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
| 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 | |
| Total cost for EU citizens | =€ 186,873.30 |
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:
| 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 | |
| Total cost for non-EU citizens | =€ 187.079.80 |
General Sale Fees and Costs
- Agency fee: 5% + 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:
| Property Price | € 249,760 | |
| Agency fees | 5% | € 12,488 |
| Agency fee VAT | 27% of agency fee | € 3,372 |
| Gross profit | € 72,260 | |
| Net profit(with repairs and improvements deducted) | € 53,750 | |
| Total net sale profit | =€ 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.
| Rental income (monthly) | € 800 | |
| Management fee | 10% + VAT(27%) | € 101 |
| Individual costs | € 226 | |
| Income tax | 15% of net annual profit | € 33 |
| Monthly net income | =€ 541 |
| Rental income (monthly) | € 800 | |
| Management fee | 10% + VAT(27%) | € 101 |
| Individual costs | € 226 | |
| Income tax | 10% of net annual profit | € 80 |
| Monthly net income | =€ 494 |
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.
| Rental income (monthly) | € 771 | |
| Management fee | 10% + VAT(27%) | € 97 |
| Individual costs | 9% | € 69 |
| Income tax | 10% of net annual profit | € 15 |
| Monthly net income | =€ 590 |
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 you’re an individual, the following taxes apply:
If we run the numbers on a Budapest based short-term apartment rental with €1,527 in monthly income, it looks like this:
| 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 | € - |
| Net income per year | =€ 8,229 |
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
| 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 | € - |
| Net income per year | =€ 8,436 |
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.