Taxation in Hungary

Individuals present in Hungary for at least 183 days in a calendar year are deemed resident. Also, if they are domiciled or maintain their usual residence in Hungary they are considered resident. Non-residents are taxed on income from Hungarian sources only, and may be liable to Income Tax, Capital Gains Tax and Inheritance Tax. The tax system is self assessment and the tax year is the calendar year.

Income Tax

Non-residents are subject to income tax on their Hungarian source rental income at a rate of 20% without a deduction for expenses. Where an individual lets property to a company, the company as tenant is obliged to withhold 20% tax.

Like many treaty countries, a credit is available to Irish resident individuals against the Irish tax liability for Hungarian tax paid.

Stamp Duty

Stamp duty is payable on the purchase of residential property at 2% on the first €16,000 and 6% on the balance. Newly built properties with a value of less than €122,000 are exempt.

Capital Gains Tax

Gains on the disposal of Hungarian property are taxed at 20% as income. The taxable gain is the sales price less the acquisition cost and expenses relating to improvements and the transfer of the property.

If the property is owned for 6 years, the taxable base is reduced by 10%, with a further 10% reduction for every additional year, resulting in an exemption after the property has been owned by 15 years.

A non-resident individual must apply to the local municipality for permission to purchase Hungarian property. Such application can take up to 3 months to process and cost approximately €250. A faster and cheaper option is to purchase the property through a Hungarian company. CGT on the sale of a company containing property is 5% and corporate tax on rental income is charged at 16%. However, consideration must also be given to the maintenance costs associated with a company.

Inheritance and Gift Taxes

Non-residents are subject to inheritance and gift tax on assets located in Hungary at rates up to 20%.

VAT

VAT is payable upon the first sale of a residential flat only, and is not recoverable. The rate is 25%. Subsequent sales will not be subject to VAT.

For more information on the Irish Double taxation agreement with Hungary please click here