A guide to fees and taxes on Budapest real estate investments

Buying property in Hungary is a fairly standard process. In such cases, the profit is in the details. Investors can make the most sound financial decision by diving deep beyond Budapest real estate prices, and into the nitty gritty of expected fees and tax rates for different entities.

Can a foreigner buy property in Hungary? Absolutely. But non-EU citizens should account for different fees, and consider what the most profitable pricing construction could be. We’ve created a comprehensive guide of all the fees and taxes related to a Budapest real estate purchase, sale and rental management.

Purchase Costs

These are the fees and taxes associated with any Budapest real estate investments made by EU and non-EU citizens.

General Purchase Fees and Costs

When the purchase of a Budapest property is complete, the buyer also pays a stamp duty, legal fees for lawyer services, and any potential notary fees.

Currently, the fees are made up of the following percentage of the total purchase amount:

  • Legal fees: 1% + VAT (currently 27%) of the purchase price
  • Stamp duty: 4% of the purchase price

The buyer is exempt from paying the real estate agent’s commission, as in most cases in Hungary this is paid for by the seller.

Land Registration Cost

Once you have signed the preliminary agreement, a lawyer will deliver it to the land registry office, where the intention to sell is recorded. Once permission is obtained for the property sale by local authorities, you can pay the remaining contractual amount, and the ownership title is delivered to the Land Register (Földhivatal). This carries with it a fee of €19.30.

To give you an idea of costs + fees in action, let’s take an example of a fictional €177,500 property:

Total cost for EU citizens =€ 186,873.30
Property price € 177,500
Legal fees 1% € 1,775
Legal fee VAT 27% of legal fee € 479
Stamp duty 4% € 7,100
Land registration €19.30

Additional fees for non-EU citizens:

First and foremost, if you are a non-EU citizen, you will automatically have to pay a €200 purchase permission fee to the National Tax and Customs Administration of Hungary (NTCA) when buying a Budapest property.

You are also required to provide a notarised copy of your passport as proof of identity when you sign the preliminary sales agreement, which costs approximately €6.50.

With the same €177,500 property example, the numbers for a Budapest property sale look like this for a non-EU citizen:

Total cost for non-EU citizens =€ 187,079.80
Property price € 177,500
Legal fees 1% € 1,775
Legal fee VAT 27% of legal fee € 479
Stamp duty 4% € 7,100
Land registration €19.30
Purchase permission € 200
Passport notary € 6.50

Sales Costs

Selling property in Hungary comes with a few seller specific fees. Here is what you need to be aware of before pricing your property for the Budapest real estate market.

General Sale Fees and Costs

  • Agency fee: 4% + VAT of the sales price
  • Capital Gains Tax
    • The capital gains tax is a government fee on the profit made from selling something you own. A capital gain is calculated as the total sale price minus the original cost of the property
    • Acquisition costs and related expenses, improvement costs, and cost of transferring the property can be deducted from the revenue to arrive at the net capital gains
    • The tax base is 15% (Personal Income Tax) after the value growth but it decreases gradually:
      • 100% of the 15% personal income tax in the year and in the following year of the purchase,
      • 90% of the 15% personal income tax in the 2nd year after the purchase,
      • 60% of the 15% personal income tax in the 3rd year after the purchase,
      • 30% of the 15% personal income tax in the 4th year after the purchase,
      • 0% in the 5th year and all the following years after the purchase

The seller is exempt from paying legal fees, as in Hungary this is paid for by the buyer.

Let’s say that you sell the €177,500 real estate property that you purchase in the previous example, 8 years later. The property has appreciated to a value of €249,760. this is how your tax breakdown would be calculated:

Total net sale profit =€ 53,750
Property price € 249,760
Agency fees 4% € 9,990
Agency fee VAT 27% of legal fee € 2,697
Gross profit € 72,260
Net profit (with repairs and improvements deducted) €53,750

Rental Costs

Long-Term Rental Costs for Individuals

If you’ve got a Budapest apartment for long-term rent, these are the fees that you need to anticipate.

  • Management fee: Monthly 10% + VAT (currently 27%) of the rental income
  • Income tax on your rental profit, which there are two ways to calculate:
    • Deduct the individual costs from your overall profit, and calculate the 15% personal income tax on your net income. Individual costs include utilities, repairs, renovation, insurance, accounting and legal fees, appliances that don’t exceed 100,000HUF, real estate tax, the above mentioned management fee, etc.
    • Pay a 10% flat rate on your rental profit
  • Building tax, which is only applicable if you are renting out for the purpose of earning income, as opposed to living in the apartment yourself. This fee varies from district to district, but across the board represents only a small fee.

The difference between deducting individual costs and paying a flat rate is not insignificant in the long run, as we can see in the example below, for a long-term Budapest apartment rental with a projected €800 monthly rental fee.

Monthly net income =€ 541
Rental income (monthly) € 800
Management fee 10% + VAT (27%) € 101
Individual costs € 226
Income tax 15% of net annual profit € 33

 

Monthly net income =€ 494
Rental income (monthly) € 800
Management fee 10% + VAT (27%) € 101
Individual costs € 226
Income tax 10% flat rate on gross annual profit € 80

Long-Term Rental Costs for Companies

If your company has a Budapest apartment for long-term rent, these are the fees that you need to anticipate.

  • Management fee: 10% + VAT (currently 27%) of the rental income
  • 9% Corporate Tax
  • 2% Business Tax

In the long-run, renting a property in Budapest for the long-term is far more lucrative as a company than as an individual.

Net income per month =€ 590
Rental income (monthly) € 771
Management fee 10% + VAT (27%) € 97
Corporate tax 9% € 69
Business tax 2% € 15

Short-Term Rental Costs an an Individual

If you’ve got a Budapest apartment for short-term rent, these are the fees that you need to anticipate.

  • Management fee: Monthly 21% + VAT (currently 27%) of the rental income
    • If you’re an individual, the following taxes apply:
      • 15% Personal Income Tax
      • 4% Tourism Tax paid after every guest night, this expense is passed off to the guests
      • Building tax, which is only applicable if you are renting out for the purpose of earning income, as opposed to living in the apartment yourself

If we run the numbers on a Budapest based short-term apartment rental with €1,527 in monthly income, it looks like this:

Net income per year =€ 8,229
Rental income (annual) € 18,330
Management fee 21% € 4,542
Management fee VAT 27% of fee € 1,226
AirBnB fee 3% of rental income € 550
AirBnB fee VAT 28% of AirBnB fee € 148
Accounting € 540
Accounting fee VAT 27% of accounting € 146
Insurance € 110
Banking € 120
Utilities € 960
Utilities VAT 27% of utilities € 259
Income tax 15% of annual gross income € 1,500
Tourism tax 4% every guest night € –

Short-Term Rental Costs as a Company

If you’ve got an investment property in Hungary that you’d like to rent out short-term, these are the fees that you need to anticipate.

  • Management fee: 21% + VAT (currently 27%) of the rental income
  • If you have purchased your property as a company, the following taxes apply:
    • 9% Annual Corporate Tax
    • 2% Annual Local Tax
    • 4% Tourism Tax paid after every guest night, this expense is passed off to the guests
    • Building tax, which is only applicable if you are renting out for the purpose of earning income
Net income per year =€ 8,435
Rental income (annual) € 18,330
Management fee 21% € 4,542
Management fee VAT 27% of fee € 1,226
AirBnB fee 3% of rental income € 550
AirBnB fee VAT 28% of AirBnB fee € 148
Accounting € 540
Accounting fee VAT 27% of accounting € 146
Insurance € 110
Banking € 120
Utilities € 960
Utilities VAT 27% of utilities € 259
Corporate tax 9% € 861
Local tax 2% € 433
Tourism tax 4% every guest night € –

Don’t Invest Blindly – Create a Business Plan

Calculating all of the ins and outs of Budapest property investments is time-consuming at best, misleading and faulty at worst. Consulting with a trusted lawyer, accountant and advisory team is highly recommended, as one mistake or missing factor could mean significant sums in missed revenue or additional taxes.

Matthew and Daniels’ ThreeSixty offer was created to guide you through a sound investment from scouting a property to managing rentals. Our local team of experts is committed to securing maximum profitability for your investment.