlords requirements, have pushed the selling prices down, causing many investors to offer their properties in Budapest for sale at prices which are considerably lower than the purchase price. However, current situation have presented opportunities for more savvy and experienced buyers to purchase properties at prime location at prices which can get to as low as 50% per sqm compared to their purchase prices just a couple of years ago.
if you are interested in buying property in Hungary, below you can find a quick F.A.Q with important notes to consider:
Taking possession of a property:
After negotiation and acceptance of your price offer, your lawyer will check the owner’s ownership status at the land registry office. Having confirmed the status is legit, the buyer should put the down payment deposit (usually 10-20%) of the agreed sales price, and simultaneously sign the contract.
Afterwards, the purchasing contract will be filed by your lawyer at the land registry office, having your name recorded as the title ownership (in order to prevent the seller from taking any mortgage or reselling it).
After the completion of making all the payment, the buyer takes possession over the property, though the full registration at the land registry office will take further time to finalize.
Buying as a private person/company: to Buy
Buying as a private person or as a company is a case pending decision to make, as each way has its disadvantages and advantages.
Generally speaking, buying as a company may be more beneficial when purchasing several properties, however, for doing so – the buyer need to first register a company with the Hungarian authorities.
The main disadvantages of buying property as a private person is that it is problematic to purchase more than one property, as well as difficulties with writing off expenses related to the purchased property. Another aspect to consider is that since many private home owners do not open a tax entity in Hungary (though they should), they cannot issue invoices for rent, meaning that many foreign companies who are located in Budapest, and require invoices for paying rent on behalf of their expatriates staff cannot let the property.
The disadvantage of operating a company is that it will require a monthly payment for an accountant, a steady tax reports submission, and a seat for the company which must be registered in Hungary.
Opening a Hungarian company is a relatively easy process, which can take about a couple of weeks, in which the owner of the company needs to inject a certain amount of money as capital (around 2000 euro) which can be withdrawn as soon as the company is approved and operational. The lawyer’s legal fee for the creation of a “simple company” is about 500 euro. There are no special permits required for establishing a commercial entity in Hungary, and even a single foreign person can quite easily open a registered company in Hungary. (at least up to current 2012).
There are several ways for setting up a company’ s structure , the ones which are more common with foreign investors in Hungary are a LLC-kft or a Bt-partnership. The main difference between Bt and kft is that the Kft’s liability of the owner is limited to the amount of the foundation capital.
If buying as a private person, an Authorization of the Public Administration Office might be required, which might takes about 60 days to obtain from the official authority.
Related fees:
Costs to be paid for the purchasing of a property will include:
- Lawyer fee: about ~1.5%
- Property duty: ~6%
- If opening a company, then a monthly bookkeeping fee: ~50 euro
- Fees for opening a company/processing authorization: ~300-750 euro (including states stamp fees).
Income tax upon selling:
As a Private home owner: the tax incurred is 25% (December 2011),However, Hungary has long standing double taxation treaties with most countries, so it is wise to consult with a tax advisor for finding a way to reduce the related expenses.
As a Company there is a 16% tax on profit plus 20% of what’s left if money is withdrawn as dividend. In general, from the kept 82% profit, a 16.5% is a dividend tax. In any case, for companies owning property, the accountant should depreciate the annual amortization as well as account all related costs to the purchase (such as flights, fees, and accommodation in the city).
