Are you planning to purchase real estate in Hungary? You should be aware of a cost that will not be included in the contract: property tax. This blog post explains what you need to know if you would like to avoid an unpleasant surprise from the tax authority after buying your dream home.
What is property tax?
As a general rule, the tax rate for real estate purchases in Hungary is 4%. Since it is to be paid by the buyer, it is never included in the selling price (unlike most other taxes related to sales). This means that if the price of an apartment is HUF 30 million (EUR 81,900), in reality you will have to pay HUF 30 million (EUR 81,900) to the seller and HUF 1.2 million (EUR 3,300) to the state. This is true for all kinds of real estate, not just apartments: the tax will apply even if you buy a vacant lot.
Real estate purchases must be reported to the National Tax and Customs Administration, usually by the lawyer involved, within 30 days of concluding the contract. The tax authority then notifies the buyer of the amount of property tax and the deadline for payment. By default, you need to pay the sum at once; however, you can request to pay in installments.
Requirements for property tax exemption
In some cases, property tax is not applicable. Most notably, the transfer of property between close relatives such as spouses (including settlement due to divorce), direct ascendants and descendants, adopted children, stepchildren, adoptive parents, step-parents, foster parents and siblings is exempt from property tax. Other examples include:
- Purchasing real estate from the state or a municipality.
- Building on an originally vacant lot within four years of buying it. The tax authority may check compliance, so we recommend you keep the deadline in mind.
- Real estate purchased with the help of the Family Housing Support Program (CSOK). However, only Hungarian citizens are eligible for that.
Real estate with reduced property tax
In other cases, property tax is reduced. When buying a piece of real estate within three years of selling another one, the tax only applies to the difference in value and only if the purchase price is higher. To put it simply: if you sold a piece of real estate for HUF 30 million (EUR 81,900) within the past three years, you can buy another one for HUF 29 million (EUR 79,100) without having to pay property tax. If you happen to purchase one for HUF 31 million (EUR 84,600), only HUF 1 million (EUR 2,700) will be subject to tax.
First-time home buyers under the age of 35 years only need to pay 2% property tax if they purchase real estate for less than HUF 15 million (EUR 40,900).
If you buy a newly-built home, property tax is applicable only to the part above HUF 15 million (EUR 40,900). As a result, newly built homes cheaper than that are exempt from property tax. (In reality, homes with such a price tag are rare in Hungary and even more so in Budapest.)
Need help? Contact us!
If you would like to know more, contact your English-speaking accountant at Helpers Finance for a detailed breakdown. You can learn more about our accounting services here. You can ask for a consultation by calling our office on +36 1 215 0712, by e-mailing email@example.com or by filling in our contact form.